We are publishing the tax secrets of the .001% | Hacker News Reader

We are publishing the tax secrets of the .001%

propublica.org

609 pointsjbegley562 comments

In Finland, everyone's taxable income is a matter of public record. One theoretical benefit of such a policy is that it eliminates information asymmetries between workers and employers in wage bargaining.

>eliminates information asymmetries between workers and employers in wage bargaining.

WOW! Never heard of this as an argument. I think it is a very good one for working class.

> everyone's taxable income is a matter of public record

That's an interesting approach. I have a couple questions out of curiosity.

Does that include their "offshore" income? By that, I mean income earned outside of the country, not necessarily hidden.

Also, what is income? If there is a billionaire investor and he loses $10 million, do you see that as well?

some countries have a social "fabric" .. the USA is a geographic location with English-style law, and a lot of people who are very divided and increasingly antagonistic.. Try to build the Roman Empire, and you get Roman Empire problems in your population..

Interesting. It seems to work for Finland. In some countries it would probably make you a kidnapping target.

Same in Norway, but the result isn't very accurate.

For one, the wealthy don't tend to have any serious income - it's mostly capital gains for one of their holding companies or similar.

Second, those numbers can be seriously "massaged" by having debt - your income will show much lower if you have any significant debt (no mater how low the interest rate is).

For normal / regular people, the public figure gives you a very rough estimate.

Again - the rich and wealthy will almost always show up with income 0, tax 0, assets 0. You don't even need to be filthy rich to get it structured like that.

edit: What it did create, though, was a cottage industry of tax snoopers. Over here, you can see who's been checking you out - and nosy people not wanting to do that, will pay a couple of bucks for some service where others will check out your information.

I wholeheartedly agree, and I'd be in favour of such a system here in the UK.

That said, I'm not sure it would work in the US, where individualism has been taken to such extreme lengths - I could imagine it being used as bragging rights, rather than a source of moral embarrassment as it would be in Europe and Scandinavia.

I am in favor of such a system.

makes it know who to rob

You mean that workers know incomes of other workers in the same company and role and thus there is no way to negotiate wages with people individually basically linking them to their negotiation skills?

I would also think that this makes neighborhoods less financially diverse. I can’t see someone with a higher than average income moving into a neighborhood knowing that their neighbors might make 1/4th as much. It puts a target on them.

That makes the lives of gold-diggers easier too.

If it were opt-in that would be fine, otherwise it's an invasion of privacy of most people who aren't rich.

It's almost as bad as having medical conditions and STIs test results listed publicly.

Facilitating public exposure of counting other people's money doesn't help anyone except the rich to know if you can fight them in court or how much to bribe them.

Fight wealth inequality with income-&-holdings-proportional fines; simple, government-calculated graduated taxes without complicated exemptions; elimination of corporate/wealth welfare; and expand economic-advancement-oriented welfare to those who aren't super-rich who can use it.

One of the primary mechanisms for tax avoidance is taking out loans against appreciated capital assets to avoid realizing capital gains.

What's stopping the average citizen from exploiting this tax avoidance strategy?

For example, every time I try to submit an order to sell stock that results in short-term capital gains, my broker should be asking me whether I want to take out a collateralized loan instead.

If there are loopholes in the tax system, they should be made readily accessible to all.

The average citizen can't borrow to pay off debts indefinitely.

At ~2% interest the billionaire can borrow against their assets and keep borrowing to pay off interest. The assets gain in value at 4-6% per year so they are actually coming out ahead and paying 0% tax.

Even a middle class retiree typically needs to draw down their savings to pay expenses. Giving up 2% to avoid taxes wouldn't be viable. The bank would also observe that there is a higher risk that the retiree goes bust than a billionaire and not lend enough money for the scheme to be worthwhile.

or even at all! large amount of Americans don't even have access to banking.

The loans they can get are insanely (i think disgustingly) predatory.

payday loans with fees can ed up being like 664% APR!!!!! Your 500 loan becomes 2000 you have to pay back in a couple months, which you obviously can't..

https://www.cnbc.com/2021/02/16/map-shows-typical-payday-loa...

Right it's crucially important we leapfrog all this crypto and fintech nonsense by just doing "fed accounts for all" administered electronically and at the post office.

Boring commercial banking should be utility, and any private sector offering will have to compete with a new non-grifter baseline.

And 2% is really high. Billionaires are likely getting less than 1% interest rates. Big banks are willing to lose money even, just to court these billionaires.

My Etrade account has that option. But I don't use it because it's risky. If you take out a loan collateralized by a stock, the stock could drop and you'd owe a lot of money.

Selling the stock locks in the gain. Now, if you only need say 1/2 the value as cash and can absorb the risk of the stock going down, then it makes sense. Or if you want to "buy insurance" by taking out an opposite short position, that would also make sense. But that short position will cost you money too.

So it's not as straightforward as "just take out a loan". You need a very good (and expensive) tax accountant to run the numbers and figure out the best strategy for your situation. Most people can't afford that.

Why isn't there an option to take out a loan where a repayment option is to transfer the capital asset (at whatever the value happens to be at the time of repayment)?

I.e. I don't get why the risky part of this loan can't be mitigated by the bank taking on the risk and managing it separately. Surely, there would be investors willing to back these types of collateralized loans?

You'd need a crazy high interest rate to account for market volatility. If the bank could make accurate predictions as to the future value of the stock, they would just invest in the stocks.

Loans against other assets are much less risky, because they are backed by actual things. If the bank screws up in predicting the future value of a house, they can still own the actual house and land if you default. With stocks it would be far more risky because stocks are far more volatile than houses.

Hm, is it possible to define a range for "crazy high interest"? As the debtor, I'd be willing to pay up to the difference in long-term and short-term capital gains (~15%). I guess where I'm going with this is: I don't understand why the average person ever pays short-term capital gains tax.

> I don't understand why the average person ever pays short-term capital gains tax.

Because the risk of holding the stock is more than the difference in short vs long term capital gains.

If the stock is worth $1000 in gains, I know I can sell it and lock in the gains today and pay my normal income rate. If I have to hold it for another 6 months, there is a huge risk that it drops more than the 5-10% difference in the tax rate for the average person.

I pay STCG on option contracts written and on (profitable) short sales (where the holding period is defined to be short-term).

Other positions have a defined thesis and, if that thesis gets invalidated, I close out the position sometimes at a gain. I do try to make most of my gains be LTCG, but trying too hard to optimize capital gains rates can lead to poorer investment decision-making/asset allocation.

You can simulate what you want by simultaneously buying an at-the-money protective put and selling an at-the-money covered call. Then regardless of future stock price movement, at expiration (i.e. when the "loan" needs to be repaid) you always transfer the stock away.

Now why don't you plug in this scenario into any Black–Scholes calculator and see how much of a net credit at entry you get (if you even have one). That would be the maximum loan amount you'd be able to get under this scheme. If you could get one at all, the loan amount is tiny compared to the value of the asset.

> ... bank taking on the risk...

Banks don't take on risk. Seriously.

That's another conversation to have, but the simple answer is do you want the value of your checking account impacted by someone else's purchase of Gamestop, or Enron?

And that's why banks don't take risk.

Banks loan money, and every loan includes some risk. If banks didn’t take on risk than the 2007/2008 bailouts wouldn’t have happened.

I should have clarified - banks don't take on market risk.

Taking the short position on a stock you own is called selling short against the box. I don't know much about it, just had heard of it, but it sounds like it's been regulated in the US (to reduce its use for tax avoidance) since 1997.

https://www.investopedia.com/terms/s/sellagainstthebox.asp

"What's stopping the average citizen from exploiting this tax avoidance strategy?"

Probably that the average citizen doesn't have capital gains.

Only 55% of Americans own stock: https://news.gallup.com/poll/266807/percentage-americans-own...

most of those will be in retirement plans which I assume aren't taxed?

> which I assume aren't taxed?

It depends on which kind of retirement account. Might be in Roths and Roths-401Ks which are taxed when the money goes in (treated as regular income), or IRAs and regular 401Ks which are taxed as regular income when the money comes out.

If you are in the US you should brush up on your personal finances.

Certainly not capital gains of the order of "all the spending money I need, without any worry about repaying it on time even if the asset goes back down in price."

Your example of loans is tax deferral, not avoidance. As for your examples in general, those are really good.

Collateralized loans on stock we usually call "margin loans" and are easy to get.

Also, anyone in real estate will recognize the term "HELOC", where you can get a loan against the value of your home, presumably after its value has appreciated.

I think both of those are fairly accessible, at least in the US.

For the mega-rich it's tax avoidance. That money gets rolled into the estate or trust with the cost-basis resetting on death.

That's not a tax loophole though. You still have to pay back the loan with interest. And it has to be paid with cash from somewhere. People like Bezos do this primarily to retain their equity because it's worth more than money to them. It's their ownership stake. For others, they are just betting the assets will appreciate more than the cost of the interest. It's income optimization not tax avoidance.

You can do the same thing with a HELOC. Otherwise you'd have to sell your house and pay cap gains then spend the net profit. I don't think a HELOC is tax dodge.

HELOC definitely isn't a tax dodge because the first $250k-$500k of profit on the sale of your home is not taxable anyway.

But there is something to be said about being able to defer taxes effectively forever. Only the ultra-wealthy are able to do this.

This doesn't defer taxes, it defers realizing profits. The loan payments have to be made with cash that came from some source which can likely be taxed. Anyone with assets can do this proportional to their assets. Admittedly most people don't have sufficient assets to make it worthwhile. Nor do they exercise the voting rights on stocks. But really any middle class investor with a nest egg could do it.

You can:

https://www.schwab.com/pledged-asset-line https://www.wealthfront.com/portfolio-line-of-credit

And HELOCs are essentially the same for people who own a house but not stocks.

Got it, but why don't brokers more aggressively push this program onto clients? It seems like a win-win.

The debtor avoids the elevated short-term capital gains tax.

The bank gets interest payments on a loan that has an almost 0 default rate due to the loan being fully collateralized.

You're basically describing a margin account. If you have a portfolio on a margin account at the broker, you can just withdraw money from it up to the amount that your margin allows. That automatically starts a loan for that amount, collateralised by your portfolio.

The problem is that this is not nearly the same as selling stock and withdrawing the sales money, because you keep the risk that the stock will go down thus force liquidating your portfolio. You're conflating selling and borrowing, they're not identical except in these very vague tales about the ultra-rich.

> why don't brokers more aggressively push this program onto clients

They do.

Wealthfront (as just one example) features and advertises this prominently in their app.

It's also very easy to do with Robinhood, simply withdraw cash using your margin. Interest rates are quite low. 2.5% with Robinhood, 3.65% with Wealthfront.

There's a big "Borrow cash" button right when you open the Wealthfront app.

> It seems like a win-win.

It's not a win-win, there's significant risk.

> fully collateralized

This is not true! The underlying asset fluctuates in value and is open to lowering significantly in value, leaving the bank holding the bag.

> leaving the bank holding the bag

You probably underestimate the ability of banks to evaluate risk. Yes, they absolutely could end up underwater on an asset backed loan, but you also shouldn't assume that you can take out $1 in loans on every $1 of stock.

On Schwab's page, they say: "Schwab Bank, in its sole discretion, will determine what collateral is eligible collateral and the loan value of collateral". So, if you have some recently highly-appreciated shares of AMC for example, they might decide they are not eligible collateral, or only offer to lend you $1 for every $5 of stock.

LOL, yeah the banks have been so great at leverage in the past couple of decades in the USA that they have to get bailed out repeatedly.

Depends on what you spend the money on. If you take the margin and spend it on an asset, then you have the underlying stock as well as the asset to cover calls. Still requires correct thinking but the risk is mostly based on what you do with the loan.

I've been saying this for years. Low interest rates are like a triple handout to the extremely wealthy.

1) pump up asset prices.

2) lower the rate at which you can borrow against unrealized gains to make avoiding taxes more attractive.

3) people use this savings to buy more assets. Repeat step 1. Virtuous cycle.

I can't go to a bank and get a loan against $1M in my 401k at 2% interest. But I know people with $50M+ that are doing this. It's absurd.

Can you explain how this works, how it avoids tax? Taking a $100 loan still means you’ll need an income of $100 (plus interest) future income and tax paid on this income...

If you’re gonna say “they benefit in the extra capital gains between now and when the loan is repaid” - no, that can’t be it, that’s exactly equivalent to taking a $100 loan and investing in stocks instead (i.e. leverage).

1) You purchased $100 of SPY on June 15th, 2020

2) You're buying a house, and you need $100 today.

3) You sell $100 of SPY, and pay short-term capital gains (up to 37%)

OR...

1) You purchased $100 of SPY on June 15th, 2020

2) You're buying a house, and you need $100 today.

3) You take a loan for $100

4) You wait until June 15th, 2021 and then sell $100 of your SPY holdings, paying long-term capital gains (15-20%)

5) You repay the $100 loan

...it doesn't really avoid tax. It's just an alternative way of accessing capital by taking out a loan instead of liquidating assets.

That's not accurate. It has several benefits (like interest payments being deductible expenses) and wealthy people can continuously borrow to pay off other debts as their other assets appreciate. You just need the rate of appreciation of your assets to be higher than the interest rate. For very big loans, it's quite possible.

Finally, it's also possible to roll the gains into a trust and the cost basis is adjusted to zero on death. [0] So yes, it's tax avoidance.

[0]: E.g. this is how it's possible to do that: https://wellergroupllc.com/taxes-resources/tax140-guide-dete...

The above basically arbitrages long-term vs short-term capgains for the price of 1 APY cycle, right? That's ~23% for short in the USA, and up to income-level (37%?) for short-term. Quite a big difference for a 2-5% APY loan that you close after 1 year, and the numbers would seem to scale better the higher you go.

But if the asset sale + the debt leaves you at a loss wouldn't you be able to avoid paying the capital gaibs over the asset sale?

The theoretical assumes SPY increased over the time period. If it decreased, you could of course sell it and pay 0% since your investment lost money, short/long-term gains wouldn’t matter because there wouldn’t be any gains.

I might be misunderstanding your question though.

Debt is not a loss unless you default on it.

https://youtu.be/8pBPZMUcsh0 They never sell, they borrow over that invested money and pay 3% (interest) instead of 37% (income tax)

The assumption is that you are using the money for an income generating activity like buying a rental property.

The correct expression to use to refer to such money is “loan”, not “tax evasion”.

Hm, but income from rental is also taxed, isn't it? If so, how does it help?

The income from the rental is taxed, but slowly over decades. You don't have to take that entire tax hit in one year.

Chances are it doesn't, but the IRS won't go after rich people if they claim they don't have any taxes to pay.

> What's stopping the average citizen from exploiting this tax avoidance strategy?

If your stocks go down, you still owe the full amount of the loan. If your stocks go to zero, you still owe the full amount of the loan.

Also available in the UK, Interactive Brokers margin loan. The interest rate is 1-2% p.a.

Um, at various times I have had a home equity loan...

If one’s broker had collateralized loans in their menu of options, what volume of gains are needed to overcome the initial setup costs of the loan?

The conflation of change in mark-to-market net worth with income has got a whole lot to do with the constant breathless reporting of "Bezos/Gates/Buffet/... made/lost x BILLION dollars today" every time the market moves by more than a point.

Sure, I get they want to beat the drum on wealth inequality, and perhaps that's a drum worth beating. But its a disingenuous disservice to pretend that these people are sitting on a massive pile of 'hoarded' liquid cash that could be redistributed in a meaningful without incurring massive losses. Might as well pretend that we could seize and sell all of the latest $100bn shitcoin and get $100bn USD to distribute.

I never followed this chain of logic. The whole point behind the stock market is to treat any commonly traded stock as a liquid asset. Why do you think that this fails with respect to Bezos and Gates?

Bill Gates started selling off his microsoft stake in the late 90s. It took him more than two decades to get from 49% ownership down to the 1.9% he has today. It's hard for figure heads to divest without crashing the stock because it carries substantial signal risk.

The stock market is only liquid at smaller scales, bigger transactions will have dramatic effects on the price.

You're assuming Gates was trying to divest from MSFT. There's no evidence he was in a hurry.

You are right that insiders selling can be a signal. That's why we have laws that govern their actions. But that's because it is assumed Gates knows more than the average MSFT investor.

Yes, if Bezos woke up tomorrow and wanted to crash AMZN by selling his shares, he could. But he routinely liquidates over a billion dollars worth a quarter.

No assumptions are needed. He created a public divestment plan and sold 20 million shares per quarter since. While it’s normal for insiders to declare trades well in advance doing so decades prior is a bit notable. He was pretty upfront about wanting to diversify after Ballmer took over.

Sorry, yes he wanted to diversify as he was no longer in charge. I meant to write something about assuming he cared about diversifying quickly (lost faith in MSFT) as opposed to so he could reduce his risk and think less about his asset distribution.

By definition a stock is not a liquid asset. It needs to be sold first. In order to be sold, you need a buyer. You don't always have a buyer.

> By definition a stock is not a liquid asset.

"By definition"? Which definition are you using?

Liquidity exists on a spectrum and is not binary:

> In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity involves the trade-off between the price at which an asset can be sold, and how quickly it can be sold. In a liquid market, the trade-off is mild: one can sell quickly without having to accept a significantly lower price. In a relatively illiquid market, an asset must be discounted in order to sell quickly.[1][2]

* https://en.wikipedia.org/wiki/Market_liquidity

The stock market converts stock into a (more) liquid asset. The value of GOOG may vary day to day, but no one thinks that it's difficult to turn shares into cash.

Turning oodles of shares into cash at the prevailing price, without pushing the price adversely, is quite a trick. "Slippage" is how to research this concept.

Who suddenly needs $3 billion out of the blue? Because Bezos regularly cashes in over a billion each quarter. Is that not enough to maintain a lifestyle?

But if he wants to buy a sports team, he can probably pay directly in AMZN stock as a private transaction (well, except for possible SEC regulations.)

And yet I had to pay tax for exercising stock options from a startup I left, stocks I was never allowed to sell since the company was private.

Everything is different when you start dealing with billions vs a few dollars. If Gates decided to liquidate his stock and use the money to buy real estate in Seattle he would decimate the stock, wreck the housing market, and get sued by shareholders. You can't just move money around and have actual goods and services appear out of thin air. That's why it's dumb when people say things like: "Those fighter jets costs 50,000 college educations".

I think the market is more to treat the stake in a company as a liquid asset. Such that you can transfer stake to someone else for an agreed value.

But, it is not the value that is liquid, necessarily. It is just the stake. In theory, there is intrinsic value to this. In practice? Much more complicated.

Lol if i have a paint which value fluctuate every year i should pay taxes or receive credits according to this article.. same for car , house.. incredibly ingenuous article ... Why stop here.. My qi could have a potential value if i do a test and get a high score i should pay taxes ? Stocks or growing company shares should not pay taxes until you sold them because you didn't benefit from those until you sell them, if you decide to give your shares to your employees when you die.. and you die poor because your annual income was low and you never sold more shares than you needed why you should pay billion in taxes if the company is worth billions (or was worth billions at certain point in time ) ? This kind of tax system proposed may cause company fail because shares owners may be forced to sell shares to pay taxes on shares just because those.. shares exists .. absurd.. when the company pay taxes and you pay taxes on what you take and also pay vat and other taxes on what you spend ? Very ingenuous article imo taxes should not be avoided and should be equal, but should be on money you receive it spend not on some assets that grown in value ( btw note that indeed something like houses and cars often have some kind of taxes already recalculated on current value ) but this is a different type of tax based on usage and owning something that require maintenance (ie: city, roads,...) But why limit at public companies if i have a company which is losing money and have 10k shares and i sell one share to you at 1k because you believe in it , this same year i should pay money on 10mil$ because iphotetical value of the company based on recent sale was 10mil ? And my net worth is now 10mil?

I will go further..let me be hypothetical.. in a closed and transparent system imho even income should not be taxed.. only spending.. if i earn 10bil and spend 0 why should I pay ? If i donate those 10b to my children and he spend 0 and grow it to 100b or leave it in bank.. all spending 0 .. what is the difference of taxation here ? We both died homeless and hungry... We are doing the equivalent of buyback\ reverse printing on dollars...decreasing liquidity ....Until i spend what is the problem ?.. btw this is not a closed and transparent system so taxing liquid assets is ok.. it's when I spend that I'm going to use or abuse the system or the ecosystem depending on what I'm buying . So let me pay 9000% taxes on a dodo steak and 1% on tofu burger this way with ethic taxing policies i would be also incentivated to spend better and improve the world ..

one way to put it, if amazon stock lost 98% of its value, Bezos would still have over 1 billion dollars worth of it.

The day to day fluctuations may be relatively meaningless, but the amount of wealth controlled via it is very real.

Yes. Most people dont think about it that way. I am wondering if there are any simple free bitcoin / cryptocurrency making services? Get people to apply one crypto of their own, make 1 billion coins. I buy one for one coin for $1. Now that person is instantly a billionaire.

If they didn't want to incur loss Bezos could just gift me his shares in Amazon

Yes, it's a bummer common discourse does this. While making the billionaires wealth seem more liquid would seem to overstate their power, I think the real issue is quite opposite.

The popular understanding of capitalism is accurate prices and liquid goods, and only a few things (as contested in culture wars) are genuine separate axis. The reality is the real power of the billionaires isn't in their "net worth" (however good the accounting is), but in their power over the institutions they control. Look at the size of the flow in and out of those institutions, their capacity for investment. Realize also that even as we collectively have the wealth for much simultaneous investment, earlier investment has a profound and non-erotic effect on future history (e.g. car vs public transit, Unix being entrenched for 50+ years, etc.) This is the real travesty of billionaire power, not the ability of Bezos to buy big yachts or whatever.

The people who will be most upset about this probably aren't the wealthy people themselves, but their lawyers and accountants.

I have a lawyer friend who does estates for ultra-wealthy people. Each week, her whole firm gets together to review all new laws that have been passed that might change estates, and one of them does a "book report" on how to take advantage of old laws. They consider this their competitive advantage and how they win clients over other firms -- by being better at taking advantages of loopholes.

I'm sure they'll be looking at this article to both gain ideas and check if any of their own clients are there and if any of their secrets are revealed.

Interesting, but Pro Publica’s calculation of effective tax rate as taxes payed divided by wealth increase is weird. I don’t think there’s a jurisdiction in the world that calculates tax that way, and there are good reasons for that.

The exact point is that because taxation does not consider this income, the vast majority of the money made by very rich people takes this form. Pro Publica's point is not that these people are breaking the law, but that the tax system should be different.

That's not how you would want to implement the tax law, but it reflects the moral intuition.

ProPublica confuses wealth with income.

If you have $2b in wealth, and lost $1b in bad investments one year, you're still a billionaire, and your tax rate is 0%.

Nope. $3000 yearly passive loss exemption.

Let's say you operate a business netting you $1B and then buy a $1B pokemon card, which you sell for $0. You owe tax on $1B - $3000.

If you have $2b in wealth, and lose $1b of it, you do not owe taxes on $1b.

At some point they may have paid taxes on that $2B asset distribution, but of course they still have it, so maybe they took out a $1B loan to pay the IRS. Now they sell the asset, and they are lucky that it fetches $1B, enough to pay the loan. Now they have $0, and a huge sigh of relief. Could have been much worse.

So you see, a lot of these equity-based billionaires would owe more than they have without these 'loopholes', and some obviously not much with them.

It's not a "loophole" to not owe taxes on lost money.

Let's say you borrow and invest $1 million into a business startup, like buying farmland. The land goes up in value 10%. Now you owe $40,000 in taxes. But you only made a $50,000 profit farming it.

How are you going to pay taxes on that "gain"? You already borrowed money to pay for the farmland, you can't borrow any more.

The only way is by selling off parts of the farm, which may not be feasible.

In other words, many enterprises will never start because it is an impossible business model.

You'll just wind up crushing existing businesses and make starting new ones infeasible.

That logic doesn't really apply when you scale up to the ultra-billionaires. Shares of stock are plenty liquid.

The rest of it still applies. It makes the numbers not work for starting a business. Besides, selling off pieces of it means making less and less money off of it. You wind up working for the people you sold it to in order to pay the taxes.

You might as well kiss entrepreneurship goodbye with wealth taxes.

There is such a stupidly easy solution to this, which is to set a lower limit for whatever rule applies.

Though... even though things like estate taxes have these rules (either "first million isn't taxed" or "primary residence isn't taxed" etc, depending on jursidiction), most people tend to not actually read the details and assume that the gov't wants to take the family farm.

No, I don't think it's your god-given right to hand down a $2 million townhouse without paying taxes.

You don't have the god-given right to take it, either :-)

Taxes should be extracted as needed to support things that only government can do. Taxes should not be extracted based on envy, or just because they can be.

Unless the float is much smaller than the cap.

I would really just like a flat tax. No loopholes or deductions. Very simple. It should not take a masters degree to understand the tax code.

I recognize this is one of the main ways Policy is implemented (incentives can drive certain behavior), but we’ve got hundreds of years of complexity going on and I wouldn’t mind simplifying this.

I don’t know where to start though.

Flat tax is too regressive. What seems justified is a basic S-curve indexed by income, and where the left hand side dips below zero so those below a certain line effectively get a negative income tax to maintain a certain standard of living.

Many of the ultra-wealthy have little or no income.

What needs to be taxed is wealth, not income.

Flat tax + minimum non-taxable incomes is where it's at. Just set high enough threshold.

Agreed. Flat tax and sales tax are both regressive and both hurt the population the economy needs most to spend on consumption to be viable with circulation.

Care to explain why? :-)

Unfortunately Intuit (Turbotax) and the CPA trade groups lobby against any tax simplification whenever it comes up. Regulatory capture of our political process has corrupted it at every turn.

A flat tax simplifies one little bit of math, and doesn't really address loopholes and deductions. If you have an income tax you have to calculate "income". If I have a little store and buy gum for $1.00 and sell it for $1.10, it will not work well if that's counted as $1.10 of income. That $1.00 is a deduction. We can't eliminate them. It's a "loophole" when we think the deduction is not in the spirit of calculating income, but that's not an objective criteria.

A flat tax removes the benefit of shifting income to different entities to pursue lower marginal taxes, but I don't think that's the kind of abuse we're looking at here, nor is that abuse particularly scalable.

How about removing income tax (hard to measure, easy to avoid by rich) and increasing vat by the same amount. Vat could be even added to stocks (buying $5000 of Tesla stocks? Pay 20% vat. This could probably end all short term speculations as well). Definitely to yacht and houses, vacations, butlers and gardeners, gold doorknobs, Ferraris, swimming pools, 200" LCDs, hotel stays, massages, anything that is consumption really)

Because this would absolutely shaft everyone other than the well off?

Because there would be no way at all of scaling the tax based on income / wealth? So someone earning almost nothing with no wealth would be expected to pay the same tax as a billionaire?

I don’t know that flat tax is necessary - progressive taxation is a sane policy, as the marginal utility of money goes down the more of it you have, and therefore a larger tax burden is more easily borne - however addressing the gap between how asset and employment income are taxed is critical to combatting gross wealth asymmetry.

I write this as a member of the asset-owning class. I wasn’t always - I worked in the U.K., with my income automatically taxed via PAYE (Pay As You Earn), and paid between 20 and 45% effective tax rates on my earnings.

Now, my income is rentals and investments, and my effective tax rate is nearer 5%, on a much larger income than I ever had from employment. I’ve not done anything special or weird, I’ve just paid capital gains and written down the allowable expenses. It would not be hard to pay no tax, just by restructuring my finances a little, but it doesn’t sit well with me as it is.

Honestly, it’s nonsensical. At the very least asset income should be taxed at the same rates as labour income - but it should probably be taxed at a higher rate, as penalising productive labour and rewarding rent-seeking is ultimately contrary to the interests of everyone.

That misses the point. The problem isn't income. The problem is there is no "simple" way to assess wealth.

Actually, simplest thing to do mathematically is to skip the dollar-denominated accounting entirely, and just pay the government in kind i.e. asset forfeiture / putting the means of production in partial state control.

e.g. the gov owns stock in a company based on the distribution of private ownership (is it equal like ESOP or unequal like Facebook and Google?), and without regard to the market price of the stock.

I challenge the mathematically literate in America to really think through this.

> I don’t know where to start though.

I would start with "cui bono" and look into learning about the various institutions in place who's main purpose is to maintain the complexity, that would stand to make significant losses (or disappear) if it were simplified.

(just in case this sounds like pessimism or apathy, I don't necessarily think it is. But if one genuinely wants change, one does need to be aware of where hurdles lie)

I would like to have discussions even for "constant" tax.

Wrote more in the comments below:

https://news.ycombinator.com/item?id=27434369

https://news.ycombinator.com/item?id=27434819

A flat tax removes the simliest fairest part of the tax code and leaves all the bullshit and loopholes behind. Don't make the mistake of thinking you're (and my) experience of the tax code is anything like the actual code. We only see 0.001%. It's easy to consider only the things we see after all.

Economically, you sort of live in a flat tax. (https://www.nytimes.com/interactive/2019/10/06/opinion/incom...)

I know that's not what you mean. But if you simply filed a 1040EZ, then paid a 20% penalty when the IRS sends you a letter saying pay the rest of what you owe, expect to pay... 28 percentage points effective instead of 26.

This is to say that tax complexity is a red herring. You can already live in an almost zero-complexity tax obligation personally, as a wage earner, above and beyond what is officially prescribed. It's not really what it's about. It's probably not about saving money either.

I'm not sure I agree with taxing the "wealth", instead of income. Sure, on paper, Buffett's wealth went up by $23B; but these are just imaginary numbers based on the whims of the market. The tax should be on what amount of money actually flowed into his bank account.

The problem is that there is no way to track what flows into his bank account. Evidence says that he can avoid being taxed on any dollars flowing to his bank account.

This wasn't a huge problem a century ago due to the Estate tax ensuring that estates would shrink over time and eventually be taxed. In stark contrast to European laws that required estates to be maintained in their entirety to preserve the aristocracy. If Buffett can avoid tax during life and death and pass on a preserved estate then there is no guardrail against a gentle class. Fundamentally it also means that we've setup a tax system more akin to a feudal system where workers pay taxes and aristocrats receive benefits.

Off topic, just for your information: gentile in English is not the same word as in, for example, French.

The English word means not-Jewish whereas I think you probably meant gentle which has an archaic meaning of noble. See https://www.lexico.com/definition/gentle

The modern equivalent (though it is not often encountered either) is “genteel”, which I think roughly mimics the French pronunciation of the original word, but with a hard “g”. Sure looks like a cognate to me.

Great Callout! I've updated the text to reflect the correct word.

What are you talking about? You think Warren Buffet can covertly sell his holdings and not have anybody find out? If he executes any sales the brokers will have the records; if he transfer the funds to any bank in the world, there will be plethora of records for regulators to access. There's no way he can secretly hide large transfers.

The estate tax wasn't even enacted until 1916 so there wasn't a period of time where "estates would shrink over time" (for tax reasons, at least; the two World Wars plus inflation actually existing did lead to huge changes in the wealth distribution). And by the early 20th century land was no longer the single dominant form of capital in the portfolios of the wealthiest individuals.

Over the long term it makes sense. Over the short term it’s more difficult if the assets aren’t liquid.

You can follow this logic all the way down:

- tax on wealth

- tax on growth

- tax on capital gains

- tax on dollar deposits

- tax on spending

- tax on value-added

- tax on labor

Oh wait, that doesn't work at all.

- no tax

Which is the correct answer that ends up in everybody paying for the economy in proportion to their benefit from it. We're already operating like this: https://www.sifma.org/resources/research/us-treasury-securit...

But what do you think about him borrowing money using his "worthless" stock as collateral?

Clearly the increase in stock price is valuable to banks. So why not the IRS?

What I don't understand is: If I (a wage slave) find a football sized diamond in my back yard, I'm suddenly very "wealthy". Should I be forced to pay taxes on that find because my wealth has increased?

What if I want to keep that diamond but cannot afford to because of the taxes?

Isn't that how business owners gain wealth: By the valuation defined by others to the thing they "found". Should we force Bezos et al to sell some of their stock in their companies to pay tax? Surely a $100m+ tax burden would do that?

> What if I want to keep that diamond but cannot afford to because of the taxes?

Then you have to sell it. This is no different from game show awards, where the “car” you ein is taxed at the car’s value, so unless you have enough savings, you have to sell the car to pay the taxes.

I don’t really see any problem with this though? Absolutely we should force Bezos to sell some of his stock to pay taxes: employees already have to do this when they’re given stock grants, why should it be any different for owners?

But why should someone be forced to sell parts of their business (stock) because that business has increased in value?

Or is that not the claim being made here? Isn't that the vast majority of the richests' wealth?

We have a system based around the notion that when a worker is given money or other value in exchange for work, part of their value increase needs to be transferred to the state. That is the same even if you get a car in compensation instead if a paycheck.

Why should the system be such that if you gain value without exchange of work, then suddenly you should not transfer anything to the state?

Yes that means that you might need to liquidate part of the asset to cover taxes on its value, just like paying a workers sallee by giving them a car might mean they need to sell it to cover taxes.

But it’s extremely odd to argue that there is some inherent “unfairness” in Musk or Buffet having to transfer part of their value increases to the state when we all agree every worker should do this.

Why do we tax property more (outside California) when it increases in value? Didn’t the owner of it rightfully make a smart claim and stake out a great piece of land? Why should they be penalized by paying more when the land becomes worth more?

In short: there’s no amount of personal “hard work” that made Bezos’ company worth what it is: the vast majority of the gains are due to his employees’ work and having staked a claim on the right plots of business ventures. Absolutely Bezos should be rewarded for making those smart decisions, but why should he take the vast majority of the gains, when he was not responsible for the vast majority of the value added?

Allowing a few individuals to amass a fortune larger than the non-US NATO budget, while we’re at the same time facing human-extinction level threats, feels a little absurd on its face. Moving the needle towards any one individual only having more power than a few thousand average people, rather than a few million, seems fine?

I mean, it's possible he paid tax on stock he got when he started Amazon. It just wasn't that much back then.

Also, forcing people to selling stock seems like something that can be abused - imagine stock spike like we had with GME this year, during change of address year followed by significant drop. You would probably have to pay more tax than stock is actually valued at.

Note this happens all the time to people who vest stock, and then before the next trading window the stock tanks in value. The employee owes income tax on the stock they vested, at the time the stock was granted, then have capital losses for the drop in share price. Losing 90% of the value of say $1,000 of stock, you could still owe something like $300 in taxes on what is now worth $100. This is the normal world for employees.

I’m not totally sure why we would want billionaires to shoulder less downside risk than their wage earning employees?

This is a strawman argument.

Bezos did not stumble across Amazon while digging weeds in his back garden. He built a successful business through a mixture of hard work, risk, his contacts, laws and infrastructure that we collectively paid for.

It’s not downplaying his efforts to point out that he now contributes proportionally less to the country than he benefits from. This isn’t an accident, either. Bezos pays smart and connected people to push for lower taxes and then avoid as many of those as possible.

No, it was a question, not an argument. Let me restate it: Buying a stock (or bitcoin) uses gobs of the same regulated, government-funded infrastructure. If that stock/coin becomes immensely valuable, that (the fact that I now have a high net worth) makes me "wealthy".

What I'm asking is: Please clarify whether the intent is to tax people based on their net worth (wealth), not their income.

The articles are not clear. They state that capital gains are lower than income taxes, but they are not 1%. Yet they state that Bezos paid less than 1% effective tax rate on his wealth increases. Implying that it's obvious we should have taxed that. It's not obvious. Presumably, and I'm asking for clarification here, he would eventually be taxed on that wealth when he liquidates it.

If so, forcing someone to liquidate by placing a high tax burden on them is unprecedented for stock holdings and other forms of wealth, but not unprecedented for, say, land valuations.

Look at the countless issues raised by people being unable to exercise stock options for tax reasons. It’s clear that taxing stock is NOT unprecedented.

We’ve seen repeatedly over the past 50 years that Bezos will NOT be taxed of that wealth under the current system.

There’s nothing sacred about different types of wealth. The question is whether society can benefit more from taxing and redistributing that wealth, or whether Bezos can by hoarding it.

I don’t just mean the raw tax receipts either. Tax policy influences behaviour, too. This has ups and downs but arguing about finding diamonds in the dirt isn’t a remotely similar analogue to the discussion at hand.

> Look at the countless issues raised by people being unable to exercise stock options for tax reasons. It’s clear that taxing stock is NOT unprecedented.

It is unprecedented to tax someone on the value of their unsold stock. That's what a wealth tax would be: We force someone to pay taxes on something (their holdings / net worth) simply because it is valuable, but not necessarily because it was liquidated into cash (sold). (like we do with land, but not stocks).

> There’s nothing sacred about different types of wealth. The question is whether society can benefit more from taxing and redistributing that wealth, or whether Bezos can by hoarding it.

I think the answer to my question is: Yes, taxing wealth is one way of extracting more public funds from those who are the most wealthy, and many such ways should be considered.

I don't advocate for/against this, I just want to understand and find appropriate analogies.

Propublica seems to have taken advocacy a priori, when comparing wealth to income, and that was confusing to me because it is actually a drastic change without precedent that I'm aware of (except perhaps land ownership).

Exercising stock options is a unique case. If I as an employer give you $10m worth of stock (through grants or options), you have something akin to an "income" of $10m on the receipt of that stock. (For the record I disagree with taxing stock grants/options until they're realized and the proceeds can be used to pay the accompanying tax burden.)

If I give you $1 worth of stock and it appreciates to $10m, you have capital gains that will be taxed when you realize those gains.

Should you be able to take out a million dollar loan against the diamond, use the loan to buy stocks, and claim a loss on the year? Then the stocks increase in value, you're able to take out a new loan against them, and use that to pay off the diamond loan. Now you have a diamond, stocks, and no taxable income. Of course, you rinse and repeat.

Maybe we need to re-examine the definition of "realized gains".

When you own stocks, you don't pay taxes every time the value of your portfolio changes. You only pay capital gains when you sell those stocks.

Your example isn't really that much different. You would only really need to pay taxes on that diamond when you sell it, in which case you would just use the proceeds of the sale to cover that.

Right. But the article (and I think the general consensus around the movement) states that the net worth (wealth) is a missed tax opportunity, regardless of whether it is liquidated. Is that correct?

You don't pay capital gains taxes until you sell the stock. The IRS only taxes you when you cash out. Presumably the articles will show the wealthy "cashing out" via loopholes that evade the tax.

The trick is to cash out by dying. You can do this by living off loans against your unrealized capital gains. These then get paid off at your death, and there are all kinds of "simple" ways to keep estate untaxed.

I have a friend who is a member of the ultra rich, and this is exactly how his family uses their portfolio. They currently can borrow with .03% interest through their brokerage.

What I’m curious about is at what level of funds flows does it make sense to start using these strategies. The average faang employees income is dominated by shares but a) they weren’t granted in the distant past when the prices were lower so the tax difference isn’t big between income and b) they have different risk tolerances as Bezos can lose half of his net worth and still be unable to spend all his money before he dies.

There must be some level where these strategies make sense but articles like this rarely point them out.

You do own taxes if you find a diamond. You don't owe taxes if you buy a rock for $10 and it increases in value to $50m.

If you want to keep something you find and can't afford to because of taxes, you either get a loan or have to sell it.

It seems like this is missing the obvious focal point: loans taken out by individuals against assets like stock options and equities should be taxed as income. It's trivial to evade income tax when you have accumulated wealth in equities by taking out a loan against the equities and then progressively liquidating them at capital gains tax rates to fulfil the loan payments. If every loan taken out by Elon Musk or Jeff Bezos against their corporate assets were treated as income, I suspect we'd see a much larger share of tax paid by them.

edit: How do I make the same point as u/fairity 5 minutes prior but accumulate down votes? lol

Why does this matter? The real problem is that the capital gains tax rate is below the income tax you would have to pay for the same income. Either you adjust the capital gains tax upwards to match income taxes or you replace it completely with income taxes. You don't need a complicated loan tax.

They explain it well in the full article:

https://www.propublica.org/article/the-secret-irs-files-trov...

>So how do megabillionaires pay their megabills while opting for $1 salaries and hanging onto their stock? According to public documents and experts, the answer for some is borrowing money — lots of it.

>For regular people, borrowing money is often something done out of necessity, say for a car or a home. But for the ultrawealthy, it can be a way to access billions without producing income, and thus, income tax.

>The tax math provides a clear incentive for this. If you own a company and take a huge salary, you’ll pay 37% in income tax on the bulk of it. Sell stock and you’ll pay 20% in capital gains tax — and lose some control over your company. But take out a loan, and these days you’ll pay a single-digit interest rate and no tax; since loans must be paid back, the IRS doesn’t consider them income.

Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead.

Every. Single. Time.

The worse tax situation is always the person who makes 500k in a good year, or sells a house they held for 25 years which went up a bunch in value.

I suspect this is a significant factor in social mobility. Our tax system is punitive to people who try to leave the working class.

I don't think you're describing an obstacle to change, you're describing the mechanism of change avoidance. Compare: "Gosh, every time we try to tax the wolves, it ends up hurting the sheep as well. Why can't our 100% wolf, 0% sheep Congress get this right? I guess it's just a hard problem!"

The solution is not to give up, the solution is to actually tax the rich more. Also, your examples are awful: paying taxes on the sale of your house is extremely rare, and the reason your hypothetical person who makes $500k in a good year pays such a high tax burden is because we tax income more heavily than capital gains, i.e. the exact opposite of a "tax targeting the ultra rich".

The problem isn't that it hurts the sheep as well, it's that it hurts the sheep almost entirely. Raising capital gains would be a decent idea that forces the rich to pay more. Basically zero support for it. Closing loopholes helps too, not what we're seeing in tax policy discussions which focus on rates instead.

Raising the top rate on income when most of the ultra-rich's money comes from investment isn't making sense. There is also little interest in creating ultra-high tax brackets. I agree in principle with someone earning $5 million/year paying a higher percentage than someone earning $1 million/year. Many countries the top rate starts at $120,000ish in local currency.

Taxes on the sale of a primary home is not as rare as you think. It may be a twice in a lifetime event for many people but if it costs you a fortune each time people are discouraged from buying starter homes and then upgrading as their family grows. Make this too expensive and people even choose to have fewer children rather than get a bigger house. People may also choose to avoid the real estate market early to wait for a realistic home and risk getting priced out entirely. Admittedly, capital gains taxes are less punitive than land transfer taxes in this regard but it's still a factor. A capped to $500K of capital gains on a primary residence of tax avoidance is useful for middle and upper middle class Americans. It's not a measure designed predominantly for the rich unless your definition of rich is so broad that it includes any property owner. We've seen what happens when you create markets where people can't move and it looks a lot like San Francisco. That's not something I'd want policies to try and replicate.

> Basically zero support for it.

Wealth taxes are extremely well-supported, despite the media as an industry [and politicians] being owned by people strongly motivated to campaign against it all costs, e.g.:

https://www.reuters.com/article/us-usa-election-inequality-p...

> Raising capital gains would be a decent idea that forces the rich to pay more. Basically zero support for it.

Zero support among whom, the wolves or the sheep? Taxing the rich more is generally popular[0] and this would accomplish that; it would seem like that's support.

> Taxes on the sale of a primary home is not as rare as you think.

I would need to see a source on this; I can't imagine a scenario in which any middle-class person pays any tax on their home at all, unless they live in an extreme-outlier of a neighborhood or find gold in their backyard.

0: https://money.com/wealth-tax-rich-tax-rates-2020-presidentia... for example

Arguably capital gains should be paid earlier so it’s a sunk cost. Being able to put it off is market-distorting. It’s hard to come up with a fair way to do it though.

Maybe a requirement to save money in advance based on market price, like payroll deductions? Then once you actually sell, you might even get a bit of a refund, encouraging turnover. But that would affect people with cash-flow problems the most.

And the biggest problem is that many people don’t want to sell and will resent any attempt to encourage it. Because encouraging turnover is equivalent to penalizing people who stay.

There is no “natural” way to do this, anything can be considered a market distortion depending on your point of view.

For large residential buildings in California, I’ve heard that apartment owners will essentially swap buildings for some kind of tax advantage. (I forgot what it was, though.)

The problem with selling your home isn't the income tax on the gains. That would be new money you have. The problem is that the closing costs are very high and that you have to pay yearly property taxes on it whether or not you are selling it.

In NYS, you would lose 2% for selling a home in transfer tax (of the value not the gain); and then if you are financing another home 1.25% of the mortgage value. So right there you've lit 3% of the two transactions on fire. That doesn't even count the non-government fees like commissions, attorneys (for you and the bank), title insurance, etc. that eat quickly eat up many thousands of dollars.

I think the only thing that would solve almost all the issues is taxing the movement of money in all forms at a small rate. there have been some thoughts on it by people smarter than I but the gist is you tax money every time it moves at a tiny percentage rate. the rate is so small that for the commoners are not affected much but the people that trade money or move money off shore or buy up large commodities would be the ones that pay the most. I'm sure there are some downsides to it but there are many upsides too.

No. The solution is for government to spend LESS. There is no amount of tax that can out earn Congress’ appetite for pork, kickbacks, and voter bribery through wealth transfer.

The only reason we are told to see the illiquid wealth of billionaires as a problem is the lie that Congress can spend that money better.

They cannot.

If a person makes $500k in a good year, they will get hit with higher taxes, but they're probably going to invest a lot in order to hedge against not so good years. Taxing their capital gains is a double whammy.

Just imagine Income Tax + Sales Tax... get taxed on what you earn, then taxed again when you go to spend it!

This is a clever way to reduce purchasing power without making it seem as bad, ie. nobody really considers the tax on a new car purchase until they're signing the final paperwork... or even on a new T-Shirt. Depending where yo live, this sales tax is non-trivial too, sometimes up to 10%+.

If the tax is on the gains it's still a single whammy.

> The worse tax situation is always the person who makes 500k in a good year

What's the problem here? Income tax rates are moderately progressive. They'll pay a higher marginal tax rate and a moderately higher total tax rate in this year. That seems fine to me.

> or sells a house they held for 25 years which went up a bunch in value

This is what I have a problem with. This house has already had plenty of favourable tax treatment, which could include:

- Tax-deductible mortgage interest

- Gains on that property deferred for up to 25 years. To give you a comparison, zero coupon bonds don't get this favourable tax treatment;

- Possibly capped or even frozen property tax increases;

- Long-term capital gains are generally significantly lower than income taxes

Just how much tax subsidies does real estate need?

> I suspect this is a significant factor in social mobility.

Let me give you an example where this is definitely true. In Australia, pretty much every state charges stamp duty on the sale when you purchase property. It's typically in the 2-5% range. There are various exemptions and allowances for first home owners and the like (this varies from state to state).

This was all meant to go away 25 years ago when the Federal government replaced a bunch of taxes with a consumption tax (ie the GST) but it didn't happen, largely because the states were addicted to the income, which became hugely significant as property prices skyrocketed in the early 2000s.

The median price of a house in Sydney is now over A$1m. How do we expect anyone to have any kind of mobility when simply moving may result in a $50-100k+ tax?

Now the US has some of this. For example, to buy my one bedroom apartment in NYC I had to pay a "mansion tax" (that's literally what it's called) but at least it was only 1%.

My point is it could be much, much worse.

The issue, if I'm understanding the OP right, is that income taxes are moderately progressive until you get to the levels where people make their living off wealth, not income. Someone earning a wage is going to pay a monotonically increasing percentage of their income as they move up the scale. That's fine. Someone who owns a holding company that itself owns 80% interests in a variety of LLCs that reinvest their profits to increase their paper valuation, and then takes out loans against the value of their holdings to pay for living expenses - could quite easily end up paying zero tax. Warren Buffett once posted that he pays half the tax rate that his secretary does (17% vs. 34% [1]), and Buffett doesn't even partake of some of the tax avoidance strategies (like taking out loans against his holdings instead of selling them outright) that many other wealthy do.

[1] https://www.forbes.com/sites/paulroderickgregory/2012/01/25/...)

Here's another way to put it.

Up to a certain level you are taxed on what you EARN. Income tax is relatively progressive.

Beyond a certain point you cease to be taxed on what you earn. Instead you are taxed on what you SPEND. By this I mean, you have unrealized or non-repatriated money and you only realize those gains and pay taxes on what you need to cover your expenditure.

So if you gain $100m in a year but only spend $10m then you're only taxed on $10m and the other $90m probably grows tax free until you really need it. This might mean then that you're effectively paying a 4% total tax rate (40% of 10% of your income).

But it gets worse. Because of zero interest rates, there's no point in paying tax on that 10% either. Instead you borrow $10m at 1.5% interest secured by your unrealized gains. If your unrealized gains grow at more than your interest rate you're coming out ahead. The worst case is you're deferring your taxes for years. The best case is you're effectively deferring them forever, or at least until interest rates increase to the point where realizing the gains is cheaper than borrowing.

This is correct. Piketty's research has shown that as one moves to progressively higher echelons of the wealth distribution (top 5%, top 0.1%, top 0.01%), a higher and higher proportion of capital is accumulated through returns on capital rather than income. That being said, we shouldn't discount that while taxes on income are more progressive than taxes on wealth, they're still significantly less progressive than those of most other Western countries (and we have significantly higher levels of income inequality compared to those countries.)

Something people forget is the high amount of churn among millionaires in the US. It's the billionaires you're trying to go after, 500k should be ignored.

$500K? Hell, ignore net worths below $50M and pile drive into everything above that. But you will then find out just how many sub millionaires erroneously believe they are temporarily embarrassed billionaires who will fight any attempt to raise taxes on our domestic overlords just in case. Which is the way they want it...

> Gains on that property deferred for up to 25 years.

Well yeah, before that point it hasn’t been sold, so paying taxes on unrealized gains on what the house “should” be worth is bullshit.

I agree, but my point is that this is a favourable tax treatment (which it is) because it doesn't have to be that way.

I agree with your general point, but your specific example of selling highly appreciated real estate is a poor one, since you incur no tax when selling your primary residence (up to something like $500k gain - over your cost basis which includes any capital improvement you made to the property) as long as you lived there for two of the last five years.

It’s a huge tax advantage for homeowners. One could argue that it is in itself unfair as it advantages people who already have large assets over those who do not.

> (up to something like $500k gain - over your cost basis which includes any capital improvement you made to the property)

In a lot of markets this absolutely hits the "moderately wealthy trying to leave the working class". Bay Area houses that went for $1.2M in 2009 now go for about $3M, for a gain of $1.8M. That's well over the $500K exclusion, even including capital improvements.

Few folks will shed a tear for people who own a $3M house simply by virtue of living in a hot area, but that's exactly who the OP is talking about.

In the US, simply owning a house that's worth $3M (and literally zero other assets of any kind) puts you in the top 1.5% of the wealth distribution, per the WID. So I'm not sure how you could classify this scenario as "moderately wealthy trying to leave the working class." More like "extremely wealthy people trying to become even more wealthy."

The people who live in hot real estate areas for years made them the hot real estate areas. Real estate appreciation isn't free money. It's people who risked moving into an area and brought their culture with them. This is what creates the value.

Just because middle class people benefit from the subsidy of low interest rates that create asset bubbles does not mean that the people who raised families in a neighbourhood or a city are somehow undeserving of the rewards on their equity.

The idea that money not taken in taxes is an "expenditure," or an advantage, and this idea of accounting for the hypothetical opportunity cost of not taking some peoples money as a tax privilege is bizzare.

"Well, this tax might still hit someone at the upper-upper-end of the middle class if they live in the fastest-appreciating real estate market in history" seems equivalent to admitting that it does not hit the middle class generally.

When a person moves house, the proceeds from the sale of the old house are used to buy the new house. If someone has lived in an area for a long time, wants to move across the street to an otherwise identical house with the same value, why should they be taxed for that move but not for simply living in the first house?

This is exactly what happens. If you buy house #2 within 90 days, you can do a 1031 (I think?) property exchange. Then you don’t pay taxes on the first sale.

It also encourages liquidity in the residential real estate market… which seems to be a net good thing.

Every single time someone tries to make a tax targeting the ultra rich, someone writes a comment just like this. Every. Single. Time.

As far as I can tell, this comment is semantically identical to:

"Every time someone tries a new cancer therapy, it ends up not helping the worst cancers."

"The sting operation was a failure because it only caught low- and mid-level criminals."

"We shouldn't use automated tests because some bugs cannot be caught by it."

"Look, this bully is ten times stronger than my kid. He's gonna beat him up whether my kid wants him too or not. We should just accept that the kid is gonna get pummelled."

There are at least four flaws I can see:

1. The obvious "perfect is the enemy of the good" argument. Unless you have an alternative proposed tax that is flawless, then the comment does not get closer to a world where people pay a share of taxes commensurate with their point on the wealth continuum.

2. By framing it as "hurting" the moderately wealthy, it applies a narrative that taxes exist to punish, that the extremely wealthy deserve that morally, and that the moderately wealthy do not. Every piece of that narrative is wrong. Taxes exist to fund services, not enforce moral orders. It's not like we have a higher tax rate for convicted criminals. The moderately wealthy also have a capacity to afford taxes higher taxes without lowering their quality of life, so a tax law that hits them too has not "failed". Even if taxes were punishment, this comment presents no actual evidence that the moderately wealthy are morally purer than the ultra-wealthy.

3. Some fraction of today's moderately wealthy are tomorrow's obscenely wealthy, so applying some tax pressure on them today is a step towards preventing them from escaping that tax burden tomorrow.

4. Equating people who make 500k in a year with "the working class" is... I don't even know what to say about it.

5. Forcing the ultra-rich to do extra work to dodge this new law is a net good. Defeatism, which seems to be the counter-proposal here, makes it even easier for them to retain and acquire wealth. We should keep passing laws. Every time they find a loophole, close it. Vote out politicians that get bought. Make them keep jumping. Wear the fuckers out because eventually some will lose if you keep trying. If you let them win... well you let them win.

Maybe you should focus on how you would avail the failures of past attempts:

https://www.npr.org/sections/money/2019/02/26/698057356/if-a...

>In 1990, twelve countries in Europe had a wealth tax. Today, there are only three

>France's wealth tax contributed to the exodus of an estimated 42,000 millionaires between 2000 and 2012, among other problems. Only last year, French president Emmanuel Macron killed it.

> In 1990, twelve countries in Europe had a wealth tax. Today, there are only three

The "Today,..." claim is is simply false (both when the article was written, and now).

Wikipedia lists examples including six countries in Europe. Belgium is listed, which created a wealth tax in 2018 - why is that missing from this article of 2019?

Tax regimes in Europe change frequently according to the political situation, so this presents little evidence as to whether any individual tax "worked" anyway. But, this claim is just badly researched (generously speaking).

I guess I could focus on it by simply quoting the article farther down?

> UC Berkeley economist Gabriel Zucman, whose research helped put wealth inequality back on the American policy agenda, played a part in designing Warren's wealth tax. He says it was designed explicitly with European failures in mind.

> He argues the Warren plan is "very different than any wealth tax that has existed anywhere in the world." Unlike in the European Union, it's impossible to freely move to another country or state to escape national taxes. Existing U.S. law also taxes citizens wherever they are, so even if they do sail to a tax haven in the Caribbean, they're still on the hook. On top of that, Warren's plan includes an "exit tax," which would confiscate 40 percent of all a person's wealth over $50 million if they renounce their citizenship.

> Warren's tax is also only limited to the super rich, whereas in Europe the threshold was low enough to also hit the sort-of rich. This higher threshold helps it avoid problems like someone having a family business that makes them look rich on paper but, in fact, they're short on the cash needed to pay the tax.

> Also important, Zucman argues, the higher threshold means only a small group will be affected. And smaller groups have a harder time fighting for exemptions, which hurt European efforts. Some countries, for example, exempted artwork and antiques on the grounds they were hard to value. It's true, but it creates a huge loophole: Buy lots of art! Economists hate incentives like these because they distort markets. Warren's proposal calls for no exemptions.

Very good point! I thought the same thing about the original comment, but you actually analyze the entire thing improved why it is incorrect. Thank you!

One of the lobby tactics the ultra rich use is to try and push a tax hike/new tax to hit as many people as possible to stall its implementation.

Then they also go on an all out propaganda offensive to act like it'll hit even more than that.

How does this effect social mobility? I agree the tax system is unfair towards those in the 1% but not 0.001%, but I don't see how it is so punitive that those earning 500k or owning appreciating assets are taxed back down to a lower social class. And no one reaches those upper echelons by saving their 500k/year or holding their house for a really long time.

The general idea is average people don't make 500k/yr. What they might do though is have a one time event that earns them 500k in a single year, like selling a small business or a house. In that one year where they finally did well the tax system comes in and hits them even harder with laws intended for someone who makes 500k every year.

Working-class people don’t own small businesses worth hundreds of thousands of dollars, if you’re in that position you’re already middle-class.

A house someone held for 25 years, fundamentally, doesn't seem any different than stocks someone held for 25 years. I'm not sure why we're obsessed with the idea that non-homeowners should subsidize homeowner's housing.

If we really claim to live in a progressive society, shouldn't renters be getting the subsidy? I mean, sure, a small percentage of the population does have public housing. But that hardly compares to the amount of people saving $10k per year on taxes with the mortgage interest deduction on ~$1M homes in HCOL areas, and then another 15-20% on $250k ($37.5k-$50k) when they sell it.

This is more than the average household makes per year after taxes...

The long-term average for appreciation on housing is 2.75%. In the last 20 years, it's been well above that. But even still, the average home-owner with a $1M house is saving $20k+ in taxes per year.

I mean - I get it. The average person buying a million dollar home these days probably has a marginal tax rate of >40%, and houses are wicked expensive. It's nice to save some taxes. But is this really the group that should be getting the savings? And isn't it possible all this is just manipulating the housing market further?

I'm not sure about everyone else, but I'd rather my home be a place where I live than a meme-stock I speculate on.

Housing benefits need adjustment so a larger share goes toward people who need it more, but overall home ownership encourages people to raise families and build communities, which acts as a compounding benefit to society. i.e. subsidizing renters will have a positive short term benefit, but long term it benefits landlords.

Another point is that $500k is not in the 1% everywhere. In the Bay Area, it wouldn’t even put you at the top 5%.

https://www.nytimes.com/interactive/2019/08/01/upshot/are-yo...

But the Bay Area's high prices are driven by scarcity + demand, not intrinsic cost. So if everyone had a higher tax burden, I'd expect costs to come down.

Unless a huge earthquake hits it, the Bay area will always be worth more than central Kansas.

At a minimum, there is one simple reason for this - the amount of infrastructure investment over the years (power, sewer, roads, etc), of which there is basically none in central Kansas, but loads of in the bay area.

What is the "intrinsic cost" of 1200 square meters of the Earth's surface?

That's absurd. If everyone had a higher tax burden social mobility would be completely destroyed.

Californians will never vote away prop 13 so property taxes will never go up, even in this imaginary increased tax burden scenario. With incomes taxed higher, prices would not come down at all.

No one would want to sell their houses, as they could never afford a new one after taxes. Prices would continue to be propped up by real estate investment wealth that is largely unaffected by this increased tax burden. No one could afford to buy a first home as their income is taxed to a degree that saving up for a 20% down payment would require being in the 1% of CA income or saving up frugally for >10 years.

And it will never change!

Taking things requires force. Force only works against the powerless. That’s tautological.

And also tautologically, if you’re benefitting from the use of force, it’s because you are powerful, and you are exploiting the powerless. I don’t care how poor or oppressed you think you are.

I agree.

As someone from a poor family, never received inheritance of any kind, and now (40 years old) makes +/- $1M per year, I climbed through every 'tax bracket'. The income tax system is absolutely designed to make it very hard to move through working class into middle class, and then from middle class to upper middle class.

Once you have escape velocity, you've got room to move with debt facilities and other options. Everyone wants to give you free, high quality banking services. It gets easier. But moving from, say $70K to $500K is very very hard specifically because of taxes.

For a very long time, the cumulative sum of taxes I'd paid were more than the money I actually had in my account, to invest and pay for things.

Ted Cruz was right, taxes should fit on a postcard for everyone.

And no, unrealized investments shouldn't be taxed and no one except do-nothing journalists are surprised to learn that they aren't - this ProPublica article is really the definition of fake news.

Actually let me just say what it is: propaganda leaked in order to build support for the president's tax increases, which are a very bad idea.

That you consider yourself upper middle class with an income of 1M a year already says a lot about how skewed your view is (not surprising there was some article on HN recently about research showing that the rich and the poor consider themselves middle class both). Sure you are not a billionaire but you are not middle class anymore, you earn 30 times the median income in the US. Now comparing yourself with the superrich might make you think you're not that rich, but you are.

have you heard about different cost of living in different places? What if the person plans to fund himself/herself in the retirement and pay for kids college rather than expecting all that "for free" from the government?

> Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead.

Governments around the tax the middle class, because that's where the money is. Our current spending campaign will result in substantial tax increases for the middle class; the only real questions are when, and how much (less if it's sooner, more if it's later).

> because that's where the money is.

Except that its not. Did you actually read the article?

Did you read the HN community guidelines?

> Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead.Every. Single. Time.

Get back to me when there is a good faith effort to raise the capital gains tax and/or institute a wealth tax instead of pretending that that "ultra rich" people derive their wealth from employment income.

Nothing like a barrier to entry to the top 1% to keep out the rabble! But yes, you've discovered the crab pot cheat code that will continue to keep things exactly where they've been and they will remain. Go ahead and propose a 1% tax on wealth beyond $50M. Even make sales to pay that tax 100% tax-deductible. It won't happen. Or how about a 50% inheritance tax on wealth beyond $100M? You're not getting that either when there's a sweet middle to upper middle class pile of Quatloos to mine and they don't have enough money to hire the right people to make that problem go away.

But I'm starting to think they need their own PAC and they could afford that.

Wait, I thought the first 250-500K home sale profit was not capital gain taxed in the US?

https://www.investopedia.com/ask/answers/06/capitalgainhomes...

That's the ultimate appeal of a wealth tax. Taxing a hundred millionaire, or billionaire, or even a 10 billionaire a progressive 4% annual tax won't affect someone making good money off of income in nearly every scenario.

I agree! All taxes should be wealth taxes. Or to be more clear - the only tax we have should be one wealth tax that is a single percentage and affects everyone at all levels equally. Maybe 3% per year or something.

> Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead. Every. Single. Time.

Could you please share some of the situations you're thinking about here? I'm not familiar.

If you have just enough assets to be "rich" but don't have enough to purchase tax assistance, you've become unprotected prey. Everyone that can afford this tax assistance has a lower cost of business than you, everyone poorer has a lower tax burden.

Very interesting concept. This happens with lawsuits. If you have enough money/assets to be an attractive target for a lawsuit, but you don’t have enough to pay to defend the lawsuit, you are also “unprotected prey”.

An example: in SF/LA (California), a decent civil litigator will cost about $400+/hr. And a lawsuit will run for 1-3 years. When you add all the legal costs up, it turns out that just to defend yourself, you’ll need to spend about $100-$200k. So, unless you have quite a bit of money, you’ll have to either default or settle in maybe not very favorable terms. Either way, you might end up bankrupt, in debt for a long time, or just with no savings at all.

I'd love to see some data on how big a deal this really is, because I would normally assume that by the time you've reached the levels of wealth we're talking about, "tax assistance" is a trivial expense.

My giving a shit about household capital gains went away when a partisan congress decided to buy redneck votes with punitive SALT rollback.

SALT deductions are a massive tax break for the wealthy. Your own partisanship that would see them restored is just as powerful, and the tax policy you advocate here is more regressive.

> SALT deductions are a massive tax break for the wealthy.

How?

The point of being able to deduct state and local taxes from federal ones is to devolve power to as local a level of government as possible. You've already paid the local authorities some taxes, so now you owe the federal government less.

SALT limits do the opposite of that.

Why should 2 people with the same income, who get the same services for the federal government pay different federal tax rates? That's what SALT does, and it should have been eliminated entirely.

I live in New York, which has a net outflow of Federal revenues that makes life in many states possible. Most of the states impacted have outflows like that.

So frankly, I think it’s fair for some Midwest farmer with land left barely fertile due to mono cropping to pay the full shot of capital gains on his farm, after all, the farm would be worthless without federal price supports, irrigation, levee systems, and direct payments for the corn. Likewise, the Floridian using the homestead laws to launder money in property should be paying the full shot on the Miami condo.

When demographics starts shifting the congress in a few years, I’m sure similar scorched earth policy will happen, which sucks, becuase it will utterly destroy whatever rural economy exists in these states.

2 people with the same income get different benefits, if one lives in a red state, and the other in a blue state. The red state is a net recipient of federal funding, the blue state is a net provider. Most red state economies would implode without this fire-hose of free money. Texas or Florida might be okay, the rest, not so much.

The same thing plays out on the state level. Eastern Washington loves to complain about taxes, and I would love nothing more than to let it have its wish... As long as Western Washington can stop subsidizing it.

that’s the point - ultra rich main concern is not a number in the bank, but that they remain “on top”, so of course they lobby for more taxes which would make it harder for others to approach them in the amount of wealth

You are right, but if they crafted the right bill, I think we could tax the ultra rich, without affecting the asset rich widow, or the moderately wealthy.

Give everyone one big tax day on a house. The family that bought a ranch style house years ago is allowed 1 huge tax holiday. That married $500k deduction is a joke, and needs to be increased.

So, the widow living in the ranch style house should be exempt from taxes, say up to 3M, if she decides to move. With that money, she could move anywhere, and not worry about property taxes too? I know you guys don't like prop 13. (Only about 4-5 counties in CA that will accept a recriprovial property tax transfer. Keep that in mind if older, and looking to move.)

Let's face it, most Americans will only see one big pay day over an asset, and it's usually the family home.

My point is only allow the tax holiday 1 time, and it would be for individuals whom make less than $500k/yr. Don't allow the tax dodge to go on forever, and abused by every ultra rich guy forever.

Let Elisabeth Warren right the bill, and I would bet the lucky middle class 1 home asset person would not be affected by a wealth tax? Warren is wealthy. She is not ultrarich. She knows the difference.

You’re not actually talking about the “moderately wealthy.” Just because billionaires are insanely wealthy doesn’t change the fact that a household making $500,000 is still incredibly wealthy.

There’s already an exemption for capital gains tax on the sale of primary homes. $500,000 for married couples, and you can remove the cost basis and cost of improvements from the equation.

In other words, almost nobody is taxed on the sale of their primary home.

A household that makes $500k on a good year is actually in the 1% statistically. They have left the working class long ago. They could work for about 7-10 years in their career and retire with an above-median salary (withdrawing following the 4% rule) in perpetuity. That is by definition not the working class: that family barely has to work in order to secure a lifetime of comfortable living if they don’t inflate their lifestyle.

In my view, your comment acts as an implication of support for regressive tax policy that hurts the actual working class. No, moderately wealthy people do not need help. No, we are not temporarily embarrassed millionaires held back from generational wealthy only by government tax policy – that’s a farce sold to us by the very billionaires that want to avoid being taxed. They want us to think that taxes hurt us more than they hurt them, which is mathematically not true.

They want us to think that “if only our taxes were cut, we could go back to affording a middle class lifestyle.” It’s not true.

>>A household that makes $500k on a good year is actually in the 1% statistically. They have left the working class long ago. They could work for about 7-10 years in their career and retire with an above-median salary (withdrawing following the 4% rule) in perpetuity. That is by definition not the working class: that family barely has to work in order to secure a lifetime of comfortable living.<<

The "in a good year" qualifier in both your comment and the parent comment means that your conclusion that this person has left the "working class" is untrue. It's not uncommon to get a windfall (stock option vesting cliff, inheritance, capital gains, etc.) that boosts income in a single year to many multiples of one's typical income. Such an occurrence does not boost the recipient out of the working class. Managed carefully, it can change their life (buy a house, turbo-charge retirement savings, etc.) but no one's buying a private island with a single year of $500k income.

I think you're extending "working class" to mean "people who live on wages instead of capital". But most people make an additional distinction inside wage earners between workers and professionals, i.e. mechanics, factory workers, nurses, assistants vs. doctors, lawyers, software engineers, managers, etc.

It's helpful in this little side discussion because policies that might affect people with (as GP says) any ability to make six figures in a year are pretty different than those that affect people without. The "works for a living" distinction isn't super relevant.

> It's not uncommon to get a windfall (stock option vesting cliff, inheritance, capital gains, etc.) that boosts income in a single year to many multiples of one's typical income

Estate taxes don't kick in for estates worth less than $11.58 million and most states make immediate family exempt from all inheritance taxes.

Of course it does. The working class doesn’t get stock options, vesting cliffs, inheritance, or capital gains!

Or much of a savings account or 401k, for that matter.

The option to stop working for more than a few weeks or months takes you squarely out of the working class.

Basically, what I’m trying to say is that the parent comment to ours is attempting to advocate for taxing just the billionaires and not to tax the moderately wealthy so much. I think that’s a flawed argument, because the moderately wealthy don’t need help, and are perhaps even more wealthy than they realize.

This post should be marked as dup

Would be curious to see twitter blocking this story on the basis that this is the distribution of stolen data as they did last year...

Twitter only does that when it facilitates manipulation of important elections. They’ve moved on to protecting Fauci, Harris, Biden from the harsh reality of their own incompetence and rapidly vanishing facade of legitimacy.

The top 1% contribute 38.5% of Federal income tax revenue.

Two questions:

1. How much of the wealth (and/or income) do they have?

2. If they paid their taxes like the rest of the population, what would this number be?

1. We don't know. Wealth is not taxable. Income is taxed.

2. They already pay according to the same rules as everyone else.

No, the top 1% of earners contribute that. Wealthy people don't have earned income. If you go to work, even as a ceo, even in the top 1% of earners, you're not wealthy.

the top 1% own 31% of all the net wealth in the US, which isn't the same as income - but gives a good idea of how disproportionate their share is

38.5% seems too low

https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...

People creating wealth are not taking it from others. Wealth is not zero sum.

> Many will ask about the ethics of publishing such private data. We are doing so — quite selectively and carefully — because we believe it serves the public interest in fundamental ways, allowing readers to see patterns that were until now hidden.... We believe that disclosing the identities of billionaires who paid little to no taxes in years their fortunes grew by billions of dollars will help readers understand the magnitude of the tax advantages the ultrarich enjoy... Our publication of this tax data comes at a possibly pivotal moment in America’s long, often contentious debate about the fairness of our tax system

So it's okay to encroach on the privacy of private individuals as long as it serves a political purpose? To try to drum up support for higher tax rates? They're not even saying these individuals used their money to manipulate the tax code, but are merely beneficiaries of income with preferable tax treatment.

And the .001 consistently encroach on our political policies for private benefit.

I see these tax loopholes as bugs/vulnerabilities in the tax code. And just like in software, bad actors have an incentive to keep the bugs in place.

Shedding light on them is a first step towards greater awareness and eventual fixes.

> Taxes aren't and shouldn't be secret.

Cool. Would you mind sending me your tax returns (assuming you're in the US), or similar income history?

You can oppose tax loopholes without encroaching on the privacy of others. To use your example, imagine dumping hacked Facebook user data because you don't like bugs in Facebook software

That's an unfair response. It's reasonable to want the rules to change for society and be willing to play along. That's different from wanting to be the only one to do it.

> Imagine dumping hacked facebook user data because you don’t like bugs in Facebook software

No need for imagination here... This happens all the time. Data leaks are a regular outcome from security bugs/breeches.

What's the argument in keeping it secret? Politicians routinely (Trump notably being the exception) release these all the time.

The bad actors with the most incentive to keep the bugs in place are the same people that put the bugs into the system: lawmakers. They might occasionally close a bug, but they are not interested in preventing them being introduced. They sell these bugs/vulnerabilities. That's the business they are in.

Ah yes, an eye for an eye.

How you feel about this is going to depend on where you are on the political spectrum. I fully support this decision based on where the country stands on inequality and socioeconomic power imbalances. It’s in the public interest to demonstrate the result of poorly constructed public policy (and thereby stoke inertia to fix it and erode wealth inequality).

I’m happy to make my tax returns and income history public if the wealthy are required to do the same.

So if someone wanted to demonstrate poor building codes by setting your house on fire, that would be okay too, since you know, it's in the public interest to demonstrate lax building codes?

Privacy is a right that I would think more people on this forum would respect. I don't see why you're so happy to offer up the rights of others as sacrificial lambs to make some political point.

A better analogy would be breaking and entering to collect evidence that a building was unsafe for occupancy, and I’d support that as well under the assumption that due process had failed and there was risk to those marginalized.

I don’t believe there is an absolute right to privacy. As always, there’s nuance.

If you purposely set it on fire, thats arson. But actually yes, in many cases accidents are catalyst needed to make change happen for the benefit of the public.

A dangerous intersection gets a traffic light after a horrible car crash.

A dangerous building design code gets corrected after the doors wont open outward during a fire.

Problems need to first come to light to be fixed.

What? That house burning example is absurd and bad logic

> So if someone wanted to demonstrate poor building codes by setting your house on fire, that would be okay too, since you know, it's in the public interest to demonstrate lax building codes?

Yes, of course destroying property and incurring expenses for the local government is exactly the same as releasing records... oh no wait - its not at all the same.

They are not private individuals. They are individuals that are of public interest (much like celebrities) and hold significant sway over communities (much like public officials). This is pretty standard legal precedent.

So privacy is only for those that aren't celebrities? Do you have some barometer for what makes a "celebrity"? Blue check mark?

Right to privacy is a human right. Do you agree? If so, are there classes of human rights that aren't applicable to some groups of individuals?

It's actually very simple. If a year from now you find that the authors (Engelberg and Tofel, others?) of this project are still free then everyone whose data they published was a legit "celebrity" and the leak was OK with the current administration. If you suddenly discover that all of ProPublica are actually sex offenders and evade justice by hiding out in embassies (or something similar) then they overreached and leaked the wrong data on an off-limits "non-celebrity". Makes sense.

Courts exist for this reason. On one hand, you have the right to privacy (though it is not spelled out that clearly, it is inferred).

On the other, you have freedom of the press clearly outlined in the first amendment. There is no perfect answer and it will be subject to some debate. But in this particular instance, precedence has made it clear that people of significant stature (and that could mean a blue check is a signal of that in court!) have less of a right to privacy when weighed against the first amendment.

Unfortunately you are speaking of ideals. In reality a person's right to privacy is dependent on many factors including their country, race, etc.

With regards to celebrity, there is absolutely a tradeoff. On paper celebrities have the same civil rights as anyone else, but e.g. have you heard of the paparazzi before?

> Right to privacy is a human right. Do you agree? If so, are there classes of human rights that aren't applicable to some groups of individuals?

Yes, but right to extreme wealth isn't. I don't think people should be able to control this amount of wealth at all, but while they can I think public scrutiny over their finances is entirely reasonable.

Hi, exotree, I have declared you to be of interest to the public. What's your annual take-home pay?

They obviously considered the ethics of this and decided to share for “the public interest” and not “a political purpose” as you say. What politicians do with this information is another matter. They’re simply telling the story like journalists are supposed to do!

Labeling something a "True Tax Rate" (paid taxes / wealth increase) isn't journalism, it's advocacy.

Good point. I guess I see the advantages of the ultra rich as something that shouldn’t be politicized. That’s some bullshit that all stripes of political belief should agree on and change. Like, who wouldn’t advocate for that? (Besides the ultra rich. And please don’t say those who aspire to be ultra rich, because that’s not a realistic argument/that idea should die)

Edit: Can you explain why the phrase “true tax rate” is considered political advocacy?

Let's talk about the actual damage that could occur to an individual here. The fact of the matter is, billionaires are effectively isolated from all societal repercussions, where the average person simply isn't. Even if you waved a magic wand, and prevented them from making any money through any mechanism, and they just had spend their wealth, their lifestyle would not change at all. They literally can not spend the amount of money they have, in the years of life they have remaining. Even the threat of jail time isn't a real threat, given the serious discrepancies in prosecution and sentencing guidelines, let alone the plausibility of someone pulling a Carlos Ghosn[0], which is much easier to do when you effectively have infinite resources.

Now let's look at the other side. The societal benefit is making these effects current preferential policies concrete. Often politicians and other supporters of the super wealthy intentionally muddy the waters by talking about "small businesses", "family farms", and other middle class and upper middle class lifestyles. (e.g. The arguments made by against inheritance tax, that only affects net worths in excess of $11.7 million, or the arguments based on absolute dollar amounts rather than income or wealth percentages.) By making the effects concrete rather than abstract, it's much harder to argue that there is any sort of negative individual effects on ultra wealthy.[1]

[0] https://www.bbc.com/news/world-50964040

[1] For example: Even if you took half of Warren Buffet's wealth ($110 B) every year for the rest of his life (90 years old, today), he'd probably still die a billionaire. And even if he lived to be a 100, he'd still have $100 million.

> quite selectively and carefully

> allowing readers to see patterns that were until now hidden

am I being too cynical, or is this a "pick one" situation? what "pattern" are the readers supposed to see in this carefully chosen subset of the data? what patterns do the unchosen subsets show?

This is where trust comes in. Most people need a narrative and a story to follow the threads; they are not experts in determining what the data does or does not tell us, and someone has to attempt to do so.

I'd give ProPublica the benefit the doubt here. They have the resources to hire the right talent, and that talent is likely empowered to keep conjecture at bay or properly disclosed.

And, of course, you're unlikely to get all the data. Stories like this will nearly always, in some form or fashion, be based on a somewhat incomplete snapshot of data or documents. But taking that data and corroborating it with what we do know is often enough to add validity to the assumptions that are being reached by a publication such as ProPublica.

> So it's okay to encroach on the privacy of private individuals as long as it serves a political purpose?

Interesting how your turn "public interest" into "political purpose".

I think, in this case, the rich encroach on my privacy enough that it seems proportionate.

It's not okay to shoot your neighbor. It is okay to shoot your neighbor if they're shooting at you.

When the rich stop trading my data, I'll fight for their privacy too.

So lots of people saying the ultra rich are hard to tax because they take out loans against assets to fund the day-to-day. This then results in an argument about the morality/viability/etc of a wealth tax.

But... why can't we just tax the loans?

If you tax loans that means every credit card purchase or mortgage would trigger a tax. If you receive a $400k loan for a mortgage, that would mean something like $100k in taxes for an upper middle earner.

Thresholds + only collateralized loans?

Pawnshops are collateralized loans for the poor.

If the goal is to tax the rich, just be more direct and tax the rich. A wealth tax would work, no need for elaborate schemes.

Small business owners take out loans in order to build up their company. Making that harder seems like something HN would implicitly dislike.

yes that's called interest which the fed is reluctant to raise to appease the same lot in the name of improving employment.

Your comment made me realize something.

The government is funded by taxes and bond sales. Bond purchases absorb high interest rate demand across the entire market. If there weren't any taxes, there would be higher interest rates. So taxes are what subsidizes low interest rates. We're the ones paying the interest on their loans.

Now it all makes sense. Mind is blown.

The article seems to be toggling the conflation of income vs net worth.

Ok HN! We are intelligent, rational, and well intentioned- but we are also diverse! And it is great.

Can someone please help me with the following! Why do we still compare WEALTH with INCOME tax?

Of COURSE wealth is skewed: you go negative pretty fast (college and mortgage), and then you accumulate over time. It is a pretty rational progress. Income can vary over time - and the tax should vary, too.

Why do we smash these two together? Are we DELIBERATLY pushing for a wealth tax? We we doing it underhandedly? Is it ACTUALLY a good idea?

I also don't understand how wealth and income can be conflated like this. We have an income tax, so, no duh, we tax income, not wealth. Criticizing the income tax because it doesn't tax wealth is like criticizing sales tax because it doesn't tax property values. They aren't the same.

I don't get how ProPublica can take such a stance. Either it's intentional, which is bad, or it's unintentional, which is even worse?

> Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell.

Taxing assets seems like it could be bad for the 99%, for example taxing people out of their homes and eating up their savings and retirement assets.

It's reminiscent of how "financial aid" tacitly assumes that one's parents should simply sell their house and then give the money to the university.

If you read the article, they are calculating a fictitious thing they call the “true tax rate”. This is the tax paid compared to the growth in assets.

That is not an income tax. It’s a wealth tax. It feels like conflating the debt and the deficit. Effectively you would have to have a deemed sale of all assets at the end of the year and pay tax on the gain/loss.

I agree that the rich have access to tax planning machinations that most tax payers do not. But this doesn’t bluster their argument.

Imo, Wyoming or Sweden not something in between. Most economies do something in between and outrageously favour maintenance of large stores of ultimately unworkable existing wealth.

But we already know the 'secrets' of the .001%:

1. Hide income and assets whenever possible.

2. When #1 is not possible, structure visible income and assets to leverage the most advantageous tax rules.

Not a great reading experience to have to scroll through nearly endless fawning of "ooh look at how we are such responsible journalists" to get to the actual story.

If they distill this information down to things that any person can use then it will be useful.

oh gosh, something is definitely going to happen, this time, i'm sure!

Side-note: although not part of the 0.001%, it's mind blowing that it's June 2021, and we still haven't seen Trump's promised tax return.

Did Trump make that promise? Are you REALLY surprised he didn't fill that promise?

Large grain of salt required. But, at least they were honest enough to state (in the middle of the article), that the information on which this is based is suspect:

"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."

>Large grain of salt required.

What exactly do I need to "take" with a large grain of salt? Have you been in seclusion for the past 20 years? I'm pretty sure we're at the point where the burden of proof is on the billionaires to demonstrate they aren't funnelling away their money, not vice versa.

OTOH, ProPublica reached out to Bezos, Musk, etc with this info and they essentially had no comment.

> 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

If they have no way to verify or at least assure themselves that it isn’t this, then they have no business publishing it.

Also, many of their statements are just lies in that context:

E.g. We are disclosing the tax details of the richest Americans …

Is a lie.

“We are disclosing what an unknown source who could be a hostile foreign agent has told us are the tax details of the richest Americans.”

Is true.

It will be interesting to see whose secrets are included and whose are not. For example if they have Bloomberg’s details, do they have Trumps?

Surely people recognize that the related article purposely misleads readers by calculating false tax rates based not on income but paper wealth that is not real or recognized. ProPublica has a hard progressive bias, this article being one among many examples.

Our political leaders and absolutely terrible media are the villains here… not the rich people protecting their wealth.

Tax is obsolete. You won't fix it with more.

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