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Comment by danielh | Hacker News Reader

This might come as a surprise to folks who do not own stocks and are not aware of the difference between income and (unrealized) capital gains. According to this article [1] from 2020, about half of American families owned stocks. But only 14% own stocks directly, the rest is through retirement accounts.

The media does their part with sensationalist headlines like "Jeff Bezos got 100B richer during the pandemic". Without some financial literacy, someone might interpret this that someone handed Jeff Bezos a 100B paycheck.

[1] https://www.forbes.com/sites/teresaghilarducci/2020/08/31/mo...

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I think you’re missing the point of the article. Everyone here understands that unrealized capital gains aren’t taxed. That’s what the article is about. It’s saying, “look, this is the result of the tax policy” - staggering gains in wealth with essentially negligible tax burden. It seems unfair, because it is unfair.

So, we all understand it, but maybe some of us think that because it is, it must be. I’ve never understood that point of view.

> Without some financial literacy, someone might interpret this that someone handed Jeff Bezos a 100B paycheck.

Which is exactly the reaction those kinds of headlines are fishing for.

A 100b check is very different than your already massive business booming more and making you richer because you own a huge share of it and that share is now worth more.

> Which is exactly the reaction those kinds of headlines are fishing for.

Not sure I get your point. Do you want to imply that 100B in capital gains would be preferable over a 100B paycheck?

They seem to be suggesting it's better the money is earned through ownership. Which is funny as I'd lean the other way and say that beyond a point, allowing such large income through ownership and not actual work is a bad idea.

Note: Bezos and Musk, could ask for a hefty salary so they may work out to similar total income, unless someone else could run it cheaper and better. While hedge funds and inherited wealth that only own and don't contribute would receive less.

And it's worse than just 'assets not cash' - Amazon might not be the best example, but even so there's no way can dump ~1/10th of it without moving the price; even ignoring disclosure requirements and the effects of insider selling, it'd be way down just on that volume (10x 30d average).

I think wealth coffers are past the upper limit of what can be construed as reasonable even in the most anarchic of capitalist societies.

Just like on the monopoly board, one cannot win when all the spaces are already owned - that’s the situation we fundamentally have. A wealth tax is necessary.

> Just like on the monopoly board, one cannot win when all the spaces are already owned - that’s the situation we fundamentally have.

Monopoly has a fixed game board with no possible means of expanding or changing the spaces the player can land on. The real world is constantly at risk of disruption from changes in technology and geopolitics that can substantially change the competitive landscape.

True, in monopoly those with nothing aren’t allowed to take back the means of production by force when all changes create further and further wealth inequality.

That doesn't work out in practice. "The richest families in Florence in 1427 are still the richest families in Florence" https://qz.com/694340/the-richest-families-in-florence-in-14... The headline tells you what you need to know. The disruption thing is just a chimera to fool gullible people into thinking that rich people actually earned what they got and that the system is fair. It absolutely is not.

The richest families in the US are certainly not the richest ones from 1950 let alone 1427. The largest companies by market cap are Apple, MS, Google, Amazon, and FB... None of those businesses existed a generation ago let alone the technology that powers them or even their business models. At least some of the founders of those companies are immigrants. There is no reasonable extrapolation from wealthy families in Florence to "disruption is just a chimera to fool the gullible" in SV.

The three richest families in the US are (according to a simple Google search) the Waltons, Kochs, and the Mars. These three families were already in the 1950 very wealthy. I don't know enough to say whether they were among the richest, but for sure they weren't poor.

> The real world is constantly at risk of disruption

Only for workers being replaced by automation and such. For whole social classes - no.

All key indicators show how social mobility is not high in most countries and it's even decreasing in many.

Yes, and:

The never ending struggle between wealth and democracy. Same as it ever was, including the pearl clutching and feinting spells.

This was my introduction to the nuts and bolts, written by Kevin Phillips, Reagan's economist:

Wealth and Democracy: A Political History of the American Rich [2003] https://www.amazon.com/Wealth-Democracy-Political-History-Am...

The same outlets that publish those headlines also publish ones like “Company XYZ made billions in revenue and paid zero in taxes”, completely glossing over payroll tax, deferred losses, and credits for capital investment.

This one makes me so mad, because it's always some ignoramus comparing taxes with revenue and ignoring the fact that if the company paid zero taxes then most or all of that revenue was ploughed back into the local economy. Jobs, construction, equipment, etc. all mean that cash lands on everyone, and then people swallow the spin and complain about it.

Now, if they were making billions in profit and paying zero taxes then that's different.

> Now, if they were making billions in profit and paying zero taxes then that's different.

Some companies are, and are very clever in hiding that (offshoring profits, etc.).

Other companies (and their boards apparently) are content with "merely" overcompensating their executives, who then have their own teams of accountants and lawyers to avoid paying taxes. The companies themselves aren't running much profit, on the promise of a better stock price and future growth. In some cases this is legitimate because they are indeed investing in their own infrastructure or intellectual property.

> Now, if they were making billions in profit and paying zero taxes then that's different.

Why is that different? Profits will be used to innovate or be invested in future infrastructure, at which time they will be taxed.

Payroll tax is paid by employers on behalf of their employees. That is, it is the employees money that pays the tax - not the employers. VAT works similarly.

There’s two halves to payroll tax. One paid by the employee that is deducted from their paycheck. The other is paid by the employer and counts as an expense against revenue.

Employees do not get to deduct the second half from their taxes. It’s considered to be paid by their employers.

(Unless you’re self employed.)

Nonetheless, it’s effectively part of the employee compensation. It goes away if the employee does.

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