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Comment by koheripbal | Hacker News Reader

Summary:

1. Capital Gain taxes are delayed until you actually sell the stock.

2. Corporate taxes are being reduced because companies are moving profits to foreign jurisdictions.

3. Estate taxes & income taxes are being avoided by the creation of charitable foundations.

The 2nd and 3rd points are very valid, and I wish the author had spent more time on them. Unfortunately instead, the author spends much more time on point 1, conflating wealth with income, and avoiding the obvious argument that capital gains are eventually taxed - the rich are not escaping that.

...unless point 3 (foundation) occurs. And that should be the main story.

Squabbling over a wealth tax is not useful. The real issue is that the super rich create these personal "foundations" that act as never-taxed income holes, and then use them as personal and political tools.

In total, there's nothing very revealing about this article. It's everything we've already known. IMO, we need to curb foreign tax havens, and severely limit tax exemptions for charitable donations.

A more interesting question is how did ProPublica get a copy of Jeff Bezos' tax returns. Seems like a leak at the IRS?

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> Capital Gain taxes are delayed until you actually sell the stock. > Squabbling over a wealth tax is not useful.

I agree that a wealth tax is not the way to go. But there are other ways to skin this cat. The big takeaway I got from the article missing in your summary is that the wealthy take loans secured by unrealized gains in order to finance their lifestyle.

So what if we found a way to make a rule that using unrealized gains as collateral for a loan was, for tax purposes, the same as realizing the gains? (You might need to tweak the rule for fairness but the basic point remains.)

I think aggressively closing loopholes in the current code could go a long way (you mentioned a couple, like charitable donations and tax havens).

Capital gains being delayed is not a direction we want to pursue. There are huge problems with unsellable stock in venture-backed start-ups and other situations where you can end up owning a massively valued asset that you can't sell to pay the taxes on. Said asset could go to zero without you ever realizing money. I don't think people should lose their start-up stock over taxes, or face putting their entire wealth on the line on a gamble the company pays off. Keep in mind it's not unheard of to have stock worth $2+ million for an early employee in a company that goes to zero. Even more relatable to the average person: If your house price goes up too quickly you can be forced to sell to afford paying the capital gains on it.

No different than me selling stock A, paying capital gains and then buying stock B, which could go to zero.

You can handle your hypo the same way the tax system handles mine. You can deduct the capital loss from future gains.

Sure it’s different. You might not have cash to pay those taxes. When you sold and bought, you had an opportunity to set aside the $$ to pay taxes

If you are borrowing money, you have the opportunity to set that money aside to pay taxes. It's really no different.

It's not easy to get a loan against illiquid assets in many cases. And even if you get a loan, if the asset goes to zero you still owe the loan balance, which could be huge compared to your normal finances. And you pay interest on that loan.

It could work in some cases but I don't see how it's the same as selling stock A and buying stock B.

You may never have future gains to match the loss.

Why would we want a system that taxes people on an unrealized gain and then (maybe) gives it back to them over coming years?

> You may never have future gains to match the loss.

C'est la vie. That's how Capital Loss deductions, Electric Vehicle credits and other non-refundable tax credits currently work: individuals may not have enough upside to maximize their benefits, That's just how the system works as it is impossible to balance everyone's competing scenarios. If you are eligible for a $7500 EV credit but only paid $3000 in taxes, you'll only get that $3000 back, and not the full $7500.

Most American's live in that system, it's called being an employee...

I think we'd want that tax income because a dollar today is more valuable than a dollar tomorrow - making sure we increase cash flow in the short term and stabilize expected cash flow allows us to more accurately set the budget.

I'd be happy if I could give a percentage of the shares themselves to the government as a tax payment (paying tax on the shares specifically), so I don't have to worry about the risk that they're overvalued by the tax agency.

You might be OK with being taxed in the form of some of your stocks, but would you want to be taxed partial ownership of your real estate based on increase in its market value? What about private high-risk equity in a venture you started by risking all of your own money? It could go to zero (or millions) in a decade, but for now the government becomes an increasing shareholder because of its current YoY volatility...

Taxing non-income wealth increases by any means incentivizes the government to manipulate the prices of those assets -- and more than any other entity, the government possesses the power to do so through regulation and legislation.

It also makes the government the eventual largest capital owner, which could create all sorts of unintended consequences. It could sit on those assets indefinitely (like it does its liabilities) instead of selling and using the money to fund itself. There's a special kind of poverty that exists when the government owns almost everything.

Also, there's a big difference between legal worth at a given time and fungible value at that time. The difference (or lack thereof) between the two could itself create all sorts of opportunities for gaming the system when fungible value becomes a basis for being taxed.

OK. You seem to be agreeing that this would be a fine system with those caveats.

So: Exemptions specifically covering residency already exist in finance law. If you go bankrupt, you can still live in your house (only if you owned it, mind).

The government, as soon as practical, can auction the stock it receives. Thus identifying its value and releasing the funds.

> You seem to be agreeing that this would be a fine system with those caveats.

I'm not advocating anything in particular. I'm only pointing out some potentially serious issues with the proposed system.

Sure, primary residence could be excluded. But that doesn't change anything about what I said, except perhaps blunt the initial impact on the middle class.

> The government, as soon as practical, can auction the stock it receives. Thus identifying its value and releasing the funds.

Perhaps that could be part of the tax law. I doubt it would stay that way... once the government can own stocks and portions of real estate, I'm sure it will seek to incrementally increase its benefit from doing so. I shudder to imagine politician-beaurocrats as the most powerful hedge fund managers of tomorrow.

> once the government can own stocks and portions of real estate, I'm sure it will seek to incrementally increase its benefit from doing so.

There's nothing stopping the government from owning these things already (governments own plenty of real estate, in particular), so this seems like undue cynicism.

There's a big difference between agencies owning buildings within which to do business (or the BLM owning vast swaths of land for environmental preservation) and the IRS maintaining a real estate asset class.

In fact there's almost no comparison to be made between the two.

Regarding the government's ownership of real estate, I suggest you are simply mistaken, e.g.:

https://www.forbes.com/sites/bisnow/2017/04/11/solving-the-m...

That article is talking about local governments, not the federal government.

Ctrl-F "federal government" suggests otherwise.

This is now really a bad faith argument.

You've moved the goalposts (again), and declared that your new goal wasn't met (when, in fact, you just ignored that part).

It's OK to admit you were wrong <3

I don't think I've moved goalposts -- maybe just failed to articulate my concern precisely. (And only skimmed the article you linked.)

If the government purchases real estate with its own money and later sells it--fine by me. They have business to take care of and need places to do it.

What bothers me specifically would be a growing federal or state government stake in assets owned by others by virtue of a tax law that grants them such ownership.

I imagine whole swaths of businesses, apartments, and other buildings in cities across the US that are >50% owned by the government 40 years from now.

It would push us a lot closer to a world where people don't own anything anymore besides their own houses (maybe not even that) and the government owns everything.

> It would push us a lot closer to a world where people don't own anything anymore besides their own houses (maybe not even that) and the government owns everything.

I'm really struggling to understand this point of view, given the article that you couldn't be bothered to read says the US government owns 15% of all real estate already.

In my country, the reason that a lot of people own their houses is because the government sold its housing stock to residents in the 1980s and 1990s. That created a majority of homeowners, for the first time.

The fact that the government didn't replace this housing stock has been the cause of a massive generational rift, with a reduction in owner-occupancy from that peak, down to the point that a plurality of people (the vast majority of people under 45 - almost all young families) are now private renters in insecure housing situations.

While that same housing stock - originally built by the people, for the people - is increasingly dominated by exploitative for-profit landlords.

It would be OK with me as long as I could buy back the government's stake in my house from the government by paying the tax in dollars.

Huh? The government owns a percentage. The asset doesn't really matter. It would be a lein, to pay back at exit, not a voting share or whatever.

How is that different from capital gains tax?

Unless you mean a series of leins incurred once a year based on price increases. But then an asset with high YoY volatility but no long-term gain would cause the lein sum to approach the value of the asset over many years, despite no material increase in price at exit. That makes no sense - the government profiting off of volatility alone.

If that's not what you mean, how is what you mean different from standard capital gains tax?

This would be a very interesting way to handle percentage taxation on assets like that.

Either pay %x in cash value or give %x percent of the item to the government.

Of course likely the government would just want to liquidate immediately but you could perhaps set it up as a "lien" on the stock/bond/property that gets satisfied at final sale.

They'd want to liquidate as soon as possible, but they might have to wait for a liquidity event like an IPO to do so.

I'm not sure the lien would really be any different than how capital gains taxes work today. Assuming you stayed in the same tax bracket every year.

For many situations it’s the same but there are cases where you have to pay tax on vesting Stock but have no way of selling the stock to pay the tax. It’s rare but it can occur.

It’s supposed to work out in the end as you have a higher basis at that point but you still have a liquidity issue.

No, you wouldn't. Unrealized gains being taxed would eventually make you declare bankruptcy or live on the street. The government wouldn't let you pay in stock but sell stock yourself.

So, unless I miss what you're saying, is that you propose that the government own a share in every business that is created by way of "taxation". Is that not what you're proposing in this statement?

Do they also get to leverage these shares to have a vote as to the business decisions, like any other share holder does? (assuming they have enough shares in this hypothetical share tax)

Not my idea, nor one I think is perfect, but I assume they are saying this would no be every company, just those where they would rather give shares than pay tax.

No doubt they would be loads of ways to scam this though, setting up supposedly valuable companies to 'pay' a big tax bill, then rinse the company or allow it to fail while diverting profit elsewhere.

I was just saying, it sounds an awful lot like forced communism through taxation. A share in a company is a portion and a vote in a company, however small.

I can't think of a way to scam it, as long as they only allow this method of payment for taxes assessed on the asset itself, rather than as a substitute method of payment for other taxes owed.

It would be an interesting idea to explore and could potentially be a massive boon to risky startups by allowing them to hand out equity more freely as incentives without worrying about the accompanying tax burden.

The government is taxing you anyway. I'm not proposing a new tax, I'm proposing more flexibility on how they accept payment. Right now, they only accept the taxes to be remitted in dollars.

For simple income tax, where you're paid in dollars and hand the government a percentage, that's fine.

But what if you're paying a tax on, say, some equity you were given in a startup?

This can cause huge trouble for people who have illiquid assets, like equity in a private company. You have to pay tax in dollars based on a guess of the value of that equity, even though you can't trade the equity for dollars (it's not liquid). When you eventually can sell the asset, like at an IPO, its assessed value could have decreased and it might be worth even less than the taxes you already had to pay on it.

That's the kind of gift you don't want to receive.

I'm suggesting that, for those who are worried about that risk, the government allow you the option of handing over a percentage of the asset instead. If it ends up being worthless paper, then the government gets nothing, but on the other hand that's also the correct amount for them to get because the tax on $0 should also be $0.

Most likely, the government would choose to (or perhaps by legislation could be compelled to) sell the asset at an IPO, but that's a detail. Perhaps they could also have an agency for managing and directing such assets in the public interest.

So the government would then be partial owner to your restaurant or mechanic shop? The government would then be partial owner to your catering business or flower store?

I cannot think of a more complicated mess as the government being part-owner of half the small businesses in America.

It's called a lien, payable at liquidation, and it's a simple accounting object.

In your house example. this is only if the homeowner takes out a loan against the new increased value of the house, and then pays tax on a portion of that loan. If your house appreciates and you don't play financial games with it, the only increase in costs would come from a local tax reassessment.

I think it is assumed a wealth tax would not require taking out a loan. You can assume that your home would be exempt, but more likely it will just be a standard allowance deductable.

This isn't a new thing. Property taxes are the wealth tax that already exists, at large.

That is... You're point on a tax reassessment is exactly what is being discussed. And if the tax on your wealth is increased as a form of capital wealth, expect the rates to be higher that most property taxes.

Edit: I see I missed that this was a hypothetical on touching collateral. Not sure how I feel on that one. In large because I know so many folks are essentially tricked by marketing to refinance all the time.

So if you decide to refinance your mortgage that would subject you to a tax? What is wrong with just paying increased property taxes?

Or, perhaps, stop accepting payment that may be valueless when you try to access it. And stop trying to get paid in a way that hides your income from the tax system.

To me, the parent wasn’t saying an asset holder would need to pay taxes on the asset unless they used it as collateral. To me, this makes a lot of sense. If someone owns a startup and worries tax implications would overextend them if the value was taxed, they shouldn’t use it as collateral on a loan.

I may be missing your point though.

But you basically always do use your house as collateral on the mortgage loan. I think this is a more radical change than you have realized.

You could pin it to when loans are issued rather than their existence.

That would only affect home refinancing, which will still be a considerable number of people.

That's different, because the house is collateral for itself, effectively a "rent to own", not for money that can be spent elsewhere.

I agree, I don’t see why income tax couldn’t be levied on any amount greater than $X borrowed/secured by an asset as collateral.

For all intents and purposes, it is income and should be taxed as such.

I don't see why we care that they're using an asset as collateral for a loan. They still need to pay back that loan with post-tax money.

Maybe they're kicking the can down the road, but that's their choice.

The real issue here is that super rich are, at the end of that road, donating shares to their non-profits, tax free. ...and that their children then have access to that non-profit and all of its assets, again without income or estate tax.

The big hole here isn't the unrealized gains - it's the "charitable Foundations" that are a complete scam.

In the UK at least, the 'trick' is that the load is never actually repaid, or is continually deferred.

> and that their children then have access to that non-profit and all of its assets, again without income or estate tax

That shouldn't matter as long as they don't start to enjoy the benefit of those assets.

This means tax rules should separate the estate as a business/investment from the personal use of the funds/wealth.

Sure, at some point it becomes neigh impossible, like let's say Bill and Melinda went to Africa on their marriage anniversary, was that business or personal? (And yes, at that level of wealth, influence, income it's always both.)

When an owner (or close relative or friend of an owner) of a family trusts/foundations/estates/NGOs/church/non-profit conducts business through said entity, that entity should pay some tax corresponding to said expense as if some part of that expense were income to the owner/relative/friend.

> Maybe they're kicking the can down the road, but that's their choice.

I can't just say "Oh, I'm investing 30% of my income, tax that part when I sell later", I don't have that choice of kicking the can down the road.

tldr; The rich, there kids and grandkids will never pay taxes under the current structure.

The problem is you're not kicking the can down the road, you are delaying it forever. Your entire 'Lifestyle' can be funded tax free. Instead of things being your assets, that you spent money on you could have a company plane, car, boat, house. Lavish dinners can be put on the company card as 'business meetings' and travel as 'Business Travel'. This is all taken out of your business profits and the best tax structure for a business is at a loss or barly profitable. Add that to the point OP made about taxing collateral loans is it would semi-eliminate the 'loophole' of never having to pay taxs.

Edit: One more point. Should a $1m donation to scientology be considered a tax writeoff?

> They still need to pay back that loan with post-tax money.

Unless they pay back said loan with another loan. Given the massive amount of wealth accumulated, you can rinse and repeat indefinitely. Basically you have a free cash flow machine, without ever having to convert that income as proceeds (unless you want to convert between asset types).

Having said I agree with your main point: we need to close the loopholes, and the charitable foundations is the biggest of all, and sadly the article missed the point entirely.

The annoying point is that those foundations are not at all charitable.

Collateral for a loan is a completely separate point. The issue was taxing unrealized capital gains. Effectively if your house goes up $100,000 you'd owe the government the capital gains tax on $100,000 immediately, not when you sold. If you don't have the money to pay for the capital gains you're looking at selling the asset. Finding the money to pay capital gains while paying down a mortgage isn't a direction I'd want to go in.

Of course, in the USA, outside of California, this is essentially what we do.

We can argue about whether or not it's good, but its not unthinkable. Property taxes in most places (in the USA, the subject of the article) are linked to the current market value of real estate. Sometimes property values rise, taxes follow, and people have to move.

Property taxes are such a small portion of property value that they seldom force a move. Capital gains can be anywhere from 20-50% depending on country. Having your home go from 800,000 to 1,000,000 and having your property taxes go from 4000 to 5000 a year is very different from having your home go up 200,000 and suddenly owing the government 40,000 to 100,000 dollars.

As I understand the proposal, you wouldn't owe the tax on $100k immediately -- that would only happen when you use the house as collateral for a reverse mortgage or similar. This makes sense to me, because the capital gains are effectively realized when used as leverage.

Parent was arguing to not delay capital gains at all, as was the article. I'm pointing out how that idea is bad.

I agree with you. This makes even more sense as in: if a lender lends you $x against a collateral of N shares, this means that they consider that there is only a tiny chance that said shares may be worth less than $x before the maturity of the debt. So this means that for all practical purposes we could decide that there are at least $x of realised gains. (In a more extreme version you could even consider that all your shares, and not just the N shares used as collateral, should be valued at $x/N per share and treat the gain as a capital gain for tax purposes)

>a massively valued asset that you can't sell

In this case, the value is not well defined. If you don't have a market, you cannot determine the value. You may think it's extremely valuable, but if you have no one else willing to recognize that value, then it doesn't really exist.

The value is precisely defined by a 409a valuation. That's the price options are offered at (the strike price) and what the FMV is.

Aren’t 409a valuations famously gamed?

It is a bogus valuation... as it is not market based. If you can't sell the stock, and nobody wants to buy it, (yes, there are startups that are in this position), then that valuation is mostly wishful thinking. Often the valuation undervalues the company as well, but that's another story.

That's the value when the valuation happens, which can be years before exercise.

A house's capital gains actually have special treatment. But in some states property values for taxes do rise by huge amounts.

> I agree that a wealth tax is not the way to go.

Why not? A tax on wealth, even a small one, is the only mechanism to avoid a long-term drift towards a feudal-like state of society.

Exactly. The strategic problem here is that the changes that took place in the Vietnam era and 80s ultimately creates a concentration of capital and power that is beyond anything we’ve seen since Roman times.

In the mid-term we’re looking at some sort of weird hybrid plutocrat/government hybrid with an American flavor and a Chinese flavor. Everyone else is in the middle with the scraps.

Because they don't work. Many EU countries have attempted them and they have all failed. There are a host of issues with wealth taxes, one of which is simply placing value on illiquid assets is difficult. How much is that rare art price worth? Well no one knows until you put it on the market. Then there are issues with immaterial things like rights, that would be very tricky to value. What if you had the rights to all of Bill Cosby's recorded stand-up acts? That could have been valued highly before the rape convictions, now it is essentially worthless. A wealth tax would just create a battle of litigation between the wealthy and IRS, and the wealthy would win. The real solution is to just have a VAT like every other developed nation in the world, is the only way to get slice of the pie from the wealthy.

It's not that hard to find a price for a rare art piece, or almost any other asset.

Make the owner declare its value, tax it at the value. But anyone can buy it at that price. If they want to keep it, they'll need to value it correctly, and thus it will get taxed correctly.

this would effectively auction off everything you own. What if an original piece of art is priceless to you? Where does it end?

If it is actually priceless, then you should not be able to hog it for yourself. /s

Can you imagine the day that you declare a value on your house and the following week someone much richer than you comes along and tells you to "beat it; I just bought this place!"

Would do wonders for the Bay Area housing market! On a serious note, this proposal was originally coupled with a pretty radical (from our point of view) approach to land ownership. Land is closer to zero-sum than many other things (ignoring artificial islands etc.), so this forces a more efficient pricing/land use at the expense of doing away with private property rights for land.

Worried that a competitor is catching up or threatening your market? Use your cash reserves to buy their factory out from under them. Don’t bother competing with Tesla, just make sure they can’t keep going once they get a little traction.

Imagine a reasonable policy rather than simplistic worst possible policy strawman. There are already many many laws that prevent abusive transactions in the current system, there's no reason that there wouldn't need to be similar laws to prevent abuse here either.

One can imagine reasonable policies around things like housing, my original two line reply was not meant to detail all the ways this would for all types of assets.

I don't think anyone would have much of a problem with the simplistic scheme applied to rare art though.

I do have a problem with that. I would prefer the Mona Lisa to remain in the hands of the Louvre than be regularly auctioned off. I would prefer American Gothic to remain in the hands of the Art Institute of Chicago, etc.

Try to imagine a reasonable policy rather than assume the worst possible policy and then the outcomes that follow.

One can imagine that public charities or government assets for example are exempt from such a scheme (since they don't pay tax anyway usually).

I’m trying to imagine the reasonably predictable response to the policy that you sketched out. Removing private property rights is not a casual undertaking I agree and would require substantial thought and care, perhaps too much to be practically workable.

Your replies so far don't seem to indicate you gave much thought to how such a system would reasonably work -- as evidenced by the assumption that art owned by charities or governments (institutions which don't pay tax) would also be up for auction.

You likewise don’t appear to have given a ton of thought to the logical responses that would likely occur from your proposal.

How long until some rich art collector starts a charity to hold their art and protect it from being auctioned?

There are already laws that would make such abuse illegal. Abuse of charities is not a new problem.

I'm not a lawyer - but it seems like one obvious factor would take into account where the artwork purchased by the charity resides. Is it in a private residence? A freeport? Probably not really a charity.

Is it hanging on the wall in the Art Institute of Chicago? Might be fine.

Then the question is what happens if the charity tries to sell it back to a private collector at some future point. Might be allowed as long as back taxes are paid assuming some appreciation schedule.

I think the more general point is that policy is _hard_, and to assume that something doesn't work because you've thought about it for 2.5 seconds is probably a bad assumption to make. Most of our existing laws/policies would be similarly easy to attack if distilled to one sentence. There's a reason actual policy and laws are really long.

Yes, policy is hard. That’s the exact same reason that when you think “it’s not that hard to find a price for a rare…”, you probably still have a lot more thinking ahead of you than behind you.

That comment was meant to be taken in theoretical sense not that I had the text of a law ready to go into effect tomorrow. I'm well aware there's plenty more thinking to be done.

You however, seem to think that because you can find a corner case in a two line proposal, the whole thing has no merit.

This a worse idea than the Jump to Conclusions mat.

I have to choose a price for all of my assets and then anyone could just be like 'yeah, I'll buy at that price' and take it from me? What if I bought the assets for the hope of it maybe being worth something in 5-10 years? Do I prematurely announce 'yeah, it's worth the price in 5-10 years that I hope it will be', and pay an enormous tax on something that's not a guarantee it will ever go to that price, just to keep other people from buying it from me if I announced what the market value is now? (And also I'm not allowed to keep any assets at market value unless I announce it's worth more to me?)

Ugh. Never get in a position where you could feasibly propose this in government, please.

Your reply could have been written to be a lot less insulting and assume I'm aware of policy implications of this proposal but did not choose delve into 150 years of research in a two line reply on HN.

I wasn't proposing that this become policy for all assets. Would it allow you to accurately assess the price of rare high valued art for the purposes of a wealth tax -- yes. It would also allow you to value other assets as well, but there are drawbacks.

I don't think your example of speculation is particularly good example of a drawback though. If you need to set the price at X so that someone doesn't buy it from you now, then that means its value is indeed just below X (assuming you've set X correctly).

If you're the only person in the world you thinks that the value of your asset will be 10X in 10 years, then you can safely set the value at X now and nobody will buy it from you. If you aren't the only person in the world who thinks this and someone is willing to buy it from you now for 2X, then I guess the value of the asset right now is 2X.

It's a completely ridiculous policy that would require enumerating every item in history and deciding if people are able to buy it from you.

My fridge? My dog? My shoes? My car? My bike? My boat? My model railroad set? My grandmothers ashes? My underwear? Oops I accidentally undervalued my gaming computer on my taxes and now people are knocking on my door.

You'd end up with a document 3 million pages long and vengeful neighbors and exes buying each others items to fuck with each other. You're calling it a strawman argument, but these are actual things that would have to be addressed.

No amount of "delving into 150 years of research" gets around all the massive, massive holes in your ridiculous idea.

When you come up with a problem (in seconds) with a policy (especially one described in essentially one line), ask yourself, what reasonable change could I make to the original idea to make it more reasonable.

For example, you could easily say that only assets that would be declared as having a value over X amount need to be declared in this way. Choose X to be somewhere in the neighborhood of a house, and you would get almost all the value of such a policy without any of the drawbacks you just listed.

You still have a massive massive number of loop-holes to fill and complexities to answer for.

Does my collection of rare coins count as one asset as a whole, or individual assets that are each under X amount? Who decides what my random painting is worth so I know if I have to declare it? What happens when my asset depreciates?

Also, once you go to X being "somewhere in the neighborhood of a house" you lose a TON of taxable income with this policy to the point where it's probably not worth it. You're not going to gain much money taxing a few mega-yachts and rare paintings, especially when you have to include the money spent dealing with more complicated taxes and audits.

We can just raise income and capital gains taxes instead and it's a whole lot easier. Wealth taxes that include assets are so fragile and complicated.

The purpose of a wealth tax is (mostly) not to raise revenue, it is to provide a downward pressure on the wealth of the wealthiest individuals.

I also think you're making a poor estimate of what the distribution of wealth looks like. Yes, there are lots of small items, but the vast majority of wealth is stored in items/things/land/etc. of significant value. Perhaps more than anything it is stored as equity in companies. For income taxes the top 1 percent paid a greater share of individual income taxes (38.5 percent) than the bottom 90 percent combined (29.9 percent). For wealth the distribution is even more skewed.

I agree there are a lot of things to figure out. That was and is true of our current system too. At one point the rules for all its loop-holes didn't exist and they had to be created and that didn't happen overnight.

If your asset depreciates, then you say its worth less next year. You decide what your random painting is worth. If you don't report an asset that should be reported, I can see multiple mechanisms:

(1) You sell it for more than X. At this point it becomes clear it should have been reported and back taxes are owed. (2) You bought it for X. If you don't report, questions would be asked. (3) There is no record of purchase and you never sell it. You might avoid paying taxes. I'm not sure what assets of significant value (over $500K) would fall into this category.

I don't have a great answer completely off the cuff about how to deal with things like a collection of rare coins. Perhaps the best answer is the easiest answer: they are just treated separately.

> The purpose of a wealth tax is (mostly) not to raise revenue, it is to provide a downward pressure on the wealth of the wealthiest individuals.

Sorry, what? Taxes should always be about raising money for various projects that benefit the country. If we can't see eye-to-eye on that I don't think we'll find common ground here. I'm not looking to punish rich people for being too rich. I'm looking to fund public projects like healthcare, infrastructure, and education.

If we have different goals that are both achieved by the same means, I don't see the problem.

I think raising money through the tax is important, but I think a more important long-term function of a wealth tax is to ensure that large fortunes eventually revert to the mean rather than sustaining in perpetuity for generations. (Unless they continue to be invested with above average returns for generations.)

Also - there are many taxes that exist not for the purpose of raising revenue, but for the purpose of a policy goal. To deny this would be to deny how a great deal of how modern public policy works.

It sounds ridiculous on the face of it to me (one exception: in board games. There's something similar in board games like Isle of Skye where you set a price for tiles that you must pay if other players don't buy them from you, but that's just a 45 minute board game for victory points, not real physical assets)

But I'm willing to read more about the idea, if you have an article or two that makes a good case for your proposal, please post and I'll give it a look.

I saw in another comment someone called it the Harberger tax, and linked to a 66 page paper that I'm just not going to read for the sake of an internet post.

I could have been less antagonistic in my reply, I apologize for that.

I do think you're overestimating how well people can judge, individually, what something is worth accurately on declaration, both now and in the future, especially if it's an asset they don't ever want to part with.

But again, I'd be happy to read articles from experts that make a case for this.

A decent intro is the first chapter of Radical Markets, available here: http://assets.press.princeton.edu/chapters/s11222.pdf but it also isn't short.

Also a video here: https://www.youtube.com/watch?v=uj186urDU8c

Neither of these is particularly short and still don't address all (or even many) of the practical issues. As with most real policy and law, I don't think something can be both short and cover all the real world cases. There's unfortunately a reason most laws are really long.

I believe the chapter of the book addresses the issue of how will people know what values to set. In addition to the solution proposed in the book, another alternative (of mine), is to allow people to pay some amount of retroactive tax. Let's say someone tries to buy the asset from you for your set price, but you don't want to sell. You can raise the price to some amount the buyer no longer wants to pay, but since you were underpaying taxes on the asset, you need to make them up.

Would such a proposal probably mean people set lower prices than are correct -- yes; would it still make sense for things like homes -- yes.

I'll at least check out the video. I can put that on in the background while I'm doing dishes later. Thanks for the links.

Also specifically for houses, at what point are you expected to make such a declaration? You don't really own the house until you've completely paid off the mortgage on it. Until then it really belongs to the bank or mortgage lender. So does that mean you're free to not make such a declaration until your 30 year mortgage is up? And what if you take out a second mortgage on the property during that time?

We're designing the system, so I think we can choose what makes the most sense. I think regardless of whether or not you have taken out a loan (collateralized or not), you would still need to declare a value right away.

In a case where you have a collateralized loan to purchase the asset, I imagine the lender could require the value you set to be at least the value left on the loan. (But the lender probably shouldn't be allowed to set the value beyond that stipulation.)

I also want to say that I definitely do not have all the answers for all the possible policy issues that might or will come up. I enjoy trying to think them through, so the first attempt might have problems and the cycle of finding those problems and fixing them will eventually lead to something that hopefully works well.

Interesting idea, but a fundamental aspect of private property is that you don't have to sell it.

Maybe someone knocks on your door and says "I just bought your house. Get out." That would be pretty unpleasant.

Or, more on topic for this site: maybe they do that with your startup.

This is called a Harberger tax and there has been extensive research on it: https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?arti...

Your overall point is right, a wealth tax would be massively complex. In all honesty it's probably only worth implementing on billionaires (and using some of the funds raised for beefing up the IRS legal team and auditors).

One thing I want to point out, the reason why 'wealth taxes have always failed' is because it's against the interests of the wealthy, and the wealthy are powerful. Look how scared republicans are of grover norquist and the billionaires that back him. It's hard not to argue the same thing is happening in the EU as well.

How do you even implement in on "only billionaires?" Wouldn't everybody need to doc their wealth to prove that they are not a billionaire?

Billionaires are largely majority shareholders in corporations. I'd say that's a fine place to look. Maybe the IRS can look at the assets of anyone who's suspected to be worth 750M or more. Again, as I said, you could fund better enforcement of this by funding an IRS task force who's job it is to find and tax them. I can't believe something so simple as 'billionaires should pay more than 23% (or whatever it is) taxes are controversial, but here we are.

I especially love how the Koch brothers effectively funded an astroturf campaign that hijacked the republican party, to get blue collar folks to argue against taxes on the 1%. That is some rich irony.

Nobody is saying they shouldn't pay taxes. People are saying they shouldn't be taxed on their wealth partially because anybody with an inkling of historic knowledge knows that a wealth tax will be coming to the masses shortly thereafter. Taxes are already far too complicated.

Most European countries, including Switzerland, still have them. They do work with some limits. And they are absolutely necessary to prevent that, once you have made money, you can profit for the rest of your life including future generations.

If there is no form of weath + inheritance tax, a feudal society is unavoidable.

Even if difficult, we'd better try.

I don't see the problem. As long as there is 2% inflation that wealth needs to be put to work in a way that ends up employing someone, therefore the employee benefits from the existence of the wealth that someone else carried hundreds of years into the future.

> As long as there is 2% inflation that wealth needs to be put to work in a way that ends up employing someone

What exactly do you mean by this? Holding wealth in bars of gold doesnt need to employee anyone (if you have enough of them, you might want security personnel, but you could also just own a Gold ETF or something).

Why should we try? Other than wanting to be greedy and steal from the rich, what reason do we have to try?

Many of these things are already valued, including some by the government such as lot of real estate. We can work to use those valuations. We can make it so insurance companies need to report valuations to the government for example. A painting worth 7 figures is going to be listed in some insurance policy. Report that number to the government and there is no legal argument to be had. Either it is being overvalued for insurance fraud purposes or undervalued for tax fraud purposes. The conflicting incentives should yield a relatively accurate valuation.

We also don’t need to make perfect the enemy of the good. We don’t need to account for absolutely every piece of wealth if we cover the big ones. We can also continue to revise these tax policies as new loopholes are discovered and exploited.

"there is no legal argument to be had"

Oh bless your heart.

Arguing that one valuation is too low/high is and admission that the valuation is wrong and you are therefore open to accusations of fraud. So maybe “no legal argument” is an oversimplification, but no reasonable legal argument can be made without an admission that the other party needs to update their valuation in their benefit.

Perfect *is* the enemy of the good here.

Major components of the economy are not valued regularly, e.g. private businesses. Sure, if a buyer paid $10MM last week for a private business, we might say it's worth $10MM today. But what about a business that was started from scratch by the founder? Or one that was last sold 30 years ago? Or one in a very niche industry?

Put simply, valuation is not only a science, but an art... and it's an expensive art. The cost and difficulty of administration alone would be reason enough to steer clear of a wealth tax.

Lastly, although I'm not a fan of higher taxes on anyone, even simply a more progressive income tax would make more sense than a wealth tax.

We aren’t talking about the economy as a whole or $10m businesses. The wealth tax wouldn’t care about values that low. We can start by focusing on billionaires. Most of those people own businesses that are either publicly traded or have some type of semi-public valuation.

I'll give you this: If you only applied a wealth tax to the wealthiest-of-the-wealthy, say billionaires only, the number of individuals might be small enough such that it's not an insane administration challenge. Forbes lists about 600 billionaires in the USA, so I'd guesstimate there are actually 1,200 (I know of at least three individuals who'd, conservatively, be worth at least $1B... but they're not on any list because they own under-the-radar non-VC companies).

I'm not a fan of taxes on most stocks (eg wealth) rather than flows (eg income). But if you held a gun to my head and said "design a wealth tax!", I'd set the minimum wealth far above the $32MM proposed by Bernie Sanders or $50MM proposed by Elizabeth Warren.

And keep in mind, even if there are actually only 1,200 billionaires in the US, a number of people slightly below the threshold will still have to be analyzed; I might not know if I'm worth $800MM and owe no wealth tax or $1.2B and owe tax on $200B of wealth.

Question? How do you feel about healthcare? Why is this the one place we should follow the rest of the world, wealth tax / VAT?

One might suspect the wealthy are just dropping turds in the punchbowl.

The Dutch (notoriously not the most Socialist of the lot) tax office assumes that any wealth above a certain “pocket money” stash, your first house and lifelong savings (money you effectively lock out of your reach until you reach pension) are invested and therefore taxed at ~20% on the assumed ~2% ROI.

Seems roughly fair

How do you separate wealth building from consumption? If you buy 10 art pieces that could be an investment or an aesthetic/decorating choice. If you buy a TV it's almost certainly going to be worth nothing in a a few years.

>feudal-like state of society

Do you have a source for this? People keep repeating this over and over, but I have never seen a shred of evidence for it. It seems some people have just decided that they hate inheritance and thats just it, no evidence required.

I would encourage you to look at the most unequal countries in the world by wealth. You may find it surprising that none of them are "feudal".

https://en.wikipedia.org/wiki/List_of_countries_by_wealth_in...

Edit: I don't mean to be snarky, apologies if it comes off that way. Unfounded ideas just bother me, and I would love to gain new perspective forming info.

He said "feudal-like". One of the key aspects of feudal society is an aristocratic elite that controls almost all the property and rents it out to the rest of the population.

Take a look at the current housing market craze where wealthy/institutional buyers are taking advantage of low interest rates to buy properties with all-cash, inspection-waived offers above asking price, in some cases whole neighborhoods at a time, so as to rent them out. This is a privilege unavailable even to the upper middle class, and could very well turn into a sort of neo-feudalism if left unchecked.

It's also not unprecedented for companies to own entire towns and pay employees in company "scrip" that was only redeemable at company stores, a practice which lasted well into the 1950s and (after some googling) apparently was tried by the Mexican subsidiary of Walmart as recently as 2008.

Looking at the broader state of the economy, wages have been stagnant for decades; property, healthcare & childcare (at least in the US) and education are more expensive than ever. With the exception of food, everything that matters in life is more unattainable for the average person, and everything that doesn't matter is super-cheap, with no signs of those trends reversing. How does that not turn into a form of neo-feudalism if left unchecked?

The last time we "checked" it (in the US) it took decades of labor protests/riots that often turned bloody and the effects of a couple of world wars. Historically plagues (that actually kill a lot of people indiscriminately) and wars are just about the only re-distributive methods that have proven successful in the long term. Unless we want a repeat of some real nasty history, we need a historically unprecedented way to redistribute wealth.

You should sort the list to notice that at the top of the list are countries that are aristocratic monarchies or pseudo monarchical aristocracies.

The Netherlands topping the list has average house prices at EUR 400k(massive spike in prices in the last year), while average annual income(pre tax) is EUR 60k.

We have a small tax on the wealth of the rich, called the estate tax. It's assessed when the owner will feel the pain the least.

And we have piles of loopholes that make it effectively only a tax on the stupid rich.

Your argument doesn't seem to agree with the evidence.

Feudal economies were actually powered by wealth taxes. So putting in a wealth tax won't do anything to avoid it becoming a feudal society. Further, confiscatory taxes[0] (of which wealth taxes are but one type) are favored by dictatorial regimes throughout history. I don't think we want to go down that road.

Wikipedia has a great summary on feudal taxes[1], and they are based on wealth (usually land and hides). It's actually a pretty good summary of a long period of time, and a complex topic to begin with.

[0] - https://www.merriam-webster.com/dictionary/confiscate [1] - https://en.wikipedia.org/wiki/Taxation_in_medieval_England

And the Decima (10%) to the Church, and another to the Landlord for the rent of their lands.

So please let’s not hot-take it to the extreme

A tax on wealth is heinous, and in the long run won't work. First of all, how do you define wealth? An average over the year, end of year, middle of year? Who defines it? Part of the problem is wealth doesn't really mean anything. You can claim something is with X but until you actually sell it, it really isn't worth anything. The other issue is, I could work hard, build a company up, make the same income as the previous year, but now my wealth had increased because my company increased. So I gave to pay more taxes? Or I own some collectible that goes up in value, and I have to pay more taxes just because someone out there wants what I have? No, a wealth tax is criminal.

This would also affect most home owners. They purchase a home, it goes up in value, and they refinance or take a second loan rather than sell the property. The wealthy do this as well with property, art, and securities. Trying to tax unrealized gains (like a home that has appreciated in value) would be a new mess of tax legislation with holes you could drive a semi-truck through.

We already have special treatment for capital gains in the form of a primary residence. No reason that couldn't continue.

The special treatment is at the time of sale. My comments were in response to taxing the appreciation at the time of a new loan (such as taking a second mortgage).

The idea is to treat a loan against an asset with capital gains as a sale. So one would have to pay taxes out of the loan and then you get a stepped up basis.

The exact rules could be tweaked to keep it from being a burden on families taking a second mortgage, e.g. if you borrow less than a certain amount in the tax year perhaps the rule doesn't apply. Use your imagination.

Then wouldn't tax law reform on unrealized cap gains drive the wealthy to buy more houses instead?

This sort of wealth tax probably would be targeted at amounts over a $5-50M threshold so it would never hit the primary residence of anyone except billionaires, who could surely pay cash.

So we’ve created one loophole. What if I buy multiple properties below the threshold? Is the limit per household? If so, does this apply to people heavily leveraged with little net worth who own many rental properties? The rent is income, but they often make improvements to the homes and take a cash-out refinance to pay for the cash down payment on a new property. If we do this to homes, and the wealthy move their money to a new place, such as venture capital, do we try and re-price those illiquid assets each year? If one IPO’s and they take a loan against the stock to buy a home, do you give them their previous year’s mark-to-market payment back to them if the stock goes down the following year and they get a margin call? I’m just going through a few scenarios but this would quickly inflate the tax code to an almost unmanageable state without creating just as many more new loopholes. Imagine trying to grow a startup and being worth X on paper with no actual gains or money in the bank. If you don’t include it, it suddenly becomes a tool for someone else to use within the assets you’ve excluded. If you don’t exclude it, you may force an early sale of promising new businesses to their competitors to cover a tax bill on the unrealized gains.

> The rent is income, but they often make improvements to the homes and take a cash-out refinance to pay for the cash down payment on a new property.

This is pretty much the situation that the tax is designed to combat - people using their assets to increase their wealth without paying taxes. So yes, if you did that, you would need to pay taxes on the new money in the refinance. I don't see an issue if that makes this business model unprofitable or untenable.

> If we do this to homes, and the wealthy move their money to a new place, such as venture capital, do we try and re-price those illiquid assets each year?

There's no need to price anything. You value the assets put up as collateral as the amount of the loan they are securing.

> If one IPO’s and they take a loan against the stock to buy a home, do you give them their previous year’s mark-to-market payment back to them if the stock goes down the following year and they get a margin call?

Nope. It's just like selling and immediately re-purchasing.

> Imagine trying to grow a startup and being worth X on paper with no actual gains or money in the bank.

Ok, but nothing happens unless you borrow against it. I'm not sure what scenario you are imagining here.

> There's no need to price anything. You value the assets put up as collateral as the amount of the loan they are securing.

People take out loans for much more or less than the value of the collateral. Do we ban that, or do we open up another tax/laundering loophole by letting the official value of a property diverge arbitrarily from a hypothetical sale value?

The taxable amount would be the loan amount, not the value of the property. The loan is trivial to value. If the property later sells for less than the loan amount then it would be a capital loss that could be carried forward from there.

And the tracking of all transactions over $10,000 used to be a reasonable limit.

If you take loans secured by unrealized gains, don't you need to eventually sell some of those gains to repay the loan? You can only take out so many loans until the interest starts stacking up.

You can manipulate the payment of taxes and only pay off the loans when you have other offsets to avoid paying taxes. 9 years no taxes, year 10 I pay off my loans and donate a chair to a University.

The solution would be to close the other loopholes used to not pay taxes on year 10.

Please, there are no legislative solutions open to America. We get one shot, so it needs to go big.

>the wealthy take loans secured by unrealized gains in order to finance their lifestyle

Eventually they have to sell stock to pay back the loan?

Aren't they just delaying the taxation?

Exactly, they are just delaying taxation. If their investments return less than loan interest, they will need to begin selling assets to pay the loans. If their equity compounds at a rate higher than the interest rate, then they can continue to defer until death where they can pass on to heirs and take advantage of basis step-up.

https://www.thebalance.com/how-the-stepped-up-basis-loophole...

If they delay taxation until death, the asset's basis resets and the only tax owed would be estate tax.

I've seen this idea posted a few times without data, and it isn't convincing. The wealthy need to pay back those loans, and realize gains in order to do so. Sure, they can maintain a higher average debt/expenses ratio collateralized by unrealized gains, but the real problems here are:

1. When they do realize gains, the tax brackets are severely broken such that someone realizing $2Billion in capital gains pays a lower effective rate than someone with 1/10000th that number in income.

2. We live in a financial environment in which the Fed will rescue the stock market no matter what, creating asset inflation and making this a relatively reliable strategy, whereas there should be more theoretical risk in doing this. Bear markets, albeit painful, are the only times in recent history where wealth inequality decreases as the economy corrects and reallocates capital [0]. Staving them off at all costs for the last few decades via easy monetary policy is arguably one of the greatest contributors to the rise in wealth inequality, alongside poorly graduated income tax brackets and (to a lesser degree) automation.

Chart: [0] https://fred.stlouisfed.org/series/WFRBST01134

In many of the cases of those loans, they are structured to be payable only after the death of the person receiving the loans. And at that moment the cost basis for all of the investments goes to the price at the end of the day of death... bypassing all of the capital gains taxes. That is the real problem there.

I do completely agree that treating capital gains more favorably than earned income is just crazy (even though I personally benefit from it).

Do you have a source for this? I just struggle to believe that lenders would make loans like that on a large scale, without some major caveats.

I don't think the loans actually need to be structured like that to achieve the same effect. You can just pay off the loan by taking out another loan.

There would be some risk that you couldn't get another loan, but if you're only borrowing 10% of your net worth, it's probably an extremely small risk.

Related to the topic, what is interesting, is Switzerland home loans. When usually countries have max periods of 20-30 years, Switzerland has periods of 50-100 years, so you very well would not pay it back before end of your life.

There's another aspect to consider, perhaps: nowadays it's very easy to get to get that kind of loans with low, low interest rates, well below average market returns. So, if you have a large collateral, you could just use a chunk of the loan to repay interest. I hope my math is not wrong, but if you borrow $100K with a 3% APR — even mere millionaires can get better terms than that — after 10 years, you've had to pay "only" $35K in interests. You could use part of the original loan to pay that, or you could get a new one, assuming your collateral has appreciated. Neither of those require realizing gains, right? You just keep pushing them into the future, until you finally die and your heirs' cost basis gets reset.

>I've seen this idea posted a few times without data, and it isn't convincing. The wealthy need to pay back those loans, and realize gains in order to do so.

No they don't. The article even describes how they use income to pay for that, and then use the interest paid to avoid write off paying any income tax:

>Borrowing offers multiple benefits to Icahn: He gets huge tranches of cash to turbocharge his investment returns. Then he gets to deduct the interest from his taxes. In an interview, Icahn explained that he reports the profits and losses of his business empire on his personal taxes.

You don't get to deduct interest for personal loans, and mortgages interest deductions have been limited to interest on 750K principal since 2017 (this article is picking examples that are no longer relevant.)

The whole article is full of logical fallacies and focusing on the wrong thing to drum up outrage. E.g. I do not care that Bezos didn't pay any taxes in some year where he sold no assets and received no income. What matters is what the tax brackets levy on wealthy people when they do liquidate, which are currently a complete joke and cap out at a number thousands of times lower than the highest earners.

the wealthy take loans secured by unrealized gains in order to finance their lifestyle.

It's even worse than that. The interest on those loans is tax deductible, according to the New York Times: https://www.nytimes.com/2021/06/08/us/politics/income-taxes-...

The interest being tax deductible isn't too bad. If they had to pay taxes on the capital gains as soon as they borrowed against it, it would be a fine way for them to finance their lifestyle

By virtue of being rich, they get loans to further increase their wealth, and then reduce their taxes because of the interest on that wealth increase.

If people really understood how this all essentially boils down to the rich not having to pay taxes, purely by being wealthy and being given loans on it, they'd riot tomorrow.

There are rumours that some wealthy people are in sufficiently dire straits that the loan-based vehicle for a flash lifestyle is now supported only by a very small number of banks (for them) and their debt instruments are valued well below a 1:1 rate.

It would be interesting to see what happened if a sufficient amount of that debt was bought up and forced to be repaid.

Are there any sources you can point to?

There were some discussions around this soon after the 2016 US presidential election, stating that the president-elect only had 1-2 banks willing to offer loans. As well as indicating that the estimated market value of the debt instruments was around 72 cents per USD. But, it being around 4-5 years ago, I only have vague memories and hearsay.

> The big takeaway I got from the article missing in your summary is that the wealthy take loans secured by unrealized gains in order to finance their lifestyle.

Which they have to pay back with post tax money. I don't see a problem here. At best this is tax deferral until capital gains are realized, something we allow for good reason - paying real money to cover tax on paper gains (which could vanish) is a problem, and could even force you into giving away an illiquid asset because you can't afford the tax on it.

They're gambling their stock will perform better than the interest rate on the loan. That's a reasonable gamble.

Taxing a loan seems silly.

> Which they have to pay back with post tax money

Unless they die first. If heirs hold on to inherited property for a while (2 years?) they can sell it at the cost basis reset to the value at the time they inherited. They pay back the loan with the before-death gains untaxed. The original buyer got to effectively realize their gains via loans, untaxed.

https://smartasset.com/taxes/how-to-avoid-paying-capital-gai...

Sounds like a problem with how inheritance is taxed, not loans.

Actually it's a feature that rich people get.

We bought a house last year and I was forced by QuickenLoans to liquidate my Tesla positions, that appreciated 5x and incurred short term capital gains. Were I richer, I could have avoided liquidating my long positions and pay proportionally less in taxes.

The most annoying part is that in the end they didn't even need all of my stock portfolio liquidated, only about 30% to cover closing costs. Yet I got hit by a 5 figure tax bill because of it.

In short - the system literally setup to extract as much as possible out of everyone, other than the wealthiest/most powerful. And that includes banks, government and lenders.

The most politically tenable way to end long term unrealized gains is

1. drop the corporate tax rate to 0%. Most notably, these corporations would follow the REIT tax policy that requires them to distribute > 90% of taxable income to shareholders.

2. Move Social Security and Medicare into the Progressive Income Tax (it being flat on income is regressive)

3. Offset #1 and #2 with a higher income tax (especially for capital gains)

For (1) You can set up pass thru entities that pay 0% tax and distribute 100% of their profits. The income is then taxed as regular income by the shareholders.

> So what if we found a way to make a rule that using unrealized gains as collateral for a loan was, for tax purposes, the same as realizing the gains? (You might need to tweak the rule for fairness but the basic point remains.)

Lenders will quickly adapt to give loans without requiring collateral

And insurance companies will stay clear of unrecoverable loans.

> It's everything we've already known.

> A more interesting question is how did ProPublica get a copy of Jeff Bezos' tax returns. Seems like a leak at the IRS?

Yes the actual tax records are what make the story interesting, even if the data only confirms what “everyone knows” — at least there’s actual data and empirical analysis of the scope.

According to this accompanying explainer, the leak is anonymous:

https://www.propublica.org/article/why-we-are-publishing-the...

> A second question certain to arise is the motives and identity of the source who has provided this data to ProPublica. We live in an age in which people with access to information can copy it with the click of a mouse and transmit it in a variety of ways to news organizations. Many years ago, ProPublica and other news organizations set up secure systems that allow whistleblowers to transmit information to us without revealing their identity.

> We do not know the identity of our source. We did not solicit the information they sent us. The source says they were motivated by our previous coverage of issues surrounding the IRS and tax enforcement, but we do not know for certain that is true. We have considered the possibility that information we have received could have come from a state actor hostile to American interests. In particular, a number of government agencies were compromised last year by what the U.S. has said were Russian hackers who exploited vulnerabilities in software sold by SolarWinds, a Texas-based information technology company. We do note, however, that the Treasury Department’s inspector general for tax administration wrote in December that, “At this time, there is no evidence that any taxpayer information was exposed” in the SolarWinds hack.

I don't think it's any coincidence that Jeff Bezos specifically was leaked.

He has been straying into politics in DC very very heavily, and it looks like he's making enemies. I suspect that is also the reason we see near-daily anti-Amazon posts on social media.

He's literally the richest man in the world. If the leaker's purported motive is to expose tax avoidance by the ultrawealthy, it would be very strange for Bezos to not be in the leaked data.

I don't think ProPublica describes in exact specificity the scope of the data, other than it contains "the tax returns of thousands of the nation's wealthiest people, covering more than 15 years". And it includes Warren Buffett, Rupert Murdoch, Mark Zuckerberg, Larry Ellison, Mike Bloomberg, Carl Icahn, and Elon Musk — a group of guys who, along with Bezos, are not considered to be politically aligned.

Richest from running a public company [holding stocks] not necessarily the richest overall.

We hope for more leaks about all these other people who are richer than Bezos.

Who is richer? Forbes says he's #1.

https://www.forbes.com/billionaires/

Possibly oligarchs and middle eastern royals, those kind of people.

People whose wealth cannot be calculated as known equity valuation * disclosed equity held. That doesn't necessarily mean anyone is richer, but they very well could be.

There are likely dozens, if not hundreds of criminal kingpins with more wealth. It’s just not in their name, only controlled by them.

Why do you think this?

Because making and selling cocaine globally (not to mention other drugs) must bring in tens of billions every year, and they have been doing it since the 60’s.

The ”human banking” method is very popular in transnational organised crime. Just look at how Putin has hidden his assets.

Some folks suspect Vladimir Putin is the richest man in the world, but there isn't the sort of public documentation that would land him on the Forbes list.

https://www.voanews.com/usa/us-politics/terrible-crimes-made...

Forbes ranks public, acknowledged wealth. Regents, oligarchs, gangsters, opaque family trusts, etc. are out of scope.

^ So would this mean: If we have to show our work on who is richest, Bezos is the richest man.

If we were to guess and not be able to prove it, maybe it would be Bezos or regents, oligarchs, gangsters, opaque family trusts

> regents, oligarchs, gangsters, opaque family trusts

Quite certain it is regents, oligarchs, gangsters, opaque family trusts.

While you're not at all saying this, it would be silly to try and analyze private and unacknowledged wealth, primarily because it would be more difficult to evaluate the wealth.

The tax returns need some relative value to compare against to show effective tax rates. If most of that wealth is illegal and well hidden, it's going to be pretty difficult to compare a tax return against and get anything meaningful from. At least in these cases, the wealth is more glaringly obvious in the open and can be more reasonably compared to tax records.

You misunderstand that list. It's not the worlds richest. Bezos is actually pretty far down (probably 100 people or more richer than him in the world).

I was worrying about some loophole Jeff Bezos was abusing but no, his hack is that he has no income. What a joke. Time to move on from this garbage article. They didn't expose anything except that Jeff Bezos has strong faith in Amazon stock.

Exactly he is stepping on the toes of those who own the media - its why the UK Press beats on the BBC and British Telecom.

BT has a lot a negative press about its sports investments but Murdoch's sky doesn't

I’m all for people paying taxes they owe. I’m against vigilante style leaks when the target hasn’t committed a crime.

Just because the person is not a sympathetic figure doesn’t mean it gives people the right to leak this kind of info, be they Bezos, Clinton, Soros, Koch, Gates, etc. get them on actual evasion if they have.

Otherwise what’s the purpose, rich people use tools to minimize their taxes? Ok, publish what the tools are and promote change in the tax code.

> I’m all for people paying taxes they owe. I’m against vigilante style leaks when the target hasn’t committed a crime.

This is the obvious consequence of a system that feels unfair and unresponsive via normal channels.

I don't think these vague emotional statements are constructive.

The rules outlined in the article apply to everyone, not just the rich, and they should be fixed for everyone, not just the rich.

In this case leaking Jeff Bezos' tax returns targeted one individual and provided no new useful information. It's exactly what we already expected about his taxes.

...and frankly, the "rich are evil - look how they don't pay taxes on unrealized gains" is a huge distraction from fixing the actual problems with the tax system.

We need to eliminate foreign tax havens, and severely limit non-profit "Foundations".

“We need to eliminate foreign tax havens”

or more succinctly:

“We need to condemn the families and businesses in places like those tiny island nations in the Caribbean to more poverty”

Those tax havens exist because they realize that a very real thing they can offer as a service is a place to domicile a business and capital. Not everyone wants to go to Ireland for its nice beaches you know.

How does Google funneling billions of dollars in revenue through Bermuda help the families there who are living in poverty?

Google's only presence in Bermuda was a P.O. box.

When you use Bermuda like that, you pay various fees to do so (registration fees, banking fees), and money ultimately goes into the national budget from that. The state then invests in infrastructure and some job creation from that national budget.

Similarly, when Caribbean nations sell citizenship to foreigners seeking easier travel or tax optimization (another avenue they have explored into order to diversify their economies), the foreigner typically pays a fee in the tens or hundreds of thousands of dollars for the passport, and that goes into the national budget.

lawyers, buildings, contracts, the person selling keys for PO Box, guards to watch over your PO Box, mail system.

Plus all the other things on top that are associated to flying in to Bermuda for the week of business to setup your PO BOX.

Oh and then there’s the airport, staff to maintain the airport.

All that plus more for a simple PO box

It seems incredibly unseemly to go after the airport staff in the Bahamas more than the tax dodgers you’re angry at.

Rules aren’t set in stone, they can change based on leaks like this.

Assuming people find this information objectionable that’s a reasonable justification to publish. In much the same way that leaking classified documents about questionable activities is morally justified, though illegal. Otherwise stamping secret on any evidence of say torture would work.

I find the leak objectionable. It doesn’t disclose any nefarious doings or tax evasion. All it does is verify what we already know. No revelation.

So this is more about shaming the witch rather than showing the witch did witchery.

"All it does is verify what we already know."

Wait. What who already knows?

I'm willing to bet that a lot of people who read this article did not already know the information contained within.

As such the article serves to educate a lot of people, which is a positive development.

I don’t think the author needed leaked data to present their objections to tax minimization.

But it does provide direct evidence (that average people can link to prior knowledge) in support of those objections.

They absolutely did.

That something is legally within the bounds of the US tax code is public knowledge.

That ultra-wealthy utilize something to an extent is not public knowledge.

Which cuts to one of the central issues with viewing the US tax code as democratic: there's almost no transparency of use.

The public might feel very different about a particular tax rule if they knew small businesses primarily used it, vs if they knew major corporations used it to shield 90% of their profits.

The IRS should do a better job of anonymizing actual tax reports, and reporting out on patterns in aggregate.

Talk to any software engineer in the valley and they do a lot of the same stuff that Bezos does. The "trick" of not paying taxes until you sell the stock is something I do all the time. It's not a trick even.

Are you also opposed to

the Watergate leaks?

Snowden's leaks?

the Pentagon Papers?

and a lot of less famous leaks of restricted information that have led to exposure and sometimes even justice for people who otherwise would have hid behind "legal" defenses for immoral or flat out illegal acts of their own?

I served in the Navy - I had a prety high clearance just to do the job I did. I know the value of classifying or otherwise restricting information. And I know the value of breaking those rules to expose those who would hide their crimes.

I consider the current tax code a recipe/playbook/script for stealing from the American public.

You are presenting an example of government cover ups or crimes. This is not the government doing something wrong, not even a private person doing something wrong.

It’s simple some vigilante having a vendetta against someone they don’t like and using illegal mans to skewer them.

The case they have is known. We know the loopholes. Let's as close them. Don’t go out on personal or vendettas of virtue when it aids nothing. There is nothing new here. Jeff, as much as I dislike his company, didn’t commit a crime.

It’s your option that these people did nothing wrong. However, many legal things like adultery are still objectionable and people object to this.

the more appropriate comparison in your case would be an open marriage where one partner complains the other is cheating. They set up the rules then complain someone is taking advantage of the rules.

I myself would like Jeff to pay more in taxes. I think the super wealthy pay too little in terms of parentage, but I should be upset with the Congress/IRS not the wealthy.

No, because it’s not the government complaining. The people complaining didn’t create the rules as such the rules are irrelevant to their complaint.

Really, it’s not a question of laws but one of obligations to society as a whole. Because society and the government are different entities but society depends on it’s government.

PS: To better use your analogy, suppose rich guy X, had an open relationship with their spouse (the government) and then started dating someone without mentioning their marriage. That’s much closer to what’s going on because it’s not a question of if what they did was legal but rather the secretary around it and the impact on society.

> It’s simple some vigilante having a vendetta against someone they don’t like and using illegal mans to skewer them.

If the leak's target did nothing illegal or unethical with their taxes, then how are they being skewered? Their taxes would just show them to be an upstanding, law-abiding citizen, right?

So sure, you can claim all you like that we already knew about these holes, but abstract arguments and aggregate data are far less persuasive and motivating than specific examples that clearly show the stark reality.

Or are you forgetting how the George Floyd video galvanized a world-wide movement despite everyone already "knowing" that racism is bad, that it exists, that police training is subpar and that bad cops kill people of colour?

You're being coy.

As if Twitter and all other social media media weren't about taking things and reframing them to make targets into bad people.

You mean ordinary people might develop a bad view of the untouchably wealthy because of the system they created to preserve their wealth? Cry me a river.

>preserve their wealth

Like it or not, they created it.

Should we extract more taxes from them, yes, arguably. But we don't have to resort to blackmail or other underworld tactics since it really accomplishes nothing other than momentary outrage by the mob.

Get congress to enact laws that close loopholes.

> Get congress to enact laws that close loopholes.

And we do that by exposing the problems of the existing system and galvanizing people to demand change. Which is what these articles are doing.

You don’t actually become extremely wealthy by creating wealth, you become wealthy by extracting wealth from other people’s work.

Either by inheriting it or some business arrangement where you keep value created by other people. Bill Gates for example didn’t code Windows 7 himself. JK Rawlings didn’t print millions of Harry Potter books or even produce the movies etc. Sorts superstars don’t build stadiums or collect ticket sales etc.

This is most obvious with investments dividends. As such thinking of capital gains as the fruit of their effort is really kind of a silly idea.

>>Rules aren't set in stone

The problem with that argument is who get to make that decision? Would you still be saying that if someone leaked you tax records to the general public?

Yep, I have no objection to people leaking any of my tax details beyond identify theft.

Anybody who has your full tax records has your name, your current and previous addresses, social security number, how much you make, your place of work, the name(s) of your children (if you file as head of household or for child tax credits), etc. What makes you think this treasure trove of information isn't going be used for identity theft? It's like saying you have no objections to someone breaking into your car or house and stealing your stuff, so long as they don't take your driver's license or registration papers and pretend to be you.

Tbh i think tax records should be public. It is in Sweden for example and that works pretty well.

At this point, I've come to believe that the real goal has nothing to do with actually fixing the system. I see it time and time again where articles like this get written and the proposals that follow focus solely on increasing income tax and proposing some form of a wealth tax. Nothing about closing the loop holes that allow this situation to happen in the first place.

> In this case leaking Jeff Bezos' tax returns targeted one individual and provided no new useful information. It's exactly what we already expected about his taxes.

I completely agree with your overall point, but this statement is not true. Solid concrete evidence of what we "already expected" _is_ new information. (also, as other commenters have pointed out - what _you_ already expected is not necessarily what the average person already expected)

>In this case leaking Jeff Bezos' tax returns targeted one individual and provided no new useful information. It's exactly what we already expected about his taxes.

I think when he owns the Washington post, it becomes of the public interest.

Hell, in Norway literally everyone's salary is public information. Hasn't seemed to do them any harm either.

It’s still not acceptable. At least the tax minimizer is following applicable laws, this vigilante is not.

They are taking it upon themselves outside the law to settle disagreements, but they want to leverage new laws to make taxes more aligned with their policy (but obviously they are okay with ignoring other parts of the law —that’s a disconnect).

I’m not a huge fan of gravity hurting me when I fall either, but I’ve found that railing against it is ineffective.

If you want these things to stop, you need to change the incentives that people operate on. Anything else will be like trying to plug holes in a dam with your finger; locally effective at best.

You can believe in the power of a legal system without respecting the specific legal system that you're currently living under.

Would it be a disconnect to illegally oppose an immoral law - like, say, the legal protection of slaves as property - while simultaneously wanting to pass laws that you expect people to follow - like, say, making slavery illegal? Probably not.

It's inaccurate to treat obedience to the law as a moral act. It can only be moral because the law itself reflects moral attitudes. Wherever there is a disconnect between the law and morality, it is the law that bends - which is exactly why laws can be rewritten in the first place.

What immoral law are you talking about? Allowing rich being rich? Too rich? You don't like rich being super rich? What immoral law is it? Be specific.

And Jesus said to His disciples, “Truly I say to you, it is hard for a rich man to enter the kingdom of heaven. Again I say to you, it is easier for a camel to go through the eye of a needle, than for a rich man to enter the kingdom of God.”

Context!!..Context!!..Context!!

I'm not calling any law out as being immoral - I'm pointing out that there's nothing hypocritical in circumventing a law you find to be unjust while still campaigning for changes to the law that you expect others to follow.

What law though. You think all tax records should be public record?

To quote my own comment: "I'm not calling any law out as being immoral". This is not about any specific law.

> It’s still not acceptable. At least the tax minimizer is following applicable laws, this vigilante is not.

The total harm of stealing billions from the public dwarfs any concern for the thieves' privacy.

They are following the law, sure... the unfair law they pay for to their advantage.

Where does the leak show theft?

If you earn $100 a week and tax withholding let you have $80 to yourself. That $20 didn’t belong to the government. It belonged to you. You however, having entered into an implicit agreement with society agree you will part with your money and give it to the government (which is different from its being theirs). Now, if you donated some of the $100 to charity or whatever and reduce your tax liability, that’s not “theft”. That’s part of the initial implicit agreement.

This argument assumes wealth is zero-sum, which is false.

No, that's projected. It's not a comment on wealth-creation, but rather that 90% of it, the surplus value, goes to the top. The middle class is getting squeezed.

The correct response is to use your legislators to change the tax code to be more fair.

Yelling at people for properly taking legal deductions, when you yourself take deductions on your taxes, reeks of hypocrisy and being mad because Joey got a cookie and you didn't.

>reeks of hypocrisy and being mad because Joey got a cookie and you didn't.

You mean because Joey took his allowance and bought the supplies for a lemonade stand, took the money made from that to buy the ingredients to make cookies, then took the time to bake himself cookies.

It's strange that people find a person who creates & grows a company and who pays hundreds of millions of dollars in legally required taxes detestable. Yet a person who fails to gain the basic education that is free to them, who has no ambition, who is literally a drain on society, cannot be criticized. It's astonishing to me that society accepts and allows people to not have a least a high school education.

I wonder what the response would be to an article about how trillions in taxes are not paid because there are millions and millions of people who simply don't develop their personal capital and make decent choices that would result in them earning more and paying more in taxes.

Don't know why you're being down voted. I have no love for bezos, but insofar as he seems to mostly follow the law, contribute to society, and built a large employer, he seems more worthy of emulation than the randos we are asked to care for on the government dole

I don’t know why you are being downvoted. If homeless people simply decided to learn Python and read PG essays for inspiration rather than being a drain on society, we could completely eliminate the homeless problem. Hopefully one day the troglodytes making up the rest of the world will catch up to our enlightened viewpoint.

Hard to tell if this is sarcasm or not.

It’s a riff on the tone-deaf “learn to code”[1] thrown at miners and anyone else losing jobs in the transition to renewables.

[1] https://www.reddit.com/r/OutOfTheLoop/comments/angr4k/what_i...

Good one. I do hope people recognize that homeless people constitute less than 1% of Americans. By contrast 60% of tax returns filed by Americans have negative net tax rates. They literally contribute nothing to the running of the Federal government, and for about 40% they contribute nothing to all other levels of government.

This story is about how the very few extremely high earners use sophisticated personal finance strategies to minimize their tax burden. On the other hand huge numbers of people use the unsophisticated strategy of not developing any significant skills or education and not earning much money resulting in not paying any net taxes. Not talking about the super poor who earn nothing, but people who earn $30,000-$60,000/year. At the end of the day, they are not net tax payers.

When the US gets overtaken by other economies in Asia, it will be because people there focused on climbing to the top by any means while we whined about how hard our life is.

There are guys in Hyderabad right now in conditions worse than US homelessness learning Python, devops, cloud, virtualization, you name it because that's how they can survive.

I know people in fairly poor countries with terrible crime rates and bad job prospects, and I have never heard them complain about how hard life is. They figure out how to get out of their situation and improve their life.

The idea that someone else has to fix your situation because life is hard has to be one of the most crippling mentalities you could have. The sheer amount of opportunity we have in the west is unprecedented in human history; instead of crying about the fact that your stable job of 20 years is ending, yes: I'm going to say that it is fundamentally you that has to pivot (even if it would be nice if the government helped).

Yup. Few people know that the 401k deduction is a massive loophole someone found and exploited. It was never intended to be a retirement vehicle or used in a widespread manner. There was discussion of repealing it as the tax revenue hit was not planned for.

> The correct response is to use your legislators to change the tax code to be more fair.

My entire thesis is that vigilante leaks like this are a product of the perceived unwillingness of the legislature to deal with the abuse of tax loopholes or to tax the rich at anywhere close to the rate that the overwhelming majority of voters want. If my theory is correct, then saying “talk to your legislator instead” is almost hilariously tone deaf, given that these leakers are probably taking actions into their own hands in response to a belief that their legislator is lazy or corrupt.

More broadly, my point is that singling out individual actors is an ineffective way to stop stochastic law breaking. Decry and punish individual law breakers all you want, but don’t expect it to stop until you at least triage the underlying causes.

The tax code is the product of the legislature and the courts, both of which are accountable to voters.

The bureaucrats are functionally accountable to nobody. This leak was instigated by a bureaucrat.

Fuck the bureaucrats.

> The tax code is the product of the legislature and the courts, both of which are accountable to voters.

That’s the theory, yes. I do not believe this to be true in practice however.

There's nothing that can't be justified by this reasoning.

You’re assuming I’m making a justification rather than an observation. That is incorrect.

"feels unfair" depends completely on the Overton Window.

What proportion of Americans have a federal income tax liability of zero or less? (Yes, some Americans get paid to file taxes, via "refundable" tax credits)

I believe it is around 42%.

What proportion of the top income earners pay 80% of Federal income taxes?

Our system is overall quite progressive. To complain that the five or so people mentioned in the article "only" paid billions in taxes over a five year period is a bit nonsensical.

Given that the federal government collects its revenue through income taxes, and that 53% of Americans are children, the elderly, students, retired, disabled, or simply unemployed, how many of those people, in your opinion, should have a federal tax liability?

Also, another 13% of Americans make less than $12/hour, with many of them working under 30 hours a week. Roughly how many of those people, in your opinion, should have a federal tax liability?

> "only" paid billions

It was millions over the period of 2014 to 2018. Not that I disagree with your overall point.

Bezos did almost pay $1b himself though. In total the people in the article paid under $2b.

How would top income earners feel without employees or workers (either their own or everyone in every business they patronize)?

I hate paying taxes.

But I'm honest about what I'm buying for my money -- the broader community I live in and happen to like and care about.

Our overall system is not progressive. Once you factor in the regressive nature of social security taxes and average sales taxes, you quickly see that the rate of taxes paid on all income remains fairly consistent up until you get to people with a net worth in tens of millions plus who pay a much lower percent rate.

> Our overall system is not progressive.

Yes, it is, overall: https://theintercept.com/2019/04/13/tax-day-taxes-statistics...

> Once you factor in the regressive nature of social security taxes

Social security is effectively a mandatory pension scheme where you get benefits at retirement based on what you paid in, so calling it a regressive tax seems inaccurate.

> and average sales taxes

Many states have exemptions for essential goods to limit the regressive nature of sales taxes, but yes they are regressive overall.

> you quickly see that the rate of taxes paid on all income remains fairly consistent

I'm not sure what your definition of fairly consistent is, but your first sentence is incorrect above, so it's probably not accurate here either.

> up until you get to people with a net worth in tens of millions plus who pay a much lower percent rate.

This is absolutely true, and is something that should be addressed in my opinion. Just taxing capital gains as income would be a great start, and might be enough.

See cancel culture, same thing.

Bothered by "internet mobs?" Look at the underlying issues.

Sticking to your principles too much when the opposition is perfectly willing to do whatever it takes may lead to you dying on your hill.

They are not doing whatever it takes. They are following the laws we have enacted. The only one doing whatever it takes is this person who seems to think taking justice into your own hands is an acceptable thing to do.

I'm not saying we should not close loopholes. I'm all for that, but I'm not for willy nilly leaking illicitly obtained private documents that do not describe illegal behavior nor anything we didn't already know.

The flaw here is that they're not following the laws that we the people have enacted. They're following the laws that they themselves have lobbied for and bought the legislators to pass for them.

If you only condone taking legal courses of action, how would you go about opposing those billions and the leverage over the legislative process that brings?

It's all well and good to take a moral high ground and say no one should ever break laws, but when the laws are exploitative and the legislators are beyond real influence, what other recourse is there?

Do you have evidence of them buying laws that allow them to not pay taxes until a capital gain is recognized? Because that’s the crux of this whole article, that they’re paying a small percentage of their “wealth gained”. As far as I’m aware, capital gains have never been taxed on eg company stock in the US before a sale triggers it, so it can hardly be considered the work of this group.

It gets substantially murkier, too, when you consider that much of the nominal valuation gains on their assets might be attributable to the dollar being essentially devalued vs hard assets.

One correction: they (the rich) are following the laws they have enacted. An average Joe can't bribe senators (sorry, I meant donate to their campaign), talk to them privately and get the desired law enacted.

How dare anyone question an established legal status. Of course Mr Bezos owes money to her Royal Majesty the Queen!

Not sure why this is downvoted. If americans just blindly followed the law, the US would be a British territory today.

Because it's the kind of low-effort humor that shouldn't be encouraged by excessive upvoting or else it would completely take over the site.

Chances are actual downvotes are still from people who not only disagree with style but also with content, but when those are a minority a magic thing happens: people who agree with content but are at best neutral about the style see it in deeply faded grey and vote "it's not that bad", but only as long as it's deeply faded. The result of a most agree but don't wand to encourage surgeon reliably ends up a slap on the wrist "ca -1", no matter how many people voted. The mechanism works great.

(and it's also quite successful at keeping meta talk like this from escalating, I only feel that it's somewhat acceptable to write this now that the story has left the front page more than half a day)

This argument makes every single law moral. It also is telling you to not question laws that are in place. If "crime" is your definition of moral or immoral I'd love to hear your take on any of the civil rights movements of the last 100 years.

You litigate and appeal and go to your legislators and eventually you go to the Supreme Court and you make your case.

I mean one is about basic rights the government owes us, the other is about us wanting the government to take more from particular people.

The civil course is slower but the alternative is typically bloody revolutions or Hongweibings, both of which set back societies.

The Supreme Court isn't a moral court. It rules on if a law is constitutional or not. Plenty of grossly immoral laws were considered constitutional by the Supreme Court and required new laws to be passed to repeal those immoral laws.

> You litigate and appeal and go to your legislators

How do you think most of the rich stay on the good side of the law? They have much more direct access to legislators via mechanisms that should be illegal, but are not because they pay to protect them.

Litigate someone else's legal tax returns? That doesn't make any sense.

There's a credible case that tax records should just be public. Some places they are. Real estate records are.

Making everyone's income public is very different than a public record or property ownership. I for one wouldn't appreciate people looking up and talking about the income of their high-school classmates. Income drives enough status in society without it being publicly known and discussable.

You don't think high school kids know who's rich and who's poor?

I kinda knew who had more or who had less, but I did not know how much they had or didn't have.

Hill staffers in DC all know you can look up each other's salary on a website, as you can with most government workers.

You could have a threshold. Sweden has a fully transparent system which is pretty nice imo. Being able to look up politicians is great to deal with corruption.

Is there a way to promote change in the tax code without demonstrating how it is abused?

How do you pass laws to make this behaviour illegal without knowing what the scope of the problem is?

Laws take political capital to pass, and without public outrage, you have zero political capital to take the first step towards reform. Any attempt to pass laws that increase transparency will be quashed, because you have no political capital to do so, and people taking advantage of this have a huge interest in squashing them, so they can keep operating in secrecy.

I'm not shilling some weird conspiracy, here. This is exactly the purpose behind ag-gag laws. [1] Thanks to them, the public can't make an informed decision on whether or not illegal activity should be prosecuted or investigated, or whether or not currently legal activity should be made illegal.

This is a similar situation, except that the financial stakes - and the incentives for secrecy - are about a thousand times greater.

[1] https://en.wikipedia.org/wiki/Ag-gag

> Ok, publish what the tools are and promote change in the tax code.

Publishing an actual example of how these tools are used is a perfect way to explain what they are and how they're exploited. Bezos is rich enough to be untouchable, so what's really the concern here?

The privacy of the people whose data was leaked.

All rights have limits, including free speech and privacy. We can discuss where those lines should be, but by precedent it's established that public figures have reduced privacy rights because it serves the public interest.

It's clear at this point that extremely wealthy figures should expect reduced privacy rights when it come to their wealth because it serves the public interest.

You're basically arguing that the public shouldn't be aware whether a person owns a nuclear weapon because they bought it fair and square and "privacy".

All rights do have limits, but this is too soft a limit for me, personally. I can understand how someone who is a well-known public figure would give up some rights related to slander, or being photographed, or whatever. But we're talking about private tax data, secured by the IRS. Guesses based on what someone makes based on or derived from publicly-available information I can understand, but leaked private tax documents crosses a line I'm not comfortable with. I do understand that others might think differently on this topic, though.

All tax records are public in some developed countries. This is a cultural line that should be moved IMO. Maybe not all the way to full public disclosure of all records, but certainly away from the status quo. Government transparency is good.

It's hard to commit a crime when you have layers of people managing your finances and other layers of people managing the people who write and enforce the laws.

Also, this person or persons probably didn't just take the information for a few rich people at the top. The probably stole the information for many, many more people. These are the few they leaked.

What are they doing with the rest of the info?

Counterpoint: perhaps putting a name and numbers to these tax loopholes will make them less abstract for people.

For example, knowing that the richest man in the world avoided paying $x billion in taxes using a loophole could insight change better than a theoretical story about how somebody could use these loopholes.

That being said, I'm still not sure if leaks like this are a good idea or bad idea. Just playing devil's advocate a bit.

So you accept all unethical behavior from these billionaires and demand ethical purity from everyone else? This is quite a toxic double standard.

What is unethical about not wanting to pay more taxes than the law asks you to?

I’m sure some people donate their own money to Uncle Sam, but most people don’t and they are not required to.

The law that you wrote?

> Ok, publish what the tools are and promote change in the tax code.

That would work if people were purely logical. But people are not. Therefore the average person needs an anecdote, not data, to start caring.

I also think leaks about billionaire's finances are completely fair game. It's not that they are unsympathetic, it's that their finances are that important to the average person.

> I’m against vigilante style leaks when the target hasn’t committed a crime.

The thing is that such leaks should help you realize that some things aren't crimes but should be.

Keep in mind that 200 years ago owning/buying/selling slaves was not a crime in the US. Yet nowadays we all agree that slavery exploitation is a crime.

I would be outraged if someone leaked my taxes to the public. I'd be looking for someone to sue, though in this case I'd fail to find anyone I can sue I'm sure. I don't care if these are the richest people in the country or if the data is really interesting, it's not ethical. In my opinion, even though propublica didn't solicit this information, they should not have posted information derived from private tax information without the consent of those involved. I don't what the laws are here, but I'm talking about ethics. I wouldn't want my private information summarized, by name, in this manner.

The other issue I have is that not only is the provenance of this data unknown, so also is it's veracity. They don't know who gave it to them or why and thus they can't confirm it wasn't made up out of whole cloth.

I actually feel the opposite. I think we should make tax returns public, as they do in Norway: https://www.theguardian.com/money/blog/2016/apr/11/when-it-c...

We'd need some small adjustments to make them not useful for identity theft (remove SSNs, stop using specific values from them as authenticators for the IRS, etc.) but with that done, I think it would be a great improvement in transparency.

My public sector salary is already a matter of public record, and that has worked fine.

Someone's public sector salary may be a matter of public record, but their deductions are not. The tax forms (in the US, anyway) cover everything from whether or not they or their spouse are blind to exactly how much they spent in health care costs from a health spending account (with receipts attached) to whether or not they added solar power to their roof. It would have to not show addresses, because of people hiding from abusive spouses, among other concerns.

I'm for more aggregate data being made available as long as it couldn't be used to find one individual, and I'm okay with the IRS adding a checkbox for "make my data publicly available" as long as you could always uncheck it. But then I take privacy more seriously than many others do, not sure why.

I'd be happier if we greatly simplified the tax laws so that this extra data was not necessary. Not going to complain if they reduce the tax burden as well.

Edit: grammar

Simplifying the tax code is certainly sensible. Reducing the tax burden is not. As mandatory expenditures (medicare and social security) continue to increase as a percentage of GDP, the discretionary part of the budget (roads, defense, R&D, etc.) is going to continue to get squeezed. Unless we can significantly reduce the amount of money going to the health care sector to the tune of about $1T/year (and deal with the impacts of that on the people currently working in that sector), tax burden is going to have to go up.

Some nice charts midway through this page: https://www.pgpf.org/analysis/cbo-warns-fiscal-path-is-unsus...

> and avoiding the obvious argument that capital gains are eventually taxed - the rich are not escaping that.

Not so, because of the step up basis at death. That provision allows the capital gains tax to be not just postponed, but eliminated.

Ahh the old death loophole...

You can't take it with you, but your estate can? WTF.

I’m just surprised more wealthy people aren’t taking advantage of that obvious one.

The step up basis only applies to estate taxes below the federal limits, so it doesn't apply to super-rich. ...another point (deliberately?) omitted from OP's article.

Step up basis might get eliminated in any case, as the Biden Administration is proposing to remove it.

That’s not quite right. The step up basis applies to everyone.

It is true that if estate taxes are paid on the gains then the step up loophole hasn’t completely eliminated taxes on capital gains. However, the estate tax is even more full of loopholes than the capital gains tax. See for example the Grantor Retained Annuity Trust.

Finally, the Biden administration is not proposing to eliminate the step up basis entirely, unfortunately, but merely rein it in some.

For ordinary people, sure. But the estate tax kicks in at anything above $11M, and is 40%.

The estate tax in America has been called the voluntary tax for a reason - it's almost never paid on at the rate you quote by anyone who can do the leg work to set up legal entities which can make the effective tax rate 0% - which ends up being trivial for billionaires: https://archives.cjr.org/the_audit/bloomberg_waltons_how_bil...

Even a quick Google search yields articles describing a (very incomplete) list of loopholes one can use to make the estate tax not something one has to "worry about": https://smartasset.com/taxes/5-ways-the-rich-can-avoid-the-e...

Perhaps, though all of those things have downsides and limitations. But the idea here is not defending all the intricacies of the US tax code. It's simply noting that the gloss of the article that somehow it's a giant scandal that unrealized cap gains aren't taxed is dumb.

Which is why we need to curb these non-profit donations and trusts.

The estate tax rate itself is fine - the issue is the exemptions.

Ironically, when saying it's well know that the wealthy avoid taxes", gets downvoted in another thread.

https://news.ycombinator.com/item?id=27090450

I love how in America everyone is middle class. $10 million estate—-that’s totally ordinary!

If the lower bound on estate taxes are too low, certain kinds of capital intensive family businesses like farms take a big hit as they pass from generation to generation -- in a world where they generally have a net disadvantage to corporations already.

I also love how the family farm remains a universal justification even as it’s almost entirely disappeared from American life. It’s similar to how every American child knows what a pig and cow sound like despite almost none of them having seen one. Our culture is funny.

That aside, I’m not arguing for a lower estate tax threshold. I’m arguing for an elimination of the state up basis at death, at least for assets which the estate tax has not been paid.

If Joe Farmer’s kids keep his $10 million farm, they won’t pay any taxes. But if they sell it, they ought to have the same basis as Joe would were he still alive.

Keep in mind, not even a couple dozen family farms have to pay any estate tax any given year, and that number is getting smaller: https://www.cbpp.org/research/federal-tax/the-federal-estate...

I would say most kids have seen a pig or a cow either at a farm, driving past a farm or going to the zoo (zoos are a common experience for most average kids).

I don't remember seeing pigs or cows at any zoos I've been too. Have you? I've certainly driven past cows in fields, but a child living in a city may not experience that. I think pigs are even more rare since they don't seem to be kept outside.

There's really no reason other than custom that appropriate numbers of pigs couldn't be raised and slaughtered in any city. They can subsist entirely on table scraps, the disposal of which is a regular burden for cities. They don't require lots of room to roam. They do produce effluent, but that is only a burden at mega-farm volumes. An individual hog will produce roughly what an individual human will produce, but only when it approaches the right size to butcher. Eventually this will seem normal, if only because chicken husbandry is growing more common all the time in many cities.

Zoos I've been to tend to have more exotic animals - giraffes, elephants, zebras, lions, monkeys, etc. I think a zoo would prefer to direct its budget/resources towards these kinds of animal attractions.

In the U.S., a pettings zoos or a county fair might have pigs, cows, and others like goats, horses, etc. Working animals or ones that kids/families raise for contests/shows, say the 4H society or FFA.

Most small businesses - even those little shops owned by immigrants, are valued in the millions.

The step up basis will probably be limited or eliminated this year with Biden's tax plan.

https://dailyyonder.com/farmers-estate-tax-myth/2017/09/20/

That’s the convenient excuse that anti-estate tax advocates use, yes.

In reality it would be pretty easy to setup the tax code to avoid such issues, but instead we’ve whittled the estates tax down to nothing to benefit heirs of the ultra wealthy.

I come from a long line of farmers. It hasn't been possible to have a "family farm" for 4+ decades. Any profitable farm has 1000+ acres and is basically a corporation.

I know the intent of your comment is to support family farms, but now these tax incentives have become perverse and really only benefit rich people, not family farmers.

If your family farm isn't an LLC, then wtf are you doing?

We were talking about Jeff Bezos. An $11M deduction on his estate would leave more than 99.99% of it taxed.

Assuming he actually pays it.

When you die, your estate pays taxes on the current value of the assets you’re passing along. Without stepped up basis, your heirs would get taxed again on gains that you essentially already paid a 40% tax on.

I think it would be perfectly reasonable to reset the basis on any asset which had 40% estate taxes paid on it, but that’s now how the law is written. Not only is there an $11 million lifetime exemption there’s also an annual gift tax exclusion that combined with some clever trust setups allow the wealthy to pass on much more than that without paying the 40%.

In practice huge amounts of capital gains are not taxed by either the capital gains tax or the estate tax.

The yearly gift tax exclusion is peanuts for a billionaire. The 11 million almost rounds to zero too.

Neither of your points impact Billionaires. They are meant to save small business owners.

Eliminating the step up basis would have no impact on small businesses owners so long as they remain owners.

Taxes happen when money changes hand, it’s not something out of the ordinary.

I agree. I’m just talking about whether stepped up basis is fair or unfair.

Correct, exactly the same way as if you'd realized some gain a day before your death. Your heirs are also taxed again on the money you earned as a regular income. This is more of an argument against estate tax, not against step-up-basis.

But are the assets liquidated? If ownership of assets just transfers to heirs, then they'll just pay the tax whenever they cash out.

That’s the point, the heirs don’t have to.

Suppose I own $1 million worth of Bitcoin I mined back in the day. If I sell the day before I die I’ll owe $200,000 in long term capital gains taxes. But if I die, leave those coins to you, and you sell them the day you inherit them for the same $1 million, you owe no capital gains taxes.

Edit: if this is surprising, it should be. The step up basis is insane.

Yeah. I've tried to convey this point to family before. I'm not sure why they don't believe me. They are convinced the "death tax" is some nefarious thing.

The proposed "death tax" idea is to make inheritance a taxable event. I'm against that. I'm for however that capital gains carry past death.

If you inherent cash, that cash has already had taxes paid for that. It shouldn't be taxed again like some "death taxes" propose to do. If you inherit stock, then sell it, the basis date for that stock should be the date it was bought, not the date you received it.

It’s not a bad compromise. Even that, I’m sure, would end up getting mangled over technicalities and added loopholes.

Sorta. Inheriting cash is no different than being gifted cash. And you would have to report that as income.

It only gets complicated with capital assets. And your proposal works for simple stock holdings.

Consider, if you are the beneficiary of a retirement account, you already have to withdraw percentages every year. So that is covered? Or not?

> Sorta. Inheriting cash is no different than being gifted cash. And you would have to report that as income.

Right and I don't think gifts should be taxed either. It's already been taxed.

On this, we'll just have to disagree. :(

At some level, most (all?) money has already been taxed. Some entities can write off expenditures as a deduction. Most of us can't.

Consider, my income had already been taxed. Why do I have to pay sales tax on purchasing something?

Edit: and in case you fix on sale's tax being different from income. Payroll for businesses comes out of profit. Which comes from that same transaction. So, somebody's income is ultimately funded from a sales made with money that had been taxed.

Oh.... Cool!

So I'll give you $200k as a gift and you gift me your house "as a gift" ;)

I think that's good and correct. The inheritor hasn't had any capital gain. Because the deceased never sold, they didn't either.

If the inheritor somehow has no capital gain, shouldn't the entire basis be taxed as income instead?

E.g. if I win a car in a contest or get paid in stock for working, I have to pay income tax on the current value when I receive it.

>The step up basis is insane.

Basis step up is extremely pragmatic, because it can be extremely difficult to establish the cost basis of a dead persons assets.

It's offset by the estate tax -- change your figures to $20 million and the situation is substantially equalized.

So get rid of the step-up basis at death. There is no good reason for that to exist.

I agree, but even Biden’s opening gambit, which I believe has very little chance of passing as is, doesn’t eliminate it entirely. It seems to have powerful supporters.

Go ahead and lobby Congress to pass that. See how easily you can get that done against the lobbying from the holders of that wealth.

Now how do we change the system? Put it in front of the entire public how much higher a percentage of their wealth they give up compared to these few, and get the entire public to fight for equity.

The basis should at least be inflation adjusted.

I agree. The law should:

- eliminate the step up basis at death entirely

- index the capital gains basis to chained CPI

- give a credit to heirs for estate taxes paid which can only be used to offset the capital gains on inherited assets up to the basis at death

Look UMA in Mexico https://www.littler.com/publication-press/publication/mexico...

Nah. The author states clearly that wage earners don’t have assets other than homes.

The facts are:

“By the end of 2018, the 25 [wealthiest Americans] were worth $1.1 trillion.

For comparison, it would take 14.3 million ordinary American wage earners put together to equal that same amount of wealth.

The personal federal tax bill for the top 25 in 2018: $1.9 billion.

The bill for the wage earners: $143 billion.”

Don't think this is a useful comparison because wealth isn't taxed. Income is. If you take the top 1% of earners, they make 20% of the income, but pay 38% of the taxes.

> If you take the top 1% of earners, they make 20% of the income, but pay 38% of the taxes.

And that's normal.

If I make $1k per year, taxing me is almost criminal, since I can barely afford to feed myself.

If I make $100k per year, taxing me $20k year is kind of annoying, but manageable. I'll probably have to avoid some bigger expenses I would have made if I were not taxed at all.

If I make $100m+ per year, taxing me $40m per year doesn't even change my lifestyle. It just gives me topics to bitch about at dinner time, but it doesn't change my life in any material way.

The more I have, the more I can afford to give away without it impacting me or my family in any realistic way. Except for losing ego points.

I understand the point but I question if reality works that way. No one looks at a tax bill and says "what have I got left after it?" They just look at the bottom line. And it doesn't matter if you've got a $100m in the bank or $900m - $40m is a lot of money.

Avoidance is a more or less a fixed cost. It's the price of tax attorneys and Congressman. To the degree you go over that fixed cost it's going to be harder and harder to get the amount. The biggest surprise to me is always just how much the rich pay not how little.

Diminishing marginal utility is a basic economic concept.

You're correct. I know that I got a lot more utility out of the first $100 I ever made then a $100 now. I don't think mentally it tracked perfectly though - that first $100 was a lot but I knew in the larger scheme it wasn't really a lot of money and today I'll still price show to save $100 even though I know it's not a lot in terms of my income.

I have no economic concept for this but I strongly suspect it's true.

How about this? If you go rooting around underneath my couch cushions you'll find quarters. If you do the same for Bill Gates' couch you'll find ... Not $100 bills. Even if in respect to his entire wealth a $100 is less then nothing to Bill Gates he can still see the utility that money has in the world at large and that changes how he views it - maybe he doesn't see it the same way I do now or I did when I was 15 but he'd value it more then would be expected in relation to his over all wealth.

Depends on what you mean by how much they "make"

The distinction between capital gains and wage income is heavily coded into law, but that doesn't make it a distinction that SHOULD be treated in the way that it is.

The problems faced at a certain level of wealth are so alien that it's not uncommon for their solutions to sound totally nonsensical - even actively harmful - to anybody outside of that demographic.

In light of this, I don't think we can so easily dismiss delayed taxation of capital gains as unimportant and irrelevant. Maybe it is, but I think we need more information to solidly come to that conclusion. Even one of the things you (rightly, I think) identify as a problem seems to have some serious synergy with such a delay. What happens if one of these charitable foundations ends up with stock? How long of a delay might that taxation have then? And is there any way for them to get some liquidity out of that stock without actually selling it? Can they take out loans with it as collateral, for example?

I'm not actively making claims here, but rather trying to show the situation is complex enough that we can't write off seemingly innocuous mechanics simply because they appear innocuous. It's complex, and weird, and needs deeper information and data to really understand.

He said delay, but that's just because the stock hasn't sold yet. Until you do, the gains are unrealized, i.e. the stock could drop precipitously suddenly due to some black swan event (i.e. a pandemic), and then they suddenly that wealth may as well never have existed.

Like let's say I'm some regular guy, but I put my only $1000 in some asset that appreciated 100x, and it's now "worth" $100,000. These people that want to tax unrealized gains swoop in and go "hey, you're 'worth' $100k on Dec 31, you should pay us $30k in taxes this year". And so I don't have that money and have to sell my stock to pay it, but two days before I do the stock market tanks before I get a chance to sell and it's dropped 70% in price, so now I'm 'worth' 30k. And now I've sold it all just to pay the unrealized gains tax.

Now this is an extreme example and unlikely to happen exactly in the stock world, although not terribly extreme if this weren't stocks we're talking about, but some cryptocurrency.

This is why taxing unrealized gains never made much sense to me. The gains aren't actually real until you've converted them into something else or you purchase goods or services with. Until then it's just some number on a scoreboard.

You can borrow against the gains though so they aren’t exactly unrealized gains either.

Yeah, borrow as in you have to pay it all back plus an extra percentage. It might be a lower percentage than capital gains, but you better hope the asset keeps appreciating at more than you borrowed + percentage.

And then once you pay it back you still have to eventually cash out and pay capital gains tax anyway.

Like if I had done that with bitcoin a couple of months ago (and it's possible to do, there's DeFi now), I would have been in some deep shit with the 50% drop recently.

It does seem like a bit of a sidestep though, and I'm sure rich people are probably taking advantage of it, so I wouldn't be opposed to some sort of small tax on money gained from loans made against your assets assuming you owned enough of them (like I don't want to hurt small business loans or anyone in the middle class from it), to discourage this practice a bit.

This is also why I think it’s crazy we pay taxes on startup options when exercised. There’s not market to liquidate to pay those taxes and the end value is very likely $0

I have what I hope is a genuine question here:

> we need to ... severely limit tax exemptions for charitable donations

Why do we need to do this? Wouldn’t the natural incentive-based result of this be a huge reduction in charitable donations? It’s essentially an asset transfer from charitable causes to the government. I’m not sure I understand why that’s default good.

People should be giving to charities out of the good of their heart, not to get a tax deduction. The tax deductibility of charitable donations makes them no cost options for the donor. Remove the tax implications, and you will see who really cares about their cause.

For the sake of argument, assume a flat 20% tax rate for a minute.

Scenario A: Your taxable income is $1,000,000. Your tax liability is $200,000. You pay your taxes, you net $800,000.

Scenario B: Your taxable income is $1,000,000. Your tax liability is $200,000. You donate $200,00 to charity. Now your taxable income is $800,000 and your tax liability is $160,000. Your net income is $640,000.

The only scenario where a charitable contribution doesn’t lower your overall income is

Scenario C: you commit fraud.

Scenario D: You donate $800,000 to a foundation you control. Your net income is $960,000 ($160,000 cash and $800,000 with some strings attached).

If they cut a string, or even pull on one a bit too much, they’re right back at C.

Assuming anyone can get the AG to actually investigate, file charges, and get a conviction.

Notoriously more difficult as the amount of financial leverage increases.

You're forgetting that you can donate appreciated assets for their market value without realizing the capital gains as income.

(Legitimate) tax deductible donations aren't no-cost. You can only use it to reduce your tax at the marginal rate you pay.

If, for example, you were in the 30% tax bracket and gave a $100 deductible donation, you'd only reduce your tax liability by $30 (ignoring edge cases) - ie you're still $70 out of pocket.

How does this make sense. It’s “tax deductible” because you are giving the income away instead of keeping it. Of course people would give less if they had to give the government a cut.

“I want to give a million pounds to charity.”

“That’s nice of you. You still need to pay tax first on that sum, though.”

“OK I want to give £600,000 to charity.”

Why should whether it's given away or not mean that government shouldn't receive the same share?

That's just the way it works. There's numerous alternative arrangements and arguments in favour and against.

You could think about if the owner of a business generously decides to give all his employees a pay rise - the government now receives less money because the employees pay a lower marginal tax rate than what the owner would have paid if he kept the money for his own higher salary. Should the government get involved here and claw back that lost tax?

Why should the state get any of it, regardless of what I spend it on?

> Remove the tax implications, and you will see who really cares about their cause.

Yes, and donors should be whipped proportionally to the size of their donation – then we'll see who really, really cares about their cause.

> People should be giving to charities out of the good of their heart [...]

It's not up to you to decide people's motivation for being charitable.

My understanding is that donating to charity, which would ideally be for the good of the common public, is purposefully encouraged, and that is not fundamentally different than giving money to the governments as taxes. In other words, someone may believe more in a given charity spending money towards social good than on the government itself.

I see some arguments along these lines here:

https://theconversation.com/explainer-why-are-donations-to-s...

Excerpts:

* The main argument for tax-deductibility of donations is that it is a form of government assistance or subsidy for what are considered publicly beneficial causes.

* A third argument is that indirect support mechanisms, such as tax-deductibility of donations, facilitates choice. So, taxpayers can direct a certain proportion of their tax to causes they choose, rather than the government determining how it should be spent.

And the counterargument to that would be:

Directing money to a charity, to avoid the money going to the government, is explicitly a way of directing your money away from the common good of the public (which is after all theoretically what the government would spend it on) and towards the specific spending goals which the donor supports. The idea that a wealthy person has a 'better' idea of how to spend their money than the collective will of the people expressed through government is fundamentally antidemocratic.

A billionaire spending money through a charity that promotes a particular kind of schooling, rather than paying the money as taxes into the general fund where it would be used to fund education as directed by a democratically elected government, is basically a way of using their wealth to obtain a bigger-than-one-vote say in how education spending works, and to bypass democratic decisionmaking about how to spend money for the common good.

Of course, democracies are imperfect decisionmakers and they may not always reflect the spending priorities that will maximise collective good - but at least as institutions they are intended to balance interests, and provide a measure of fairness and equality in how decisions are made. And why would we believe that individual wealthy charity donors will make better decisions on how to direct spending?

An individual billionaire deciding that all schools should work the way they would prefer might be a positive way to end-run around institutional inertia and advance the state of schooling for everyone; or they might just pay to have every school library stocked with books about how humans coexisted with dinosaurs. They're one person, unconstrained by how the rest of society would like to improve schools.

Your points are valid. I agree mostly. I was only answering HenryKissinger who missed both your and my points.

>> The idea that a wealthy person has a 'better' idea of how to spend their money ...

The word 'wealthy' can be taken out here. The said choice is being given to others too if we let go of the nitty-gritties.

I agree also that I have no reason to believe that donations should be entirely tax free. The optimal point may be at giving say 10% of the donation amount as rebates while the remaining 90% still is subject to taxes. May be that optimum is at 0% rebate also.

>> and provide a measure of fairness and equality in how decisions are made

Overall, I do agree to your point. Fairness in decision making is more important.

Equality however is different from fairness though. Equality and efficiency bear tradeoffs. See here: https://en.wikiversity.org/wiki/10_Principles_of_Economics

Also, I do not see how high earners being subjected to higher taxes is fair (to them). In my opinion, the very premise of taxes being proportional to income has flaws. See my comment here: https://news.ycombinator.com/item?id=27433973

>> is basically a way of using their wealth to obtain a bigger-than-one-vote say in how education spending works

If my viewpoint in the linked comment above of constant income tax is accepted, then the rich may not even have a bigger-than-one-vote to begin with. Overall, I agree to you though.

> Also, I do not see how high earners being subjected to higher taxes is fair (to them).

The fundamental model behind progressive taxation is that the pain of paying taxes should be roughly the same regardless of income level. The notion of "pain" in this context is closely tied into the concept of marginal utility of income: how much value does a given person get from receiving an extra $X in income (or conversely, how much do they lose by not having $X in income). Give an extra $1000 to person who only earns $12k/yr, and it's a pretty big impact. Given an extra $1000 to a person who earn $12M/yr and its just noise. Taxes follow the same principle, but in reverse. When we tax those with very high incomes, we want them to feel the same "pain" of taxes as those with lower incomes. Because of marginal utility, that requires different marginal tax rates.

> the very premise of taxes being proportional to income has flaws.

Taxes are not proportional to income. We have marginal tax rates, not all-income tax rates. Someone who earns $40k/yr pays the same taxes on the first (and only) $40k (likely close to zero) as someone who earns $4M/yr. Someone who earns $200k/yr pays the same taxes on that $200k as the person who earns $200M/yr.

>> The fundamental model behind progressive taxation is that the pain of paying taxes should be roughly the same regardless of income level.

Good point. I'll think more on this.

One thing though which makes this non-obvious: We are in an equibrium system where demand and supply rebalancing change things. Economic utility and purchasing power of $1000 is the same whether someone earns $10K or $10MM per month. For somplicity sake, if all are made to pay $30,000 per year in income taxes, those who earn less would stop working, however, the demand-supply rebalance would either raise their income levels or the industry would have a higher drive for innovating and inventing to automate those jobs. In a similar fashion, with lesser taxes for the super-riches, more people would incline towards doing startups, etc. When that rebalancing is considered, the point of equalizing pain does not remain obvious to me anymore, as of now. :-)

>> Taxes are not proportional to income. We have marginal tax rates, not all-income tax rates.

Yes, I had made an approximation when writing "proportional". Marginal tax rates makes the income taxes grow faster than proportional with the income, whereas I am arguing for a constant income tax. :-)

> Economic utility and purchasing power of $1000 is the same whether someone earns $10K or $10MM per month.

Marginal utility of the $1k is not independent of income, even if purchasing power (almost irrelevant in this context) is. This is just basic economics.

> more people would incline towards doing startups, etc.

This seems naive. The rich do not, in general, do startups. The super-rich in particular do not do startups. Maybe you mean "invest in startups", which is an entirely different thing, since it presupposes the existence of startups to invest in. There is zero evidence from anywhere in the world that reducing taxation on the super rich results in any notable increase in investment activity.

I have no idea what this "rebalancing" that you're referring to is. I see no evidence that economies in the real world are in equilibrium states, nor any reason to suppose that they would be.

> For somplicity sake, if all are made to pay $30,000 per year in income taxes, those who earn less would stop working,

This thought experiment seems fairly pointless. This isn't going to happen. And if it did happen, people would not stop working. People need to eat, etc. Depending on the enforcement of the tax, they would have to find more or less ingenious evasion methods.

Your broader points could very well be valid.

I'll think some more.

If there are some mathematical works showing what you have explained, I would like to read. :-)

> or they might just pay to have every school library stocked with books about how humans coexisted with dinosaurs

And what about when it is the government who wants to place these books?

Vote. Run for office. Lobby.

All things you can do to affect government action that are unavailable to you to affect private philanthropy.

Are they able to count contributions to organizations that lobby on issues that benefit their business, or to politicians (like a SuperPAC) that would vote favorable to them as charitable contributions? Because if that's the case that's kind of shitty. I honestly don't know though, just occurred to me that might be another way they're taking advantage of this.

That's indeed a valid point, and I bet there would be instances of the same where the charitable contribution serves self-interests besides tax savings.

If donations were going to 3rd party charitable organizations, maybe (though they are notoriously inefficient/corrupt themselves), but if you are simply transferring the money to an organization under your full control anyway, then it's not really a charitable organization.

This distinction is so hard to make, that I think it simply makes more sense to limit donations to a much smaller percent of AGI.

The current limit of 60% is so high, that most donations at that level are providing some sort of unspoken utility to the benefactor.

Even a charitable organization the donor fully controls must follow regulations on its activity. Surely some people use their foundations as personal piggy banks, but that’s fraud and is pursued as such.

It’s like a conservation agreement. The land (wealth) remains in control of the owner, but the state gets some say in its use and the public benefits. Abuse of the the system is a case for stricter enforcement; sanctioned but objectionable uses are a case for stricter regulations

Yes, but these regulations are not well policed. They effectively take the accounting books provided at face value.

It's almost never investigated, and there is, in the normal course, so much overlap between expenses that benefit ME as a person, and ME as the owner of the charity.

Travel is a big one, for example.

This type of misbehavior is widespread, too. These foundations are not limited to the ultra wealthy. Tons of even moderately rich people (say, tens of millions in wealth) take advantage of these vehicles. Pumping their income into "charity" where charity is not Habitat For Humanity, but "MR JOHN B ENTREPRENEUR CHARITABLE FOUNDATION LLC". The foundation is run within a millimeter of the law, and basically funds the owner's lavish lifestyle tax-free. It's such an obvious scam but since it's just barely legal, nobody bats an eye. And if anyone questions the practice, you have people coming out of the woodwork saying "why are you against charities like Habitat For Humanity?"

Probably a fair complaint. I’d question whether enough people with foundations take bald-face risks with enough of the assets to be relevant to tax policy.

More pedestrian stuff (eg expensing a conference in Seychelles) definitely slips through, but we could make the same principal-agent complaint about business expenses or other settings where one person gets to spend money from different buckets that are taxed differently.

I’d challenge the notion that the rules are unenforced though - someone will have questions if you’re living in a house your foundation purchased or somesuch. At the very least several people with an obligation to know better and much less to lose we’re going to be very nervous.

> Even a charitable organization the donor fully controls must follow regulations on its activity.

Conversely, even a charitable organization not run by the donor may be heavily influenced by a disproportionate donor such that it is de facto controlled by them.

So they get to set organizational policy, but still can’t compel the organization to do illegal things (like route the donors money back to them tax-free)

>but that’s fraud and is pursued as such.

Our former president would beg to differ

Sadly true, though he did get get sued by the NYAG and in settlement agreed to a raft of restrictions on his charitable service, as well as the closure of the foundation and return of $2m in misused funds[0]

[0]:https://ag.ny.gov/press-release/2019/donald-j-trump-pays-cou...

Howard Hughes Medical Institute - In 1969, Representative Wright Patman "complained that the Hughes foundation was a tax‐evasion device," noting that the institute spent only $5.7 million for its operations between 1954 and 1961, a period during which Hughes Aircraft accumulated $76.9 million in profits. By 1975, it had also avoided certain stipulations of the 1969 reform act for charitable institutions due to legal filings by Hughes to change its operational status, with his objections going directly to the White House.

https://en.wikipedia.org/wiki/Howard_Hughes_Medical_Institut...

It seem like a good loophole for the rich to have control on where their charitable money goes to and do what. you can argue the Gates foundation is the same but Bill Gates actually doing some goods with his charitable organization like someone else said, if the charity is being use like a little piggy bank for the rich then its a crime.

Seems like laws already exist around legitimate charitable institutions. If those aren’t being enforced now, what makes you think new laws will be?

If the existing laws are not enforced, maybe it's time to remove, or at least rethink the exemptions then?

That doesn’t follow in the least.

Are you saying we should reconsider the ban on felons buying firearms because the law isn’t enforced?

Either that, or change the law so that it becomes enforceable, or spend more resources on enforcement. If the law is enforced in, say, 1% cases, why is it even there? Most people who break it face no consequences, and it has a potential to be a tool to unfairly target people ("we want to destroy you so we will find a law that you're breaking that is normally not enforced and lock you away for that").

As for the specific example, yes, I think felons that served their sentence should have their full rights restored.

Nice dodge with your last paragraph.

Unintended, can you explain why you think I dodged the question? My assumption was that felons are either in prison, or served their time.

Not a tax lawyer but I'm pretty sure there are regulations around what it means to be a charitable organization according to the IRS.

For instance, I'm fairly certain that using the money in a way that provides you a tangible benefit is verboten, as is taking a deduction for a "donation" to said charity that results in a tangible benefit.

Whether these things are enforced or violated is another question; but it does not seem reasonable to assume that every such organization operates by fraud, nor that getting rid of all of them would be no loss.

Here's a simple suggestion:

You can't make a charitable donation to an organization created after you were born, or created by an ancestor. It's not perfect, but it's a sharp line in the sand, and prevents bullshit like the Bill and Melinda Gates Foundation.

I'm not convinced that most charities really get much done other than making their donors feel good. I think the government is actually more efficient. And I'm saying that as someone who really doesn't like the government.

Really??? Like the government needs more tanks and F-35s.

I encourage you to go take a look at the larger 501(c)3 non-profit "aka. charities" in your area. Here's a few from San Antonio where I live:

Haven for Hope (transformational campus to combat homelessness) https://www.havenforhope.org/

San Antonio Food Bank (part of a national network of food banks) https://safoodbank.org/

Catholic Charities, Archdiocese of San Antonio (I'm the Board Chair, we run ~40 programs meeting people where they are and helping them on a path to self sufficiency) https://ccaosa.org/

I'm pretty sure a lot of them really invest in the common good.

The issue is more with the ones that actively promote the interests of their founders.

https://en.wikipedia.org/wiki/Koch_family_foundations

https://en.wikipedia.org/wiki/Cato_Institute

https://en.wikipedia.org/wiki/The_Heritage_Foundation

Are just a few examples of far right think tanks that are tax exempted.

What charity doesn't promote the interests of the people giving it money? Who doesn't believe their interests are for the common good?

If the problem is that you think some interests should be promoted and other not - well, I'm all in favor of that. The two of us just need to sort out which will be favored. My plan is for me to decide and you to agree with me. Sound good?

They are using the deductions we grant for their purpose. Seems to me we should at minimum be aware of the fact we are ceding control over the country for no good reason.

In some cases, evidence is fairly clear that the charities are used to actively undermine our society even further, e.g. Kochtopus.

Fairly clear? That's the standard? I'm going to stick with my proposal that I get to decide what charities are destroying America and which one's are helping it.

Who's with me on this?

Have you read the book? What part was not clear to you?

The foundations listed are basically political entities. When you or I make political donations, we have to do it with post-tax money. Why shouldn't the wealthy have to do the same?

If I give money to the NRA, the EFF or NARAL it's all tax deductible. That's what all the people mentioned are doing.

Plenty of better modern firearms lobbyist groups to give to besides the corrupt dinosaur that is the NRA.

Check out:

- Firearms Policy Coalition

- Second Amendment Foundation

- Gun Owners of America

A tax deduction is essentially a matching grant from the rest of the tax payers. I don’t know that I’m totally opposed to the idea, but it’s ripe for abuse and conceptually difficult to fully define in such a way as to eliminate any possibility of such abuses.

Why not instead have people donate their own money to causes they believe in, and have no matching grants?

That is exactly the reason to be opposed to them. There’s zero reason for them to exist, other than to enable corruption and enabling a way to direct your taxes towards your own tribe (churches, synagogue, etc) rather than the public as a whole.

Typical estimates suggest a 1% increase in tax expenditure on charitable deductions (so government forgone revenue due to deductions) leads to a more than 1% increase in charitable giving, so deductions increase social spending (see p170 in https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.25.2.157)

But could be distributional issues as well depending on where the rich choose to donate — lots of that money is probably implicit transfers from government revenues to the Met

This logic is similar to trickle down economics. It's not useful. Government expenditures have a high multiplier as well, so even if true it's not better than tax revenue.

Should have been more precise. By "social spending" I mean sum of (tax revenue) + (donations to charities), since 1% decrease in revenue translates to >1% increase in donations to charity. Agreed that this says nothing about "net social benefits," since it depends on the value of government vs. social spending.

My point is only that the elasticity is above 1, since if it were below 1 then there would be literally no justification for deductions. In that case, 1% reduction in tax revenue from deductions would lead to a less than 1% increase in giving, so the government could increase aggregate funding for charities by killing deductions and issuing grants. Elasticity >1 opens the door for deductions being sensible depending on objectives and use of funds by gvt vs. charities.

Note this is not a spending multiplier, so the comparison with government spending multipliers is irrelevant. The relevant comparison there would be, for example, GDP (or ideally the "social") impact of each dollar in charitable spending. I don't know what that is and it probably varies by charity.

https://www.nytimes.com/2018/08/03/business/donor-advised-fu...

It's complicated and corrupt, basically.

> voiding the obvious argument that capital gains are eventually taxed - the rich are not escaping that.

In one sense yes, but if they're living happily on a tiny fraction of their wealth then they can hang on to the rest until an opportune time to cash out. Governments come and go, taxes are imposed and abolished, loopholes open and close. If they can afford to play the long game then "eventually" may be very different to what would happen if they cashed out today.

But what's the alternative? Forcing people to sell? Forcing people to mark-to-market? There's no way to (fairly) tax capital gains except at the time of sale.

Except the uber wealthy who can afford to lose money to pay taxes for the infrastructure that has enabled their explosive asset growth.

I agree that you and me, and even my paper-millionaire neighbors and friends cannot afford to be taxed on their assets, but a billionaire can, even a paper billionaire can drum up the cash or debt when needed to pay taxes. They do it every day for their large purchases.

Sounds pretty authoritarian.

> Except the uber wealthy who can afford to lose money to pay taxes for the infrastructure that has enabled their explosive asset growth.

Federal income tax almost never gets used for infrastructure. Infrastructure is mostly built by state and local governments, which receive most of their income from sales tax and property tax, and other taxes, which are already almost entirely paid by businesses. So, they are already paying for the infrastructure that enabled their growth.

So you're not opposed to property tax? That's just what we're considering here, for securities rather than real property.

Various levels of local governments provide many services and benefits for my physical property located in their jurisdictions, so I do not oppose a reasonable property tax. But the federal government provides no services or benefits to the securities in my vault, so a general federal wealth tax on them is altogether different, and I oppose it.

The federal government has spent several trillion dollars fighting several disastrously stupid wars over the last several decades. Please don't try to pretend all that death and destruction wasn't good for the securities in your vault.

Or if that’s too abstract for you, think about how the securities in your vault would fair in the absence of government maintaining basic law and order; honouring and enforcing otherwise fictional property such as copyright, trademarks and patents; some degree of redress in a court system; and some degree of stability of regulation of markets.

So much of the wealth on this planet relies on Governments for it to exist and to persist.

These sort of administrative and bureaucratic activities are less than 1% of federal spending though. So your argument makes no sense.

Military spending is 54% of the federal discretionary budget, though (the discretionary budget is about 1/3rd of the total budget). That all contributes to its security, if not all directly.

According to the 2020 figures, national defense was 11% of federal spending. Discretionary vs. mandatory seems irrelevant here. We might as well say military spending is 100% of military spending. It's just dividing it by something to make it sound higher, usually for propaganda purposes.

Nevertheless I totally agree some part of that 11% will benefit business and commerce. But it is still a terrible deal. In any other context no one would ever buy something with a 90% "commission".

I overlooked that I was looking at the chart from 2015 sorry about that. I was reporting the number on the chart I was seeing, which is why I specified discretionary and also said that discretionary was about a third of total spending, so it was clear. I just didn't have the exact number.

So I did look up actual numbers and the numbers I saw were different to yours. In 2020 the percentage was 15% (721.5 billion for military of 4.79 trillion budget).

But the exact percentage isn't that important. I still don't get the 'not a great deal' part. It's not some good you could either buy from retailer X or brand Y. If no money is spent on military than the country is ripe for invasion, so it's either secure or it isn't. And it's not like we want the percent to be higher. Like we don't want to spend MORE than the Department of Defense thinks we need to secure the country. That's an even worse deal.

Even if you choose to move your assets/business to a country that spends a lot less on military, you're likely benefitting indirectly from how much the US spends on military (assuming it's an ally and the world is stable, that might not stay true in the next couple of decades).

Unless you're arguing to pay for a private security firm to secure your assets, then maybe you can pray we get to a Mad Max style future where it makes sense to do that.

Or you're suggesting it can be bypassed by buying cryptocurrency, which is secured by other means than government might. If that's the case then I'm on board with that thinking.

If your main argument is 'I want all of the money I spend in taxes to solely be spent on securing my assets, so reduce my taxes!' then that's ignoring the other government services those taxes provide.

I disagree that you can compartmentalise Government in that way. To the extent that there's aspects of Government which don't directly prop up the value of assets, many of them still play an important role in maintaining the social license required for Government to govern—and thus provide whatever it is you imagine is in your "1%" bucket.

The fact that a lot of unrelated money transits through Government to pay for social services is completely irrelevant to the point.

The government very clearly provides for support for the equities in many ways (which I’m sure you’re aware of) How do the following not count as benefits to the equities in your vault?:

1. Maintaining a navy that reduces piracy enough to have global JIT delivery networks that reduce costs for corps

2. Protects corp interests abroad allowing a larger market and higher profits

3. Enforces regulations that attract a larger than otherwise likely share of people to put their money in the stock market, increasing the value of your equities.

US federal spending 2020: $7 trillion

The entire budget of #1 is about 3% of that, and #2 and #3 around 1%.

What a terrible deal.

4. Pumps millions/billions/trillions into failed financial corporations to prevent the financial system itself from collapsing.

A great many state projects are 50-90% funded by federal grants. Interstate highway projects and airport projects in particular are often 90% federal (and are self-evidently infrastructure).

The problem really isn't people not paying tax. Americans have similar expenditures to Europeans on a per capita basis ($20,674 US vs $17,202 UK or $20,960 in France the highest taxed nation in terms of % of GDP) they just get considerably less for their money.

https://en.m.wikipedia.org/wiki/List_of_countries_by_governm...

That's an argument for a tax on those assets then. Corporate taxes for stocks, property taxes for real estate, etc.

Probably true in general, but if people are already monetizing assets through borrowing then likely: they have liquidity and b) the asset has a fairly concrete value.

I’m not sure how you’d write a matching tax provision but there should be something. Maybe the answer is to rely more heavily on VATs as Europe does.

> Forcing people to mark-to-market?

The Netherlands manages to do exactly that.

> There's no way to (fairly) tax capital gains

The fair part is that it's taxed - otherwise, it's unfair on people who are unable to exploit this tax avoidance.

We are talking about people with meaningful wealth. They can afford to be taxed without waiting for it to be perfectly 'fair'. Letting them pay $0 until its fair doesn't make sense.

It makes more sense to pay the expected amount, at least until you have the receipts.

Indeed, that's how my own labour income is already taxed. I first pay income tax for 2021 based on my income in 2020 - whenever it turns out to be too much, I can declare it later and will get a refund. But, I can't pay $0.

>>We are talking about people with meaningful wealth. They can afford to be taxed without waiting for it to be perfectly 'fair'. Letting them pay $0 until its fair doesn't make sense

But....shares are useless until sold. Even if you have 1BN worth of shares it means nothing until you actually sell them/trade them? In fact, they could be worth nothing next week, how can you be taxing someone on a hypothetical sale value?

>>Indeed, that's how my own labour income is already taxed. I first pay income tax for 2021 based on my income in 2020 - whenever it turns out to be too much, I can declare it later and will get a refund. But, I can't pay $0.

That's literally insane. So you're basically giving your government a loan a year in advance? Why? Why not pay your income tax when you know - you get your income, like the rest of Europe does?

> That's literally insane. So you're basically giving your government a loan a year in advance? Why? Why not pay your income tax when you know - you get your income, like the rest of Europe does?

I think you're misunderstanding. The tax rate they are paying is estimated based on the previous year income (we'll actually it's a combination of present income and previous years) because the tax office can't know your exact income (and deductions) until the end of the year. So when you do your tax return at the end of the year you either get a refund or need to pay some more. I'm pretty sure that's how it works in most of Europe (at least in most of the countries I'm aware of). So there is no loan to the government, they still pay the tax as a rate on when the income comes in.

OP said:

"Indeed, that's how my own labour income is already taxed. I first pay income tax for 2021 based on my income in 2020"

It sounds like they pre-pay tax for 2021 based on what they paid in 2020. If that's not how it works then I retract my statement.

That is a thing you can do in the US. It is not a thing you have to do, by any means.

Dollars only have hypothetical value until spent as well, but we still tax them.

I'm not super rich but if the government wanted to tax my shares, I'd pay the tax out of my income instead of buying more shares. I could probably pay a decent chunk of it out of dividends too, if I wasn't reinventing them.

Property tax here in Australia is based on hypothetical value, the sky doesn't fall.

Even if people have to sell some shares, I just don't care, it's not a big deal. Sell em.

Not all shares can be sold. Especially at all times (blackout periods, etc.)

The problem with the oft-cited options example is that tax is levied on gain of an asset that in fact cannot be legally sold at the time the tax is levied and is often enough worthless (or worth a lot less than at tax time) by the time it _can_ be legally sold.

Asset-based taxation on liquid assets with deep markets and clear prices is indeed probably fine in various ways. But if you tax other sorts of assets there are various problems, and if you only tax the easily-taxable ones people will turn to the other ones to avoid taxation...

Not to mention that at least in the US, decades of effort has been put into moving peoples' retirements into personal, private investment accounts. Including Roth IRA/401k where the entire point was to pay tax on the input to avoid it later on the output.

The idea that someone should pay taxes on potential money is not a good one, IMO. I think there would be a lot of legitimate pushback, and if a plan was adopted anyway there would be serious political consequences.

> That's literally insane. So you're basically giving your government a loan a year in advance? Why? Why not pay your income tax when you know - you get your income, like the rest of Europe does?

You might be misunderstanding - this is literally how tax withholding works. You pay estimated taxes as you go through the year, and then file a return at the end of the year and settle up with the government to what your actual tax liability should be.

That's how most income taxes work in most countries.

When I worked in North America I found this incomprehensible at first. I think the reason is because you need to manually file a tax return each year rather than having it calculated and deducted automatically.

To avoid a massive tax payment at the end of the year, you could elect how much tax would be deducted from your salary each month. The usual way to calculate it was based on last year's income. It wouldn't factor in all tax deductions so, at the end of the tax year, and after you'd filed the tedious and complicated tax return, you'd find that you'd overpaid. Better that than underpaying.

In the UK, usually your employer collects tax monthly. They calculate the amount to collect based on your current monthly salary projected forward and how much tax you've already paid. If there's a mismatch at the end of the year, the tax office uses a 'tax code' to adjust the amount to collect over the next 12 months.

> Why not pay your income tax when you know - you get your income

Yeah, I have no idea why gambiting is not doing that.

The rules in the US is that your estimated tax payments have to cover the smaller of 90% of your current-year ongoing (quarterly) tax liability or 90% (sometimes 110% for high incomes, an there are other special rules for farmers/fishermen) of the previous-year tax liability.

So yes, you can make them based on last year's income as as safe harbor if you have no clue what's going on with your income this year for some reason. Or you can just make them based on this year's income as you go.

> But....shares are useless until sold.

I think there are high profile cases of founders getting low interest loans with the shares as collateral. This allows spending of the money without losing control or paying taxes now.

So, no they are useful before they are sold.

> But....shares are useless until sold. Even if you have 1BN worth of shares it means nothing until you actually sell them/trade them? In fact, they could be worth nothing next week, how can you be taxing someone on a hypothetical sale value?

Germany does something similar: https://de.wikipedia.org/wiki/Wegzugsbesteuerung (unfortunately only in German).

Basically your tax advisor agrees with the government on a "fair" valuation and you are taxed on a 'fictions sale' when you cease to be a German tax resident and hold more than 1% shares in a company.

> But....shares are useless until sold.

This is clearly untrue. At least they have use in the ongoing option to sell. I can use them as collateral to borrow at least as much as, and probably a multiple of, their value.

If you genuinely think they are useless, please give me some. I will use them.

> how can you be taxing someone on a hypothetical sale value?

Since shares are fungible, the government could just apply the tax as a number of shares. Then nobody has to worry about defining a hypothetical value.

> But....shares are useless until sold.

You can borrow cash against them, and live entirely on that cash for decades.

But......at the moment when you want to repay that debt, you need to sell the shares = pay tax on them. You can of course pay off the debt in some other way, but presumably whatever money you use for that purpose would have been taxed too, perhaps even more so than shares are.

And I mean, if I borrow money to help me out until I get my paycheck, I don't pay the income tax on the borrowed money - I pay it when I get the paycheck.

Don't repay that debt. Just have it in perpetuity, paying a little interest.

> We are talking about people with meaningful wealth. They can afford to be taxed without waiting for it to be perfectly 'fair’

I don’t see that holding up in court.

This is putting the cart before the horse.

What is being proposed is to change the law. A court will absolutely uphold that law, once it is written. What it would do under current laws is irrelevant.

Plenty of unfair taxes hold up in court. Property taxes are an "unfair tax" in the same sense.

Of course, the assessor can't exactly predict the value of a commodity like a home with complete accuracy. Some people get undercharged and some get overcharged, this might even be a systemic thing. But as long as it's "good enough", then the tax works more or less how it should.

So if I wait to sell shares when it suits me I a some how a monster now ? You do realise that many employees on average wages do this.

Even the SWP is cool with employee shares now

> So if I wait to sell shares when it suits me I a some how a monster now ?

Being asked to pay tax on your wealth is not a judgement about your moral character.

We ask people to pay tax to benefit society, not because we hate them.

Given that shares are fungible, you could just give a percentage of your shares to the government as the tax/the government could or should accept this as your tax payment.

> You do realise that many employees on average wages do this.

I'd like to say almost none but I understand the median person the US holds a small amount of wealth. If there was a progressive wealth tax, you could take people with average wealth out of the requirement to pay.

So I should be forced to sell shares early? I have no problem with paying tax due I am not in US BTW

And some countries think and I agree that people having a stake in your employer and in the economy through share ownership is a good thing.

Real property is subject to tax every year. Every county in USA has an elaborate hierarchy of assessors and collectors devoted to this. There's no conceptual reason that securities couldn't also be subject to tax on a regular basis, and it could be made much simpler by only levying the tax on e.g. the top 1% of owners of securities.

Wouldn't they figure out a way to split their holdings into smaller delegate trusts, something like that, to come under the threshold?

That's certainly a concern, but the IRS works for us so if we choose for them to investigate tax evasion by the wealthy they should do that.

You think the IRS works for us... that's cute.

Unless you are a large corporation / billionaire yourself, in which case I apologize, yes it works for you.

Well, obviously, I don't actually think that. USA as a system of representative government, if it ever actually existed, certainly doesn't exist now. There is no way for the polity as it exists to stop taking everything from the majority of citizens and giving it to the authoritarian rich. The eventual answer will be a breakup, with the wealthy Pacific states escaping first and various other regional subdivisions giving up on the dream until finally the DC vampires will have no more victims left. Some of these successors to USA will reproduce the same broken system, only at a mercifully smaller scale. Others, I hope, will reduce the harms that arbitrary authority inflicts on humanity. Since we'll all still be Americans, many of us will be able to move to e.g. western Iowa if they figure out the best way to live before the rest of us do. At least once bond-holders are no longer tempted to finance our horrible wars we won't menace the rest of the world with so many of them.

However, when discussing the various symptoms of this fundamental malady, as we are ITT, it's often useful to take the marketing at its word. It would be nice if our IRS were created and operated in the interests of justice for the vast majority of Americans. Let's imagine how that might be, and see how far the actual falls short of the ideal. The quicker we see USA as it is rather than how it has been sold to us from birth, the quicker we'll figure out something else marginally less awful.

it's easy to talk about how much other people should pay. why shouldn't you pay a regular tax on your assets?

Yes that's what we're discussing ITT.

There are any number of principled reasons to oppose paying taxes to USA government, but "I'm rich and I can afford the lobbyists and tax attorneys to make the system work for me" is not among those.

The entire middle class already does pay a regular tax on their assets. We call it "property taxes". The groups who AREN'T taxed on the bulk of their assets are the poor (who have no assets) and the wealthy (whose assets aren't taxed).

I agree that forcing people to sell has its issues, but perhaps you could have a tax on loans of a certain size and/or not being able to deduct as much for the interest paid. Then nobody would be forced to sell, unless they wanted very large amounts of cash. I'm sure someone could find loopholes for those ideas as well.

I don't know. I suspect the true answer is "there is no fair way to tax people equally across multiple orders of magnitude of resource ownership and multiple wildly different types of resource," especially when dealing with individuals who are approaching the same economic ballpark as the governments that are attempting to tax them. I'm just pointing out that capital gains being taxed "eventually" isn't watertight.

And it's not as if the current system is fair. You regularly see cases like that kid who won a trip to the ISS and had to give it up because it was valued at $X million dollars and to accept it he'd have to somehow pay hundreds of thousands of dollars in taxes. There's also the issues with stock options that come up here from time to time, where someone is owed millions in options that they can't actually use because they'd have to first pay a percentage of the value in taxes.

As someone who is currently undergoing a tax audit for a year in which I reported ~$20M in cryptocurrency trades but only realized about $10k in income from them, I can confirm that "fairness" does not appear to be a goal of the tax code. Cryptocurrency (and especially derivatives) really exposes some of the head-scratching aspects of the tax code around capital gains.

You could have stopped at "there is no fair way to tax people".

Don't these exact same arguments apply to property taxes?

Yet property taxes are very common throughout the US. Would you make the same arguments to eliminate property taxes? If not, why are capital gains any different?

(not sure why the downvotes, I just upvoted you - this is a solid question)

I suppose because property values are considered to be more stable than, say, GameStock puts. But you raise a good point, that what we're talking about (really) is a "how we should tax _wealth_" vs "how should we tax _capital gains_".

I feel like "capital gains" occupy a strange middle-ground between income and wealth.

Capital gains clearly represent a change in your wealth, and are somewhat "income-like". But they also are a persistent thing that you are in control of until the time of sale, and are somewhat "property-like".

It seems plausible that we could come up with a reasonable-scheme for capital gains taxes that manages to accommodate both properties, but I think it'd take a fair amount of consideration to make sure that there aren't nasty edge cases, and the benefits outweigh the additional accounting.

Capital gains aren't a strange middle ground. They are the best attempt to have an income system work: they allow the taxation of income from money. A system that taxes only income from labour is grossly unfair to the poor. A system that taxes all wealth is overly bureaucratic and deeply invasive.

I'm against wealth taxes, but you make a good point.

You may have just solidified my opinion against property taxes :)

Seriously, evaluating and setting values for property takes a lot of resources at the city/county level... it would take a massive increase to properly evaluate wealth for taxation, because so much of it is completely intangible and abstract.

What if you ask them to declare the taxable value, however anyone is allowed to step in and purchase the asset listed at that value? If you want to list your business as losing money and worth no taxable value. Someone can pay what you say it's worth and take it over. Using greed to align incentives.

The problem with that (and all other forms of eminent domain) is that the value of a piece of property to the owner is often far higher than its value on the open market. Even if this is purely a business decision and not, say, related to an irreplaceable family heirloom, the risk of a forced sale at an inconvenient time would be far too disruptive.

For example, let's say you own a car with an appraised value of $25,000—meaning that you could buy one similar to your for that price (more or less). So you declare the taxable value to be $25,000 and pay the corresponding tax, and then right before you leave for an extended road trip someone decides that they would rather have your vehicle than one from a dealer and makes you an offer for $25,000 which you cannot legally refuse. Now you're without a car and scrambling to buy a replacement and get it registered, insured, packed, and ready to leave on short notice. Your plans are disrupted and the new vehicle, while "equivalent" to the one you had before in terms of factory specs and general condition, just isn't the same as the one you had carefully maintained and customized to your liking.

In practice people would need to over-declare the value of any property they didn't want to sell, which effectively makes this a tax on how attached people are to specific items and not a tax on their "fair" market value. The situation becomes even worse if the owner has enemies willing to over-pay for the item purely out of spite.

One of the fundamental rights of ownership is the right to choose not to sell, no matter how much someone offers.

Pretty trivial to declare your car at $26,000. The extra tax is minimal, and if someone buys it, the $1000 bonus will cushion your annoyance.

If we think that "everyone" will have to "overdeclare" in such fashion, then obviously the government is collecting more revenue than it intended and will lower the tax rates to compensate, so in the end, you'll pay the same dollar amount in tax on your $26,000 car as you would have on your $25,000 car.

So, such a system would work fine. Particularly for property taxes, which are currently the subject of much scamming (apartment buildings in NYC being valued at a few percent of their actual market value, for example).

> If we think that "everyone" will have to "overdeclare" in such fashion, then obviously the government is collecting more revenue than it intended and will lower the tax rates to compensate, …

If everyone over-declares by the same amount, sure. But not everyone will. It depends on how much attachment one has to a specific item, how much risk there is that someone will attempt to take it, and how painful or inconvenient it would be to lose it. And you're ignoring the point about being vulnerable to motivated individuals willing to pay above-market rates purely to cause trouble.

Pretty obvious that insurance companies would make a killing here, providing "asset retention" riders.

You get to declare a reasonable value, and if someone wants to buy, but you're not willing to sell at that time, the insurance company negotiates a substitute payment, and works that cost into your retention rider rate going forward.

This is outrageously favorable to the uber-wealthy (and anyone who is an order of magnitude more wealthy than you.)

Piss someone off? Maybe they'll just come in and buy your house. Cherished one of a kind item? Jeff Bezos likes it, so it's his now. Property developer wants to build something on your land? Get ready to move, no questions asked.

>>Cherished one of a kind item? Can you give an example of an item with a large resale value that is cherished? Most sentimental valuable items tend to be of lower value. The ones I can think of, e.g. Wedding rings etc..... well if this would drive people to spend less on diamond rings or useless trinkets that generate a lot of pollution because it's the sentimental value that matters, that would be a win.

Any item must be purchased at a +30% premium over the recorded value with that extra 30% going to the state if a sale occurs. So if you did want to hold onto something, you would declare a higher value and get paid extra.

You would declare a higher valuation and get taxed extra... all while still not preventing Jeff Bezos or anyone with sufficient wealth from swooping in and buying it.

> Forcing people to mark-to-market?

For liquid investments that have a well-agreed-upon market value, that wouldn't be a problem above a moderate wealth threshold. In particular, it should be easy to obtain credit against these securities (if necessary/desired) to pay the tax bill.

The loans would be very secure, since by definition they would have appreciated more than the taxes owing. And if the current offsetting-loss notions are retained (e.g. losses can be carried back to offset prior gains), if the securities fall in value then the taxes paid would be refunded, providing another way to repay the loan.

In the meantime, you'd avoid a current inefficiency of the tax system that encourages people to hold on to subpar or undesirable investments to avoid realizing taxable gains. The entire cottage industry of deciding which investments are "tax efficient" and should be held in taxable versus tax-sheltered accounts should go away.

What if the government purposely targeted relatively high inflation by printing money (and distributing it to all as a UBI).

Inflation seems like a pretty efficient wealth tax… and if the money is distributed fairly as a UBI that would cancel out the benefits that the wealthy have vs regular people to protect against inflation.

They would purchase inflation proof assets e.g. property. Then increase the rent every year in line with inflation.

Actually it is even worse -- 1. What happens if the MtM is negative (your have unrealized losses) -- does the government now owe you a refund?

2. Isnt this unfairly in favor knowledge businesses where there is tremendous value but no real MtM? So a private accounting firm with lots of clients gets no real MtM while a farm with physical assets gets a high MtM that is taxed.

How about significantly reducing taxes for everyone? Say, no more than 5% of anyone's income?

There's some truth to this - but opposite could happen as well. You might get to the end of your life and find that the tax situation is even worse. So it's a gamble.

If we eliminated the charitable "Foundation" dodges that the super-rich are using, then I think we'd see many fewer people playing this game.

Presumably you would penalise every employee including your self that has options?

> The real issue is that the super rich create these personal "foundations" that act as never-taxed income holes, and then use them as personal and political tools.

Opinions may differ, but one major point is that our tax system is a joke.

If we can put a movie about flying humans to the moon on Netflix, why can't we implement a tax system that isn't a Byzantine train wreck?

> why can't we implement a tax system that isn't a Byzantine train wreck?

because of lacking political incentives?

Lacking? The incentives are in geared towards a high rate with lots of deductions, certainly on the business side. If I'm running a business I don't want a low rate or low regulation - I want a high rate with loopholes narrowly tailored to whatever I'm doing and a high regulatory burden. Politicians want exactly the same thing.

It's not exactly the same with non-business tax rates but it's not that far off either - see the deduction for SALT.

> ... why can't we implement a tax system that isn't a Byzantine train wreck?

Because the people with power (money) like it this way. They aren't interested in what is fair for everyone, they are only interested in what they can get away with.

The rich can afford to hire a team of lawyers and accountants to navigate the tax system, and pay almost nothing. But they have to keep the fiction up that they are paying tax by having their "on the books" tax rate be non-zero.

> why can't we implement a tax system that isn't a Byzantine train wreck?

The Hong Kong tax code is about 250 pages.

> avoiding the obvious argument that capital gains are eventually taxed - the rich are not escaping that.

I used to think this too until my wife inherited some stocks from her grandmother. Turns out the strike price is reset when you inherit and you dodge all of the capital gains tax.

This turned out to be a major win for us because her grandmother had acquired the stocks when she worked for AT&T back in the Ma Bell days and had not paid attention to them for 50 years. The paperwork was a complete mess and we had zero idea what the strike price would have been on stock she got as part of her normal income some time in the 50s and had been split up and recombined so many times in the mean time.

Nit: I think you mean "basis" -- "strike price" only pertains to options.

Capital gains are eventually taxed if you ever sell, but some individuals will just hold and take out loans against their enormously large amount of collateral to avoid incurring capital gains tax.

To the degree that someone isn't so concerned about passing down the maximum amount of wealth, there are also a number of things that can be done to turn appreciated assets into an annuity through an existing non-profit of some sort. (e.g. using a CRUT).

This argument is repeated a lot but I never understood the mechanics. Wouldn’t they have to pay back the principal + interest, from a supposedly taxed source of income? This sounds like a scheme to delay taxes and optimize cash flow, but not a way to avoid taxes altogether?

It's all about deferring to death and then hoping for the best possible tax treatment at death allowing basis step-up and avoiding estate taxes via various trusts.

I created this spreadsheet to show that the difference is pretty trivial IFF you ever cash out (<2% over 10 years).

However, a lot of people:

1) never plan to cash out.

2) know that tax rates are fickle and plan for a day when there will be extremely low tax rates - just like for companies to "repatriate" their profits - and hope that they can in the future realize with little-to-no profits (although, I doubt capital gains tax rates will go much lower, and might actually go MUCH higher).

Anyway - the difference before you realize is >13% over 10 years (and the higher the rate of return is, the bigger the difference - it's >17% with a 10% per year return, which is historically average for the extremely wealthy according to Piketty).

Here's the sheet: https://docs.google.com/spreadsheets/d/1dZ6h0s2lZBp0fM6Z2w1K...

This strategy isn't really popular unless you have a networth of greater >$20M. It's particularly attractive, because you get $40k in untaxed capital gains per year - which is roughly what you need to pay the interest on your "borrowed" / "pretend unrealized" capital gains. And, the added benefit is, the interest IS TAX DEDUCTIBLE!

Great summary and sensible conclusion. The problem is much of the NYT and ProPublica writing are wrapped in sensationalism and start from an extreme left position on the subject.

I'm totally supportive of "taxing the uber wealthy"... But govt needs to take the long approach on this. Eventually, people die and inheritance kicks in. That's where these generational mega wealth transfers that don't do much good for society can be mitigated.

The document leak probably has a banal explanation. Some insider with access to the documents...

I hope you at least recognize that this is an uncommon opinion. Most Americans think billionaires pay too little tax, not only that they pass too much to their heirs. It's hardly extreme left.

>> ... we need to curb foreign tax havens

Luckily US cannot police other countries (not that it didn't try) to prevent people from taking advantage of more competitive tax regions outside of US.

US obsession with taxing people and businesses to the ground is a strong contributor for so much capital escaping US.

I feel like this article does 4 things: 1. Foment rage at the inequalities of the tax system (very easy to do) through their simple narrative 2. Flag to wealthy people who are paying their fair share to look at how to further improve their tax efficiency. 3. Create political damage (which seem to lean democratic) to the individuals who are doing everything legally?

It seems like ProPublica is trying to continue to lay the groundwork for a wealthtax campaign by fomenting further rage around the inequalities of US tax system.

Aside from that I have deep concerns about the source of this information and why it was used. Seems like IRS taxes have been weaponized and are readily available. Everyone should be deeply concerned about how ProPublica got this information.

Actually, most HNWI capital growth is not taxed, ever. It is a mistake to think any meaningful percentage of the wealth is sold or transferred, except on a stepped up basis to descendants, who likewise will hold it indefinitely. This does concentrate wealth.

> IMO, we need to curb foreign tax havens

That depends on what you mean. The US government (and a lot of US citizens) think that the tax on money Apple earns on selling iPhones in Europe belongs to the US, not France. But I feel if an iPhone is sold in a French building by a French person to another French person, with money transfered between two French bank accounts, all of that in French society, that that tax money belongs to the French and the US needs to keep its grubby paws off of it. No bullshit 'if you bring it back in the US we will forgo half of the tax on it and protect you internationally from the fallout'.

Yes... and it's important to remember that unrealized stock gains aren't really wealth either. It's not like Bezos can go out and buy 100 billion things from the McDonald's dollar menu. The money is locked up in the shares and he has so many that any attempt to sell more than a few could really depress the price of the stock.

If anything, he's sort of a curator of the wealth for everyone in the Amazon world. Yes, he's able to live very well, but the simple value of his unsold shares doesn't capture his true ability to buy things.

The article explains this, they use those unrealized gains as collateral for loans—bypassing the need to pay capital gains by actually selling the shares.

How do they pay back those loans? I've never understood that part.

Presumably they sell stock, but any money works. It's all a gamble. If the stock tanks -- and they often do-- then it's easy to end up in bankruptcy.

But this article is all about hating on the rich and imagining that it's all perfect for them. They don't want to talk about the times when the stock falls and the once rich turn into very poor.

> the times when the stock falls

Remind me when that's ever been allowed to happen in the past 10 years. At the first sign of any market trouble, the default Fed response is OMO and cutting interest rates to shore up the markets. Stock prices can never fall even if the actual economy is in the shitter.

With their income, and they get to write off most or all of the income tax with the interest paid.

Note that assets in a foundations and donor advised funds are not reported in anyone’s net worth online calculators.

There is no way to predict somebody’s net worth and all the lists are wrong. There are only a few public things and they are all snapshots in time that assume it’s still true forever. An actor on a big movie? The list will say “we estimate they made 20 million, lets list them as a net worth of 20 million forever”, a non obfuscated real estate property record either in someones name or linked to them? Okay we are counting that. Aside from that they are just counting shares of public companies that large % holders are required to disclose. Outside of those slivers you’ll still never know if they were a savvy and passive investor in other public equities just like you are trying to be. You’ll never know if they made 1,000% more on tech stocks. You’ll never know if they assigned shares and cash to a charitable organization they control. You’ll definitely never know what subsequent trades the charitable organization made.

But even without pointing at charities: Hedge Funds, VC and Private Equity firms are not reported nor are any business interest. These things can pay out arbitrarily and also have large amounts of funds in any limited partners name.

This seems like a state-sponsored hack to reveal this information (Solarwinds?). Way too much information for one IRS employee to leak.

I would be incredibly surprised if anyone who had that kind of access to IRS returns (ie searchable database for everyone) would leak the 25 top earners. It does add up for the career risk to take that risk on especially as its not leaking anything illegal just shining a light on the injustices of the system.

> A more interesting question…

From their other article, https://www.propublica.org/article/why-we-are-publishing-the...

“We do not know the identity of our source. We did not solicit the information they sent us. The source says they were motivated by our previous coverage of issues surrounding the IRS and tax enforcement, but we do not know for certain that is true. We have considered the possibility that information we have received could have come from a state actor hostile to American interests. In particular, a number of government agencies were compromised last year by what the U.S. has said were Russian hackers who exploited vulnerabilities in software sold by SolarWinds, a Texas-based information technology company. We do note, however, that the Treasury Department’s inspector general for tax administration wrote in December that, “At this time, there is no evidence that any taxpayer information was exposed” in the SolarWinds hack.“

The article also points out that "in the coming months" it'll reveal more. Although I agree this isn't that interesting, just judging by the income reported Buffett, Bezos, Musk, paid 19%, 23%, and 30% respectively (not counting obviously massive stakes in unrealized gains)... the outlier here is Bloomberg at 3%.

Due to the step-up-basis law, the government does not collect any capital gains not realized prior to death. So if you make 10 million in capital gains on a lucky early stage $5,000 investment, and die without any other assets, the (US federal) government will collect zero in taxes from you, your estate or your heirs.

Other countries have a time limit for how long you're allowed to sit on unrealized gains. In Ireland, for example, you have to pay capital gains on unrealized gains at the 7 year mark.

How does that work for housing? Or is there some exception there?

It doesn't apply to housing. (And there is no capital gains on sale of your primary residence anyway).

i don’t see the issue with the charity thing as long as the money is actually used for charity

i would trust the gates foundation to use money 1 million more wisely than the government just wasting it

Looks like a confirmed prediction from The Sovereign Individual.

Probably familiar to many of you, but I have my coke and mentos moment while I read it, in 2021. Here is a link to archived pdf, for others like me

https://web.archive.org/web/20210112042733/https://www.lopp....

> 1. Capital Gain taxes are delayed until you actually sell the stock.

By far, the greatest increase in wealth (and inequality) is due to capital gains.

> [...] capital gains are eventually taxed

Normally, one might sell assets before a decline, and at that point gains (and therefore taxes) may be realised.

This is avoided by HODL stock in holding companies (such as Berkshire Hathaway) which can rotate assets without ever incurring capital gains (or indeed income).

What about the point about taking out loans to avoid paying income tax, since money from a loan isn't income. Isn't that one of the major points?

I don't get how do they pay the loan off though, without paying taxes on the money used to pay off the loan. How does that work? Any loan I take out, I'd have to get income and then use my income to pay off the loan.

I assume if you have a loan of $100,000 secured against an asset worth $1 million that appreciates 10% each year, you can basically continue rolling over the loan.

As long as the asset value doesn’t drop, you never have to actually repay the loan with your own cash (at least, not until you die or you sell the asset).

Ahh, makes sense. So they are never paying back the loan with earned income. Thank you!

> Squabbling over a wealth tax is not useful. The real issue is that the super rich create these personal "foundations" that act as never-taxed income holes, and then use them as personal and political tools.

Politicians have them as well. Their foundations rarely if not ever cater to their stated mission. Instead, politicians use them as legal bribery vehicles.

Regarding it's not tax until it's sold, this isn't necessarily true.

One little trick here is to take out huge loans using things like stock holdings as collateral.

You're not paying tax on the money, and you can pay it back a bunch of difference ways that can limit how much you pay.

There are nuances to this, it's not as straight forward as I mentioned, but that's the general idea.

> Unfortunately instead, the author spends much more time on point 1, conflating wealth with income, and avoiding the obvious argument that capital gains are eventually taxed - the rich are not escaping that.

Isn't it the point that wealth creates more wealth? and the more you have the more you can make? thus not paying taxes leaves you with more to play with?

No, the more wealth doesn't mean the "more you can make". A majority of people own homes, for instance. And these homes usually go up in value. But no tax authority comes to your house and starts taxing you on how much the value of your home has increased. You pay taxes on the profits when you sell your home, not when you sit in it. Same thing goes for shares in companies. In both cases, the home and shares, owning something that has increased in value doesn't mean you have a stack of cash in your hand. You might once you sell your assets, at which point you pay taxes in both cases.

What!? I absolutely pay a rolling cost in the increase in value in my home — to the tune of 3.1% of its expected value, every year.

That's a property tax, not quite the same thing. You'd still pay it even if the home didn't increase in value, and you'd still pay it even if the home decreased in value, right? Isn't that more a local infrastructure bill?

The property tax is based on the value of the home. If your home loses value, your property tax goes down, all other things being equal. Increasing home values increase your property tax bill.

Here the property tax is a function of the estimated marked value of the property.

Especially fun for old people living off their pension in their family home with large, attractive gardens in areas which were way outside town but now, some 50-60 years later, has become highly attractive...

https://www.oslo.kommune.no/skatt-og-naring/skatt-og-avgift/...

Real estate tax is literally a tax you pay to the authority that “comes to your house and starts taxing you on how much the value of your home has increased”.

Just to be precise, aren't the taxes approved by the taxing authority allocated proportionally based on the total value of the real estate in the jurisdiction? In other words if all real estate values go up, your taxes should remaing constant?

Maybe in different parts of the US this varies, but should the taxing authorities get more money because the real estate market is hot and do they take less when real estate values are down?

Appraisals can go down (mine did this year), but there's no proportional allocation by the county assessor.

This doesn't make sense to me, people take loans to make more money via starting a business or other ventures, loans cost a lot of money, so just having capital to loan out etc makes you money.. Money creates more money so the more you have the more you can make in a proportional way. No?

Isn't point 3 actually a net good, though? I'm personally okay with people wealthy enough to consider point 3 creating foundations that procure more murals, enhance local zoos, or support cancer research.

On point 1, it’s also important to realize there is a step up in basis when inheriting or donating appreciated stock

Interestingly I can't hear any party, be it from the left or from the right hand side of the spectrum, telling that they are going to tackle tax avoidance by limiting 2. and 3. It should be frankly quite easy to identify fake costs and "charitable" foundations.

They can only talk about minimum Corporation Tax...

What a joke.

The rich usually are escaping capital gains tax. There are a very large number of ways to avoid realising capital gains. A good example of this is John Malone...he has spent about two decades continuously trading assets up to $8bn, I would be surprised if he has ever actually paid capital gains.

Point #3 has come to the (wealthy) masses via the “directed trust” which allows you to “donate” your money and take the write-off without actually donating it yet. It’s only just a bit more than a promise of eventual future donation.

1. You don't have to sell the stock -- one could fund an ultra-wealthy lifestyle by renting expensive things, using stock as collateral. As your stock goes up in value, so does the value of things you have access to.

Points 2 and 3 are also being accomplished by corporations being willing to sponsor politicians that will reduce them no matter how horrible or unqualified they are in other domains.

This is a little random, but I had received stock as part of an acquisition, which I had to pay taxes on as if it were income. Now, if I sold that stock, do I have to pay taxes again?

You pay capital gains tax on the difference in the price when you received it, and the price you sold it for.

Presumably only on the capital gains, assuming any. So if the stock was taxed as being valued at X when you received it, and you sold it at x + y , you'd need to pay taxes on y.

Funnily made that point three days ago here

https://news.ycombinator.com/item?id=27404513

If those foundations can do more good for humanity with less money than the federal system, wouldn’t it be good to leave these “loopholes” in place?

The biggest issue is that when you die, your assets get a “step up in basis” so the gains until then won’t ever be taxed.

"conflating wealth with income"

The author(s) explicitly do NOT conflate these and point that out several times.

The authors conflated right here...

"The results are stark. According to Forbes, those 25 people saw their worth rise a collective $401 billion from 2014 to 2018. They paid a total of $13.6 billion in federal income taxes in those five years, the IRS data shows. That’s a staggering sum, but it amounts to a true tax rate of only 3.4%."

Income taxes paid divided by increase in net worth, how is this NOT conflating?

No one's definition of 'true tax rate' is calculated this way.

The charity “scam” is brilliant because it is the hardest to argue against by the masses.

Are foundations available to folks on a tech salary as a similar tool?

Why is a wealth tax not a good idea? Seems like it is the right idea.

Wealth taxes in practice tend to make income taxes look simple - to be effective they need to be capricious and arbitrary in way that's difficult to sustain in a country with a legal system that at least makes a reasonable show of not liking either of those two things.

demogoguery will be pushed instead of sane tax policies for companies like amazon or tesla.

its part of the far rights end around democratic decline.

Fringe, whacky ideas are getting funded and their bad ideas given fuel to spread, and boosted on social media. Just thinking back how laughably bad of an idea communism was, and how many lives it cost. Just because you're a billionaire does not mean you should be playing a social engineer.

Add to that list:

4. Divorces are being initiated to show expenses and "reduce" wealth ;)

Unless the tax brackets go down, net taxes (spouses combined) should come to roughly the same thing.

It's very possible to pay more taxes while married. Two high income people getting married will very often face a large "marriage penalty".

It's the dumbest thing I've ever heard of when I first looked into taxes when thinking about getting married. We seriously thought about not getting married on paper because of it.

I would like to see more details. :-) What you wrote is not my current understanding or observations.

You can just Google "Marriage Tax Penalty" and you'll get more details and history than I can write in a post.

I imagine it's not a super common problem in the general population. But for the HN demographics, two high earning bay area tech people getting married is pretty common, and they'll often be hit with the penalty.

That explains it. I looked it up and it does indeed say that it impacts those cases more when both people are high earners. Thanks. :-)

The source of how they got the tax returns is the story - very unsettling that the IRS had a security breach (either leak or hacked). I suspect SolarWinds has a part in this

Capital gains are not eventually taxed if you hold the stock until you pass them get the step up in cost basis. Easier to do if you can borrow cheaply and deduct the interest.

please help me understand what you call "capital gains". in india, when you are holding a share in a company for example, its value goes from $1 to $4 in a year. for that financial year, your accountant says "hey. you earned $3 as capital gains", and its appropriately taxed as short term capital gains or long term.

how do American financial statements show "wealth"? i read the article but i don't understand. if my personal balance sheet was $ 1 at the start of the year and by the closing, i say my capital balance is now $2, that means i got the balance through some earning so that is what is taxed. why the half assed approach to delay till final sale? accrual is an accounting word. isn't it?

If I buy a share of a company for $1 January 1 2019 and it is worth $2 January 1 2020 I've got $1 of 'unrealized gains'. I pay zero taxes.

If I sold it before 1 year of holding, I'd pay $1 in taxes (the gain) at my top tax rate based on my other income. If I sell it after 1 year I pay tax at a reduced rate on the total gain.

i am not concerned about selling. i am saying when you "accrued" an income, you pay taxes on it.

It’s not an income until you sell it

In the US (and most western countries), the difference is not reported as income until you actually sell it. This removes any debate about the value of the asset.

my question stands. why doesnt us tax system recognise accural of income?

Because,there’s no income until you actually sell.

Imagine someone poor, having bought a small house in a sketchy neighborhood for not much. Imagine this neighborhood now becoming really fancy with hipsters moving in. With your system, the person would have to basically sell his house just to pay taxes on gains that didn’t translate into anything in his real life.

In many places in the US (California aside), property taxes are pegged against the assessed value of the home and re-assessed on a regular cadence. So the scenario you paint can definitely happen.

The way that property taxes work in California is more similar to Capital Gains in the US where your taxes are based on the sale price (although imposed continually, not just when a transaction occurs). The net effect of this is that you have neighbors with effectively identical homes who pay a full order of magnitude difference in property taxes every year (i.e. 2k vs 20k). [1]

[1] https://www.officialdata.org/ca-property-tax/

what is wrong with you. when did i talk about a "poor" person. i specifically wrote when you record an amount in your financial statements as your "gain", after close of financial year, there is no uncertanity of what was earned. the actual has happened. why would a regular home owner create his financial statement?

You said "accrual of income". Everyone has been trying to clarify to you, that the change in value of an unsold asset is not income, it is not a gain or loss as far as taxes are concerned.

It's not income until its sold.

Also, that scheme of taxation just further advantages the very wealthy and discourages investment anyway.

you dont know what accrual is then. good

Reading a couple of sources on capital gains tax in India, it appears to work in the same way as the US (taxed only when you transfer/sell the asset):

https://cleartax.in/s/capital-gains-income

https://home.kpmg/xx/en/home/insights/2011/12/india-income-t...

Yes, and that's the only sensible way to do it, IMHO.

The market value of an asset goes up and down all the time. There is only an actual gain or an actual loss when that asset is sold. That's the appropriate time to tax (and that's also when the person is sure to have the cash to pay any tax since they have just sold the asset!)

"why ... delay till final sale?"

Delaying until final sale encourages people to keep money in the market. Money in the market is, ostensibly, providing a value to society as good; probably better, than anything government has ever done.

The distinction is "wealth as personal consumption" versus "wealth as resource allocation."

The former is something that only benefits the wealthy person. The latter is something that already benefits society.

> "wealth as personal consumption" versus "wealth as resource allocation."

Wanted to post exactly the same comment.

We are yet to develop an appropriate terms, that are _widely_ understood that describe the problem in details.

Personally, I don't see the problem with "rich getting richer". I see the problem with poor getting poorer. It seems it is waaaay more complicated then the simple tax the rich

> The former is something that only benefits the wealthy person. The latter is something that already benefits society.

Even a rich person's consumption "benefits society"* by stimulating the economy. Their spending is someone else's salary or profit margin.

*Leaving aside that most consumption is a negative for the environment.

> how do American financial statements show "wealth"

That's the point though. This is a tax on income, not wealth. And, until you sell the asset, it's not income.

> in india, when you are holding a share in a company for example, its value goes from $1 to $4 in a year. for that financial year, your accountant says "hey. you earned $3 as capital gains", and its appropriately taxed as short term capital gains or long term.

Capital gains taxes in India appear to work the same way as capital gains taxes in the United States[0]:

> Simply put, any profit or gain that arises from the sale of a ‘capital asset’ is a capital gain.

The tax is only incurred at the time of sale. If you don't sell anything then your accountant will report $0 in capital gains, even if the value of your assets (on paper) has increased.

If you are invested in a mutual fund then (at least by US rules) you may have reportable short-term or long-term gains despite not actually selling any shares due to trading activity in the fund; the taxes are passed through to the fund's investors. However, this is unrelated to any change in the value of the fund's shares.

[0] https://cleartax.in/s/capital-gains-income

> capital gains are eventually taxed

Not if you never sell. At death the "basis" is reset to the current market price. All those capital gains accumulated during a lifetime are never subject to capital-gains tax.

There is currently a proposal to eliminate this loophole which was originally intended to deal with the difficulty of determining the history of a dead person's assets. Obviously this doesn't apply to the extremely rich with accountants, lawyers and financial advisors.

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