ProPublica's tax story
savingjournalism.substack.com
savingjournalism.substack.com
> > We understand that nearly everyone who provides material to a reporter is doing so in ways that reflect their worldview, agenda or biases. We have long held that those motives are irrelevant if the information is reliable.
> This is an … insane statement? — both rationally and morally. Truth can't ever be a sole criteria for publishing. It's necessary, but not sufficient. To suggest otherwise ought to flunk someone out of first year journalism school.
This is a misinterpretation of the quoted text. Propublica says that the motive of the source is not part of the set of criteria for publishing (unless it the information is unreliable), not that reliability is the sole criterion for publishing. Propublica's article explicitly says that privacy is a legitimate concern. "One of the billionaires mentioned in this article objected, arguing that publishing personal tax information is a violation of privacy. We have concluded that the public interest in knowing this information at this pivotal moment outweighs that legitimate concern."
Dragging debate into the minutiae distracts from the cogent moral objection. Time honored technique.
Observing that inequity is accelerating does not and should not require a CPA.
"They’re right about the laws, but incurious about why the laws are that way (not just in the US, but across the developed world).:"
Opinions differ.
You do not cite the original precedent setting court case.
Nor do you cite the prescient objections which have proven true.
Further, you do not acknowledge the central issue, nor offer any guidance or wisdom for possible remedies.
Lastly, I don't like your clickbait title.
I don't see why they couldn't have anonymized the data [bracketed] and have the same impact. Exact figures are less relevant than providing a picture of what's going on. I think the only reason is to doxx and "shame" or whatever unrelated rationale they have.
And why isn't Twitter suspending their account for doxxing --which they appear to apply unevenly but usually not levelled against birds of a feather.
“Norms” don’t define things as right. I’m pretty sure we can think of some dark examples.
[1]I think I read about something called “The Watergate Scandal” about illegal gathering of information...
That aside, I guess I just don’t have much sympathy. If certain “rules” are gonna apply to billionaires and not normal people, that seems fine by me. It might seem “biased” or “unfair” to some people, but hey: Who ever said we were operating in a “fair” context to begin with? Sure this kind of bias could be turned against more vulnerable people, it already is, it’s about time it got turned against the people at the top.
On certain public things, yes. On illegally obtained private finance info - no.
Edit: I don't agree with what ProPublica is doing here, but I can understand how the ends might justify the means from their perspective.
What’s next, some news org wants Biden out, they don’t have a legit source, but a foreign source has dirt on him, now that’s cool cuz they want to change public opinion of Biden?
Was the pearl clutching around Biden’s son’s laptop material being illegally obtained just a flimsy excuse? [uh oh, it’s doxxing, it’s doxxing... suspend their Twitter, Jack are you listening?]
Public interest is the right threshold. Just because somebody has done something illegal, does not mean that their privacy is worthless. Likewise, hypocrisy is not illegal, but documenting the hypocrisy of the powerful is often in the public interest.
For instance, an aggregate number of only 10 data-points is enough for people inside those 10 data-points to band together and out the real information of the remaining people through collective action, as an example. There are thousands of similar contingencies planned for.
So if you publish this data redacted, it's still a violation of the privacy laws because you can figure out easily who is whom since there are only a few billionaires and there's enough information provided to narrow down people's identity by looking at public information.
As for Twitter or whatever, I believe the law technically was violated only by the person who handed the data to the journalists. After that the journalists can't be held accountable unless they aided in some way in obtaining or they directly requested the data from the individual or group or whomever it was that did this.
Honestly, though, this is why people in these positions are held to extremely high standards and it ends up being frustrating when others fall through like this. It's too easy to occur, and these roles are rarely compensated well or have any "backup" for technical tasks since it's all based on who organizations trust, so they can't hire anyone to help and we end up thinly spread.
Add a small dash of political or financial incentive and suddenly the data you have been working to design to protect from Russian hackers becomes technologically meaningless when someone just leaks it who has direct access. I'm surprised there aren't more of these happening given the dire straits many of us are in, out in the wild-west on our own with nobody to even talk to about it and nobody willing to work in government (or to not be assumed to be trustworthy enough to have access).
ProPublica even wrote a long statement on why they believe publishing this is ethical, legal, and in the public interest: https://www.propublica.org/article/why-we-are-publishing-the....
You can of course disagree with their reasoning, but Arnold—who claims to be, it is worth noting, a paid PR flack for tech companies—is being disingenuous* to suggest that ProPublica claimed their "sole criteria for publishing" is "truth".
* By which I mean, to be perfectly clear, he's a liar.
Anyway, I awarded a correction bounty here. I'd said in the same piece "if your only criteria for publishing are some measure of verification and some measure of newsworthiness", but used poor phrasing in saying "sole criteria" prior. I don't think it was likely to mislead the fair reader. But a mistake is a mistake, and I'm happy to own it.
"lol at" = not actually denying it, so not technically lying, right? ;)
I write all the time about what my day job is, and I regularly disclose it whenever there is even an vague intersection with a story I'm writing. It's not a secret!
Lots of people drift between comms and public writing. When there's a perception of conflict, they disclose. As do I. Pretty routine.
I said in that same segment "if your only criteria for publishing are some measure of verification and some measure of newsworthiness". In re-reading their piece, that's all they checked for. So what I said seems substantially accurate to me.
But as a matter of phrasing, it's true that I used "sole criteria" above, which was sloppy. So I'll award a bounty on that. See your email.
All that said there’s a fundamental challenge here. People conflate unrealized wealth with income because loans offer a mechanism with cash today while deferring tax until later.
As pointed out in many places, we target the 1% at the expense of not going after the .1% or even a .01%. I think it makes perfect sense for somebody to say that any loan that is backed by stocks granted on the basis of RSU, incur some additional special taxes. For all intents and purposes the principal is Realizing some of the value of the stock by getting a loan against a stock.
Unfortunately articles like this which conflate things actually make it harder for us to fix the real loophole.
Im fortunate to temporarily be a member of the top 1%, but not the top .1% or the top .01% my tax burden last year was 40%. That’s not including healthcare or government fees. I’m fine with that, but the fact that both people earning more than I, and earning less than I pay less in taxes as a percent is incredibly irritating.
Articles like this will result in politicians blindly saying the rich need to be taxed more while the hyper Rich continue to skirt taxes.
While I would consider that a loophole, I'm not sure it's the main problem. I feel that for all the complaints and logic of the substack piece, it misses the point of the propublica one, the kind of underlying feeling that's driving it: that it's unfair that the wealthiest people in the world pay so little tax compared to people in the 10% to .1% bracket, and even compared to people in lower brackets. It's unfair that they can gain extraordinary amounts of wealth, to such a degree that it's impractical for them to even use, and yet not be taxed on any of it, unrealized or no.
Because from my perspective, my monetary gains (eg. salary) don't really feel realized until I use them to buy something. Cash in the bank doesn't do much but make me feel financially safer - so why is taxing income considered reasonable, but wealth is not? And why, exactly, is it apparently reasonable to have sales taxes that don't exceed 12% (disclaimer - in the states, as far as I know); capital gains at 15%; but my income at 25%, 35%, 45%? Why is considering taxing wealth like company shares "far left end" but taxing other wealth, like my house, considered acceptable? Heck, we even have assessments and appraisals for real estate for the purpose of determining value without selling, for more accurate taxes and associated financial instruments - but taxing something that has a constant active market is the thing that's weird?
The way that the substack article fails to mention Warren's millionaire wealth tax proposal is a further disappointment, and leaves me feeling like it is also a fairly weak piece of journalism, not unlike the one it criticizes. It also makes little mention of the ever-higher bracket of the estate tax, and has bits like
> Sometimes stock prices go down, and that's generally not a write-off. So taxing the upside at an arbitrary point is unfair and kind of just silly.
Just because it isn't a write off now doesn't mean it couldn't be if some sort of wealth tax was implemented; this a poor-faith considering of the policy. In short, while I wouldn't consider the original article to be of much merit, and certainly below propublica's usual standard, this rebuttal is hardly any better.
Your cash in the bank is guaranteed to not be erased tomorrow, up to the FDIC coverage limit.
Stock has no inherent value until it's sold at whatever price the market is willing to pay. Claiming that I've acquired "wealth" simply because of an increase in the current market price is an extreme stretch.
I don't have that money – I simply have the potential to sell my stock for some estimated, potential price.
This guy Arnold seems to take the position that the ProPublica piece is somehow invalid because…you can’t tax unrealized gains?
1. I don’t understand how the latter follows from the former.
2. Of course you can. Property taxes are just that.
3. Wealth taxes are also just that, though elsewhere in this thread I see Arnold has argued that they aren’t really that.
Whether you should tax unrealized gains is a policy debate, but it’s not an outlandish or ignorant position to say you should—though ProPublica doesn’t say that, so I’m still not sure the relevance.
> Claiming that I've acquired "wealth" simply because of an increase in the current market price is an extreme stretch.
You’re aware that the market price is what someone is willing to pay, right? It’s not theoretical, it’s backed up by someone willing to buy shares (a lot of them for Amazon) at the quoted price.
Until I actually sell, it's merely a datapoint for very loosely estimating what the sale price will likely eventually be.
AAPL is up 0.67% over yesterday. Let's pretend it's January 1st, and my net worth is tied up entirely in Apple stock. Should I pay taxes on that unrealized gain?
> Typically, corporations report the value of their assets in their accounts.
With the notable exception of feudal property taxes, we generally don't tax the mere possession of assets.
Did you read the whole of my comment? Yes, there is a real issue here.
Nobody should be put in the position of having a tax obligation they can't afford. Equally, nothing good is achieved by closely tracking the day-to-day volatility of stocks. But in general I don't think there is a fact of the matter about the kind of "ought" question you are asking in isolation: a tax regime is a system that should be judged as a whole.
> we generally don't tax the mere possession of assets.
Who is "we"? Many countries have wealth taxes.
Many meaning 7, right? 7 countries have net wealth taxes.
It used to be many - dozens of countries did it. They stopped doing it.
As proof, if we already had a wealth tax and people referred to it that way, the past year and a half wouldn't have had people arguing over whether or not we should introduce a wealth tax. It would be whether we should expand the wealth tax to cover new assets.
People sure do pay taxes on "unrealized gain" of the houses they live in when the real estate market heats up in their neighborhood, and the property tax assessor gleefully changes their assessment that year.
"But equities can go to zero!"
Sure, just as a house can go to zero (fire, acts of God-level insurance incidents).
"But those are covered by insurance!"
Sure, just as you are free to buy options to insure the equities.
I'm not really seeing strong arguments based upon some intrinsic property of financial instruments used at scale granting them capital gains treatment against taxing financial instruments like any other property / real asset. There is the whole "hold Grandma's retirement hostage" policy aspect that can be mitigated by a generous cliff and age means test perhaps, I haven't thought about that mitigation much, as well as capital gains at different scales. But at the policy level, capital gains treatment being so non-linearly favorable at scale compared to income tax treatment seems a reasonable topic to explore in public discourse. I'm not averse to capital gains continuing at smaller scales, even at millionaire scales, but I am curious what the economic rationale is to continue that treatment at the billionaire scales when it seems much like income on a more complex level.
Extreme losses are caused by the manic-depressive boom-bust cycle which is in turn caused by plentiful money chasing fraudulent opportunities that don't really exist. (See also, S&L crisis, securitisation failures, and many many more.)
Damping that cycle and turning it into an engine for national profit sharing would raise collective prosperity, increase social mobility, and create new opportunities.
This isn’t actually an argument against the idea that you’re wealthier, you’re just arguing that society shouldn’t tax you yet. These arguments are orthogonal, one can admit that paper gains are real wealth while also maintaining that we should only tax realized gains for policy reasons.
Similarly, if my house doubles in value, then I’m richer. It might not be liquid yet, but the bank, the local property tax authority, and my account would absolutely treat me as significantly richer than before.
The issue in the above article isn’t that gains aren’t taxed until after the sale. The issue is that for the ultra wealthy they basically never sell. Instead their stock holdings are used as collateral for low interest debt that finances the lifestyle of these executives. In this case it sure seems like the gains are realized in every way other than for the IRS.
Personally, I’d tax the bejeesus out of this scheme, preferably by counting it as straight up income subject to normal tax rates. Take a salary or sell the stock and pay the gains tax, no other choices.
That kind of illiquidity is not taken into account In this argument.
(a) Amount beneficially owned: 227,131,935 shares which includes (i) 170,492,985 shares of Common Stock held by the Elon Musk Revocable Trust dated July 22, 2003 and (ii) options to purchase 56,638,950 shares of Common Stock that are exercisable within 60 days of December 31, 2020. On August 28, 2020, the Issuer effected a five-for-one stock split of its Common Stock (the “Stock Split”). The share numbers reported on this Schedule 13G / A reflects the Stock Split.
(b) Percent of class: 22.4% (percentage ownership is calculated based on 959,552,475 shares of Common Stock outstanding as of December 31, 2020 and assumes that the shares of Common Stock underlying the stock options are deemed outstanding pursuant to SEC Rule 13d-3 (d) (1) (i)).
Roughly speaking it's the price someone is willing to pay for one share. That doesn't say much about how much money Elon would receive if he liquidated his entire portfolio tomorrow. You can't just put 100+ BILLION dollars worth of anything on the market and expect there to be a buyer for all of it at yesterday's price. And furthermore, what is Tesla going to be worth when its chairman and CEO is seen to be dumping their shares?
I doubt Elon could even realise one quarter of his "net worth" if he needed it converted to US Dollars next week.
If not, why not?
It may also have something to do with the fact that billionaires can buy significant political control of policy in our supposed democracies, while poor people organising to promote their interests are bullied and sneered at.
Also, if I’m underwater on my house, I don’t get a break on my property insurance. I still have to pay the assessed rate.
This “no taxes if I take a loss” is an extremely selectively applied principle in the US legal code.
Until a hyperinflation period hits.
If someone earns a lot of money and just sits on it, they're essentially just reducing the money supply and redistributing purchasing power to other owners of dollar-denominated assets. What is fundamentally "unfair" about this? Why obsess over income inequality if there's admittedly not much consumption inequality? Why is it more "fair" for the government to marshal this purchasing power via taxation than for other holders of cash? Is the implicit assumption here that there's a monotonic relationship between government revenue and fairness?
The article reflects the worst sort of moralized economic illiteracy.
>Successful companies induce enormous tax receipts for governments at all levels (corporate taxes, income taxes, property taxes, payroll taxes, headcount taxes, etc). If Bezos is paying less percentage-wise today because he's holding his Amazon stock, where said holding makes Amazon more valuable, that's a good net deal. The alternative world where he’s routinely trimming his shares and thus reducing his economic stake in Amazon's future isn’t really ideal for anyone.
I think my being allowed to pay 0-3% taxes and holdng on to more of the cash I earn would make the world better too and is a good deal. Try using the same logic as this author does with the IRS and see how far it gets you.
Except that's not what the author said. You don't earn the cash, see - it's not realized gains.
If you make a cryptocurrency and then get a friend to buy one coin for $10 and now say your cryptocurrency has a market cap of $50,000,000,000, almost all of which you own, you shouldn't get taxed on 50 billion dollar income this year - you should be taxed on the $10 worth you actually sold because that's the cash you earned.
But that $10 plus you making even $1,000,000 in income means you pay taxes at a 0.00000009% rate.
So...yeah. You are allowed to do that, and it will get you far with the IRS.
The really big problem is that regardless of where the money comes from on paper, in an important sense all the big government spending has to be paid for out of that actual money in the form of people's income. Suppose the government carries out a big series of infrastructure projects, or even say AOC's plan for mass upgrading of home insulation. That will use a huge amount of scarce resources like raw materials, workers' time, equipment etc which then cannot be used for other things. Which means that whatever would've otherwise been made with those resources no longer exists to be consumed, and that everyone overall is worse off in terms of stuff they can buy with their income by the amount required to offset this cost. This real tax on the actual real value of everyone's income cannot come out of Bezos and Musk and the other multi-billionaires' wealth, because the amount of stuff they consume is tiny compared to their paper wealth. It has to come from ordinary people. (A similar argument applies to the cost of shuttering all those businesses and paying their workers to sit around doing nothing during the pandemic.)
Now of course, a lot of big companies do themselves use a bunch of resources, but take those away and you lose whatever the company is supplying. No Amazon warehouses? Suddenly a lot less stuff is available to be ordered online. No Tesla factories? Say bye-bye to clean electric cars and hello to more pollution and CO2. Etc, etc.
Your cash in the bank is actual money in the sense that...
> No Amazon warehouses? Suddenly a lot less stuff is available to be ordered online. No Tesla factories? Say bye-bye to clean electric cars and hello to more pollution and CO2. Etc, etc.
...you can buy stuff from Musk and Bezos.
(The secondary problem is that the big multi-billionaire winners often get that way by figuring out how to satisfy the same consumer demand with less real resources. Which means that if you get rid of those companies, guess what? Everyone is worse off because the overall size of the pie has shrunk, and there's no clever redistribution of slice sizes that'll fix it. For example, without Tesla we'd have to burn more non-renewable oil and use more of our CO2 budget to fill the same transportation demand.)
If Amazon hadn't been invented, how long do you think it would have taken someone - probably a HN reader - to build a multisite search aggregator and bargain hunter?
Apple and Google's customers would not be worse off if all scams were removed from their respective app stores. Web users would not be worse off if Google search and ad tech didn't distort search rankings by promoting clickbait at the expense of high quality content.
YouTube's small content creators would not be worse off if the copyright strike system wasn't biased towards big corporate at the expense of small creators.
The electric car market would have happened without Musk. It may or may not have happened as well - that's up for debate - but it's clearly not going to not happen.
And the fact that we have a small but growing electric car market in 2021 instead of 2001 - when it was really needed - is entirely due to the political distortions caused by the billions generated in Big Fossil profits.
I have no problem with smart talented and driven individuals making money by solving real problems. But I do have a problem with attempts to deify and canonise the individuals who are most prominent just because they become very rich.
We need more accurate accounting systems that select for benefit without ignoring social, political, and environmental costs. Otherwise we're just rewarding people for being high-functioning narcissists instead of selecting people who can get shit done cheaply and efficiently without ignoring the social and other externalities that are currently ignored.
Sales taxes tend to be regressive.
Someone making $50K a year pays the same sales tax as someone making $500K.
You're throwing out percentages for income tax, but those are progressive: the 40,000th dollar earned is taxed differently than the 140,000th dollar.
A wealth tax, especially in the US, would go a long was. Something like 2% on net wealth above (e.g.) $500M or $1B would slow inequality; below $10M it'd be 0%, from $10M to $100M it'd be 0.5%, then 1%, then the top rate. See Piketty's book:
* https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
Someone else distorting the contents of an article says nothing about the intent of the original author. They’re literally different people, who can be doing different things for different reasons
Propublica is to gun manufacturers as drudge is to john wilkes booth.
I understand why it is irritating that those earning more pay a lower tax rate, but why do you find it irritating that those earning less do?
Based on the numbers published though, it does not appear like these people are taking out loans with shares as collateral.
E.g. Bezos declared 4.22B in income and paid 973M in tax. This leaves him with more than 3 billions after tax, so I sincerely doubt he also took out a loan.
There are many examples of government in the U.S. taxing unrealized gains. Prime one is property tax.
The author claims:
> most countries use the very sane solution of staggering sales by only imposing a tax when an asset is sold
States and cities right here in the U.S. impose taxes on real estate long before it is sold, regularly assessing its value. Homeowners are indeed forced to sell or mortgage their homes sometimes to pay. In California this laid the groundwork for Prop 13. But property taxes are common globally https://taxfoundation.org/countries-target-property-tax-refo...
Politicians like Elizabeth Warren have proposed a wealth tax to treat stock and other assets more like real estate.
The author seems to strongly imply the US treatment of stock capital gains is some highly rational system designed by deep thinking experts. In reality it is the end point of a long, ad hoc political process, like all our laws.
While I do wish Pro Publica had examined the roots and benefits of our current system as the author suggests, his own post similarly lacks context in the pursuit (IMO) of a buzzy smack down.
Which is a horrendous injustice. I bought my house at a fixed amount. I have no desire or plans to move.
My property taxes have increased by over $3k since I purchased my home, simply due to market conditions. Why should the size of the local municipalities coffers increase, at my expense, relative to the vagaries of the housing market, instead of according to actual budget needs?
I have realized no value whatsoever; if I were to sell my home to try to realize that value, any home I'd buy in the area has similarly risen in price.
The only way for me to realize that "wealth" is to sell my home and significantly downsize, or leave the area entirely, and buy somewhere cheaper.
It's basically feudalism. I'm not against taxes in general, but property tax means you never really own anything.
I remember feeling sympathetic to the argument that property tax means that you don't really own land but just rent it from a state, but if there's a particular kind of thing that you possibly shouldn't really be able to own but should just rent from some institution purportedly representing a community, it now seems like it's more plausible that that should be land, as opposed to movable property, labor, debt, and contractual interests.
Feudalism and the modern tax-supported state are two approaches to avoiding constant conflict. With feudalism, the king protects your holdings, and in return you owe him military service to support this protection. With a modern nation-state, the state holds a monopoly on physical violence, and you pay taxes to the state so they can maintain a standing army and legal system to enforce your property rights.
Debates over which form of taxation is best are better framed in economic terms rather than moral terms. Which forms of taxation encourage beneficial pro-social behavior and discourage anti-social behavior? There's a good argument that wealth taxes (particularly when taxing natural resources like land, data, the electromagnetic spectrum, CO2 emissions, or pollution) are much more effective at this than income taxes.
> Debates over which form of taxation is best are better framed...
Discuss whole systems. Piecemeal is how these messes are created.
I no longer care what any one opposes. Yes, yes, yes, everything sucks. We know. WE KNOW.
I want to hear solutions, not complaints.
The US does substantially favor “primary residences” vs other forms of capital ownership, basically for the reasons you give. Renters, typically, receive fewer such protections (but this depends on the state).
Borrowing against a potential future gain is not realizing that gain, and such a loan incurs the risk of losing some (or all) of my equity in the home.
(if your answer is going to include some form of 'but housing is an essential requirement to live', be aware that my next question will be how to differentiate housing from food, or some other essential requirements to living, which are also left to the market to the chagrin of only the most hardcore communist)
There could be a lot of reasons 'why' but the biggest reason for me is that land/location value usually has nothing to do with the actions of the individual owners. There exists cheap/marginal land that can be had for almost nothing because it either has nothing or is near nothing while there also exists land which is rich in minerals, fertile virgin* cropland or forest, or other natural resources or is is valuable urban land which happens to be located near well paying jobs, good schools, good food, entertainment, accessible open space, or has really good weather or views. As the physical space of varying quality along all these different dimensions is in fixed in supply its price is determined by demand. Oxygen in the air is another "essential requirement to live" but fortunately it cannot be enclosed as easily as land can. Water is already somewhere in between. Land is differentiated from housing, food, and other essentials because there is no work required to produce and distribute it. It just exists and those who happen to own valuable locations are unjustly able to take the economic rent which is the common right of everyone. For a lot of things, you're right, it's often best to leave the production and allocation up to market forces and we end up with an abundance of food and other goods. But there is no real market for land and other natural opportunities because it's not something that can even be produced in the first place.**
Questions to consider:
- When someone claims a house costs more because the weather is mild and temperate (like coastal California), who should be paid for the good weather? Why pay the previous owner?
- When someone claims a house costs more because the local schools are really good, why not pay the municipality more for the schools? Aren't you paying twice by first paying local taxes that fund the schools and then paying the previous owner?
- When someone claims a house costs more because it is on a hillside with a panoramic view of mountains, bridges, bodies of water, and city skylines, who should you pay for the natural topography and shining lights? Why pay the previous owner?
- When someone claims a house costs more because it is near a lot of high paying jobs or is close to shopping, doesn't it seem like a significant amount of profits and wages of the businesses and employees (particularly the least profitable businesses and least paid employees) are being siphoned off to land owners?
- When someone claims a house costs more because it is close to a quality transit station/stop (and other public services) doesn't it seem like you are paying twice to access those services? Once as a fare or usage fee and again as rent or payment to the previous owner?
* land that has never been farmed before or forest that hasn't been logged before as sustainable soil management and forestry do in fact carry a long-term cost for production. Still, there is location value as it relates to climate conditions, access to water, and access to markets for labor, processing, and distribution.
** even landfill (common in parts of the sf bay area, manhattan, and boston) are only done because the /location/ is so valuable that it is worth the cost of filling in with soil moved in from elsewhere. It's less common today not only because of higher costs of dredging and filling but because we also tend to be more aware of the cost of environmental externalities.
What is growing is the government expenditures.
So you can either hop around similar places and profit, or stay in one place that improves over time, and also pay more taxes over time.
They also aren't a tax on capital gains because there is no form of "basis" for real estate taxes: it doesn't matter for the determination of the tax who the owner is or when the owner bought the property, or, in principle, at what price.
Meanwhile, real estate sales are also subject to capital gains taxes, and I don't think you can detect property tax payments against the capital gain!
I think you made the overall point correctly: in the U.S., ownership of an asset is generally not taxable at all, and therefore unrealized capital gains not only are not taxable but don't affect one's tax liability at all, except for assets whose ownership is itself taxable, which is the rare case rather than the common case today.
Adam Smith argued for a "land value" tax in "The Wealth of Nations", after all.
I think the ProPublica piece properly points out that such taxes are _unpopular_—justifiably or not; I have noted elsewhere that one of the primary concerns, of capital flight, is probably inapplicable to the US, which already has a global tax on residents and a burdensome reporting requirement in place.
This is getting tautological though. The point of the ProPublica piece (generously read) is that there’s no reason we have to tax capital gains — or more to the point, wealth broadly — the way we do. And that the article isn’t “wrong” (as the link for this HN post seems to suggest) just because it seems to suggest that reality should perhaps be changed.
Overall you seem to be reading my post as an argument to literally replace capital gains tax with property tax. That’s not the point, the point is there is precedent for taxing assets that have not sold. Issues like how to handle falling asset values under a wealth tax or how a wealth tax would intersect with any remaining capital gains tax would be policy mechanics subject to robust debate IF a decision was made to do a wealth tax.
Update - oh hi Seth we met when you were at Berkeley and made a stand on the loyalty oath. Fan.
Just because something is not legally tax avoidance does not mean that it should not be.
> I don’t think anyone involved at ProPublica grasps why virtually all developed countries don’t tax unrealized capital gains
Again... whether we do or don't is not related to whether we should or shouldn't.
> I don’t think anyone involved at ProPublica tried very hard (at all?) to learn about what they didn’t know before publishing this piece
Sure.
> I don’t think anyone involved at ProPublica gave nearly enough thought to the implications of violating privacy laws (or at least norms) to publish a non-story
Or perhaps this is truly a societal issue, as evidenced by the wide difference between the current amount of taxes which the wealthy pay, and the historical amount; and as evidenced by the wide difference between different countries. The fact that it has long been a part of the public discourse suggests so.
And none of that explains how it is "misleading".
Edit/PS: https://www.propublica.org/article/why-we-are-publishing-the... but sure, tell me how they didn't give "nearly enough thought to the implications of violating privacy norms"
I think this author would agree with you on this point and indeed most of your points. I think it could perhaps worth considering this author's point - understanding something about the systems being criticized is important because it guides people to good critique.
If ProPublica is indeed writing from a position of gross ignorance on the subject they are writing about, this should be understood by the readers and color how the story is read. Much as we here on HN are likely to find it salient if someone with thoughts to share on programming languages knew very little about computing.
> But even there either the heirs are withdrawing money to spend or they aren’t. If they are, it gets taxed.
Under current US tax law, the heirs are inheriting the assets on a "stepped-up" value basis, i.e., any gains realized BEFORE they inherited the assets are NEVER taxed.
The fact that this detail is not mentioned once in the article means that the author either is not as knowledgeable about finance as they present themselves, or they are, themselves, trying to sell a "BS Tax Story".
https://www.kiplinger.com/retirement/estate-planning/602701/...
Here's why that step-up doesn't really matter. For round numbers, let's imagine Bezos acquires shares of Amazon at $1 each. Fast forward a few decades and they're now worth $100 each. He's accrued $99 in taxable gains. But he blows up in space, so it's all left for heirs. At transfer, the cap gains part is thrown away. But this is only to avoid double taxation, as the heirs now pay 40% on current market value for assets > $1m. Making them pay 20% CG on $99 and 40% would be far too high. So the gov lets them only pay 40% on ~$100, which is roughly 2x the total receipts.
(If the assets are left in trust, you can avoid the estate taxes. But then you're back to paying cap gains when the money is withdrawn.)
EDIT: Technically it's assets over $1m + other exemptions and deductions. In practice it kicks in more like $10-12m depending on particulars. But the amounts in question here are way, way above that baseline.
No. Gift taxes are paid by the gifter. Gifts are not income for the recipient. Additionally, there are annual and lifetime exclusions for gift tax.
They manifestly are income for the recipient.
They aren't taxed as such, though, because undertaxing income through generational wealth transfer is how you preserve a privileged elite.
> Additionally, there are annual and lifetime exclusions for gift tax.
The annual per-recipient limits are large, only amounts over them count against the lifetime limit, and the lifetime limit is enormous.
The argument that the step up basis avoids double taxation appears to be slight of hand. By the same rationale, you should earn a tax credit for sales taxes paid during the tax year.
But to be clear, if someone wants to argue for say a 45-50% estate tax (or even a higher CG rate), that's fine! My point in the article was just that this should be done as an oped, not a faux-bombshell news feature.
Isn't this pretty easy to pull off? Just buy a home (most americans own their home), and get a reverse mortgage when you're retired.
Bezos didn't avoid CG, he deferred it. By not paying CG, he also didn't cash out, meaning to cash out the inheritor will have to pay all the CG Bezos would have paid? i.e Bezos full tax amount on stock was deferred to the inheritor. Unless they get to dispose / realise gains on those stocks for only 40% - but I read it as they receive the unrealised stocks, and need to pay 40% tax to do so.
Tax policy isn't something I know a lot about, so I'll discuss your article "Breaking Down the New Yorker's Slanted Robinhood Story".
> "Brokers by definition are middlemen who have customers on both sides. And if we have to pick the side that matters more to Robinhood, it’s obviously retail customers. To suggest otherwise is either disingenuous or negligently ignorant."
Channeling my inner Antonin Scalia here. The Cambridge English dictionary defines a customer as "a person who buys goods or a service." There is a perfectly reasonable argument that Robinhood users are not customers at all, let alone Robinhood's primary customers. It's not a good look to dismiss the plausible as "disingenuous or negligently ignorant". That's a symptom of ideological conflict, which is dull and tiresome.
> "Payment for order flow is something that it seems only one financial journalist understands well enough to explain"
I see a trend here. People who disagree with you are ignorant or lying. It's not difficult to understand that PFOF entails selling user orders to brokers under common control with enormous asset managers that hoard advertising data and make market-moving trades. Questioning the intelligence of those who disagree is another symptom of ideological conflict.
> "Did stock markets haemorrhage value in 2007-2008? Famously so. But the causes there were complex. Was excessive Wall Street greed a part of it? Sure! But so were a lot of other elements — including weak consumer financial education."
With all due respect, that sounds like some sleezy shit Anthony Mozilo might say. I want to give you the benefit of the doubt, but it's hard to see this as anything but pandering to one side of an ideological conflict.
I'm not following this. Are robinhood customers not buying stocks from them? Are stocks not "goods or a service"?
>It's not difficult to understand that PFOF entails selling user orders to brokers under common control with enormous asset managers that hoard advertising data and make market-moving trades.
You seem to be beating around the bush here. What nefarious activity are you suggesting they're doing? Front running? Because that's explicitly illegal.
>I see a trend here. People who disagree with you are ignorant or lying.
>[...] but it's hard to see this as anything but pandering to one side of an ideological conflict.
I hope you see the irony here.
When PFOF is involved, Robinhood users do not buy stocks from Robinhood. They buy them from the Robinhood customer who buys order flow.
> What nefarious activity are you suggesting they're doing?
I pointed out a troubling conflict of interest and a potential ability to act on that conflict in a legally ambiguous manner. For what it's worth, one of Robinhood's customers was recently sanctioned for old-timey tradeahead front running.
> I hope you see the irony here.
I don't see the irony. Can you explain it to me? I was trying to be opinionated, but intellectually honest. Did I fail?
I don't agree with this and I doubt many other people do either. I'm fine with them paying 20% on $99 and then 40% of 80.20/share they inherit. Due to multiplying percentages, that's only a 51.88% rate.
Of course, you're ignoring a lot when you say "other exemptions". Like the first 5.35 million to each descendant being a "gift" before the estate tax is applied.
You still pay the estate tax (40%), even with the stepped up gains.
Biden's plan is to pay income tax on the gains, and then the estate tax on the rest. Or vice versa, the news reporting on this has been deficient.
1) if somebody actually sold say 100M in stock at long term cap gains rates they should be paying roughly 15% tax, but in these cases people paid far lower than 15%, so they must offset those gains with something — what was it?
2) borrowing say 100M and using their large qty of stock as collateral at say 2% interest rate means you can buy stuff with that money then they pay it back later, but how? If they sell stock to pay it back later, then in that year they should have to pay tax in that year.. so ultimately the cash flow needs to be tracked.. if somebody buys a sports team for 2B, where did they get the cash for that? Did they buy it by paying the person in stock?
Would be great to understand how people are doing this kind of stuff because it seems like the old line about “not taxing the job creators” translating to somebody only paying 1% tax might be fine if that was the societal trade we are making but if that person is not actually benefiting society in any way, then that person paying ultra low taxes does seem unfair.
1. Lots of possible deductions. Charitable giving is a big one here. I guess we'll see from future instalments in the ProPublica series which ones were specifically used.
2. You can roll-over loans by borrowing new money to pay back old debt, up to a practical cap of a max % of collateralized share value. And this is worth it if the expected growth on your shares is higher than interest on the loans. But at some point you or an heir will have to realize gains if you want to exceed that practical cap -- or if the loans get called. Bezos could probably raise $2bn for a sports franchise on loan no problem coz that's only ~1% of his shares. If you're a regular billionaire with say $4-5bn in shares, much harder.
The meta point here though is that the taxes are always going to be paid at some point, and deferring that point to the future is fine if the rate of growth on the gov's share exceeds their borrowing costs (currently between 0-2% depending how you look at it).
(Or is that just an urban legend I’ve been told?)
Not for individuals, but when you are a high net worth individual, it's all the same.
Again, if you are going to throw punches you ought to make really sure you’ve done your own homework.
As for the concrete, the important thing here is whether those repurchased shares retain their original cost basis or not (to the grantor) from the IRS's POV. If they do, all that's happened is a complicated tax-free cash transfer. If they don't, then cap gains taxes have been avoided.
So far as I understand the rules, it's the former. If I'm wrong, I'm happy to be pointed to a credible source etc.
Be careful. ProPublica is conflating "wealth gain", aka unrealized, unsold stock gains, with income and actual capital gains.
ultrawealthy typically hold fast to shares in the companies they’ve founded. Many titans of the 21st century sit on mountains of what are known as unrealized gains, the total size of which fluctuates each day as stock prices rise and fall. Of the $4.25 trillion in wealth held by U.S. billionaires, some $2.7 trillion is unrealized
Maybe the trick is simply just borrow for your whole life then when you die pay back the loans but somehow that payback process results in limited taxes somehow.
The ‘somehow’ is the stepped up basis upon death loophole: https://www.thebalance.com/how-the-stepped-up-basis-loophole...
The cost basis of an asset when inherited is set to the value on the day the owner died.
Our income/gains taxes avoid confiscating your (hopefully productive!) property by only taxing you on the profits you realize, which both enables and encourages you to keep up what you're doing, producing more prosperity for yourself, your community, and tax income for the government. It doesn't reward you for taking risks, but it doesn't punish you for taking them either. If you take a risk, lose money, and still get taxed on that money you're getting punished for taking a risk.
Imagine you believe that a stock will stay at the same price, so you make an investment that loses money if it goes up and gains if it goes down, and another that moves in the opposite direction. So the two largely cancel out and you make a bit of profit if it stays the same as you expect.
What should you pay taxes on? The amount you actually made or the 'virtual money' that flowed through only to be canceled out on the other side?
Our income and gains taxes are intended to tax you on just what you actually gained, after taking out costs (including the costs of the other investments you made that didn't pan out).
1. Bezos gets lucky and turns $100 of founder shares into $100 billion of unrealized gains.
2. Bezos goes to the bank and gets a loan for $500 million to invest in a diverse portfolio of early stage startups knowing that only a tiny fraction of them will account for majority of his returns.
3. Every year a portion of his portfolio fails, allowing him to sell a portion of his original shares to offset the losses and show a net gain of 0, allowing him to pay no taxes.
4. He hits a Google or Uber and 10xes the original $500mil but gets to continue this scheme of not realizing the gains unless he has losses to match while his control of the universe continues to expand.
https://startupflux.com/jeff-bezos-investment-portfolio-owns...
"Jeff Bezos Investment Portfolio is very large and diverse. he owns a stake in several Very Very large companies that you’ll be surprised to hear. Bezos was one of the first shareholders in Google, when he invested $250,000 in 1998. That $250,000 investment resulted in 3.3 million shares of Google stock worth about $3.1 billion today."
presumably because he's disproportionately funding "the universe"? All that money on failing start-ups probably lose him more than whatever the stock-disposal tax rate is. What isn't going to the government is directly seeding the economy.
The 10x payoff is taxed. You seem to assume that would still have happened anyway - who would have funded it? Bezos investing in a portfolio created that wealth.
Assume he breaks even: He had to burn through 10$X in order to have $X shares in that 10x company. The tax he would* have paid if not offset against losses, is the same he pays on the unicorn. i.e He gets credited tax on the 10$X, but pays tax on $(10X).
AFAICT, the main objection is he has an obscene amount of money (which fair enough, he does). I'm not sure what your objection to this scheme is in general.
Would you still object if a small business owner did the same thing (which I'm pretty sure is common, just not with startups)?
Yes, maybe only billionaires have the capital to make this bet less volatile, but such is as with all things: It's generally easier to turn larger amounts of money into more money as high-capital-requirement opportunities become available to you (not just relating to this), they have still have to have large amounts of capital, and put it at risk i.e more to lose.
The point is, you start from a $100 initial investment that has already turned into 100s of billions of dollars of unrealized gains which you can now selectively live off of without paying a dime in taxes by harvesting losses.
https://startupflux.com/jeff-bezos-investment-portfolio-owns...
If you had $175M to buy a mansion and paid $0 tax, you must have had $175M of losses as well. To have $175M of losses, you had to have paid $175M for those Theranos and Juicero shares. So you already had $175M sitting around in your bank account a few years ago. You could have just left it there and bought your mansion now. Your scheme gained you nothing, in fact you are worse off because you had to sell $175M of your Uber shares, which you wouldn't have had to sell if you had just kept your $175M in your bank account rather than investing in Juicero and Theranos.
My point is that the $175M you had in your bank account years ago was already realized and fully taxed because it was cash. So being able to spend it on a mansion is fair because it's already fully taxed. You used it up on your mansion and cannot spend it on anything else. If you want to buy a second mansion you'll have to find some new fully taxed money (such as sell more Uber shares and actually pay capital gains tax on them).
> you had to sell $175M of your Uber shares
If you had these separately to the Theranos etc shares, you had to buy them. Since the $175M was a full loss of $175M then that can't account for the (non-losing) Uber shares.
> you had to sell $175M of your Uber shares, which you wouldn't have had to sell if you had just kept your $175M in your bank account
You'd need to know to only invest in Uber, and not in Theranos etc to do this. The idea of the portfolio is you need to invest broadly to allow for the successes. If you kept the $175M in your bank account, you wouldn't be able to achieve that.
>If you had these separately to the Theranos etc shares, you had to buy them. Since the $175M was a full loss of $175M then that can't account for the (non-losing) Uber shares.
Yep. So you had to have more than $175M of fully taxed money at the beginning. But most of that stayed in Uber, only a small percent of the Uber stock needed to be sold. This makes my original argument stronger, but only slightly. Since it only made my argument slightly stronger I didn't bother mentioning it.
>You'd need to know to only invest in Uber, and not in Theranos etc to do this. The idea of the portfolio is you need to invest broadly to allow for the successes. If you kept the $175M in your bank account, you wouldn't be able to achieve that.
Sure. But my main point is that this isn't a method to spend money while delaying tax on it. m_ke seemed to be saying a billionaire can spend money on a mansion without paying tax on it right away, but that $175M at the beginning already had tax paid on it. So the $175M spent on the mansion was fully taxed already.
A diversified portfolio helps with optimizing stock sales to delay some taxes. But enough taxes are still paid early such that every dollar spent is fully taxed by the time it's spent.
But some here would say "OMG he evaded taxes on the $100 Uber gain!"
Tax loss harvesting is not a loophole, it's exactly the right thing to have, and it's available to everyone.
Which changes depending on losses. What you are missing is you needed to purchase the portfolio in the first place - The more tax you can write off, the more it mean you lost in the first place.
assume tax rate 25%, portfolio of startup portfolio cost $X.
$UBER_CG_BILLIONS - $X is portfolio unrealised CG. I'll assume this is positive, meaning $X < $UBER_CG_BILLIONS.
Assuming "I sell enough shares" means uber shares (as opposed to some other share),
I sell exactly $X worth of my Uber shares (ignoring what I paid for the Uber shares themselves), which I offset against losses to pay no tax. Since I had to pay $X initially, this is my original investment restored.
I retain ($UBER_CG_BILLIONS - $X) worth of Uber shares.
Where does the $175mil come from? Assuming it isn't the $X I had to invest in the first place, I could sell more Uber shares, but I would have to pay full tax - I already offset all my losses in order to get the original investment back.
TLDR; you suggest $175mil was gained without tax, but without mentioning how much was lost on the portfolio in the first place - presumably more than $175mil.
EDIT: Now assume that $X is $100 for the whole portfolio, per last sentence. How common would an Uber-billions unicorn be for such a small investment to rocket like that. The more diversified your portfolio, the thinner you spread your investment. Uber stock would have to increase by 10,000,000 in value to be worth just 1 billion, even if you only invested you $100 in Uber. It would need to increase by a factor of 1,000,000,000 to be worth "100s of billions".
You sound like the people who say “oh! He avoids tax through charitable donations - he donates $1M and gets a $300k write off”
I'm not saying that he can save money by investing in a bunch of juiceros, just that each year when a few of his investments are duds he has a pool of unrealized gains that he can pull out tax free to match the losses.
No, capital gains tax has brackets -- it isn't a flat 15% -- and the Net Investment Income Tax also applies; for $100M in cap gains, you would pay 23.8% (20% bracket + 3.8% NIIT) on the majority of those gains (everything over $440k single / $500k MFJ).
In short, the estate pays off the loans by selling stock immediately after death.
Substack author got stuck on “tax avoidance” and missed the broader point. Sure, perhaps taxes get paid at some point, but it’s radically different if you can build up a huge warchest and sock everything away behind future wealth transfer schemes. (And point that you get one-time 40% vs 20% cut then 40% cut is also valid).
Beyond all that - when you can accumulate wealth without taxes like that - you get security and comfort. Certainly there are reasons to prioritize investment, but why should earning income via wages put you at such a HUGE disadvantage?
Def doesn’t rise to the inflammatory title. ProPublica has a different attitude towards wealth and investment than you do - fine! Not sure there’s a truly “objective” way to look at this.
Wages are paid out of pre-tax earnings. Capital gains correspond to after-tax earnings. This puts them at approximately the same level. (A lot of cap gains are also due to inflation, i.e. they're fake gains.)
Also, if you’re going to discount inflation, don’t you have to do the same for annual salaries which are very much worth less under any significant inflation?
So a dollar goes into a corp, it either:
(1) gets paid to you, you pay your marginal income tax rate on it (say 28%), the corp doesn't pay a tax on it because you're an expense they deduct.
or
(2) they pay corporate tax on it (21%) and then it turns into gains for you and you pay LTCG on it (15%) = ~33%.
(and no, it's still automatically lower than your marginal income tax rate when you're in a higher tax bracket: LTCG goes up to 23.8% when you have sufficiently high investment income)
... and if you don't qualify for LTCG on that cap gain, you get taxed at your income tax rates on it even though you, as a (tiny) owner of the company, already paid corp taxes on.
Additionally you appear to be assuming that all capital investments ‘came from’ a paycheck and not some other source. Probably all of the underlying money in question in the original article was created through some kind of invention or productive work, not through Jeff Bezos investing his paycheck.
Salaries tend to rise with inflation. The tax brackets are indexed to inflation, so there's no inflation tax on them.
> (A lot of cap gains are also due to inflation, i.e. they're fake gains.)
You are a poor investor (or at least a weird one!) if that much your gains are due to inflation -- even under the more aggressive or even kooky benchmarks of inflation they're still not that large compared to broad market returns.
The fact that the fake gains from inflation are taxed is probably somewhat market distorting in that it discourages investment in low risk low return opportunities, but (perhaps due to that distortion) it ends up not being that big of a factor overall.
As a startup employee, I understand and appreciate the mechanics of capital gains taxes. But I also realize that the ultra wealthy are using a number tax maneuvers unfairly. They use shell companies to avoid paying corporate taxes, they use stock buybacks to avoid paying taxes on dividends, and they use stock as collateral for personal loans to avoid liquidating stock and paying capital gains.
My primary source of money/income are my wages. I have few if any options to defer or reduce my tax burden. Meanwhile folks much wealthier then I have figured out how to delay a large portion of their tax burden indefinitely. And in the meantime, roads need to be fixed, the military needs to be paid, etc... and many of these government expenditures disproportionately benefit the wealthy (roads subsidize cheap transportation of goods, military enforces US hegemony allowing for international trade (and stable allies in which one can locate their shell companies!)).
I am not a huge fan of wealth taxes, but I struggle to see a better solution that won't eventually get loopholed to death. A 1% tax on holdings worth more than $10M or so seems like it could be the solution. An added benefit is that it would "encourage" wealthy individuals to earn some income, take dividends, or realize capital gains in order to pay the wealth tax, and each of those actions would generate a separate set of tax revenues.
The overall point Jeremy is making is that: Propublica claims to be independent and non-partisan trying to do investigative journalism to the highest standards.
However, here they are really publishing a thinly veiled policy op-ed, and a pretty badly informed one at that. IE not investigative journalism.
They are further morally justifying the privacy invasion on some really shaky grounds as well.
Like, for example, even if one assumes that their story is somehow "investigative journalism" rather than "policy op ed", there is no obvious reason not to anonymize the data except to make it more salacious and get more clicks. They basically write that as their justification, along with some other "ends justify the means" crap, but try to make it sound better.
That is not an ethical or moral reason to do something.
You may agree or disagree, but this feels like a very valid set of points to raise, and doesn't "miss the point" at all.
It is propublica that is claiming to hold themselves to a high standard and failing in a lot of ways. So this is overall a critique/commentary on the standards folks are holding themselves to much more than "are they right".
The "are they right about tax" is almost secondary here, and that is what you (and lots of others) are focusing on.
Which is ironic, because it basically proves
That said - subhead from Substack is:
> What happens when journalists don't have any friends in finance to challenge their thinking?
Which to me firmly grounds their point in being about tax policy and not journalistic policy.
Obviously, if we could distribute tax contributions proportionally, it would help everyone. But HN can’t fathom that.
Actual 1%ers are substantially over-represented, but they are (by definition) a very tiny fraction of the overall public.
What lots of people still aren't realizing, all tax codes apply to everyone. There are no class distinctions. New tax codes apply to the 99% as well. When the whole GameStop/AMC stock ride happened, a lot of people realized "I now have an opinion about capital gains taxes... I don't like them". You have access to all the same loopholes the 1% have access to.
Using meme stock millionaires as an example is hilarious. That’s maybe a handful of people in comparison to the rest of the normal working class population.
https://www.bloomberg.com/news/articles/2021-06-09/sequoia-m...
This just isn’t true is it? According to the OECD Colombia, France, Norway, Spain, and Switzerland are the countries that raised revenue from net wealth taxes on individuals in 2019: https://en.m.wikipedia.org/wiki/Wealth_tax
To get granular:
Wealth taxes are a bit distinct from taxing unrealized gains directly (even though they often have that effect, and there is some obvious overlap). If we look at, say, the Netherlands, they're assessing a ~1.7% wealth tax on assets over €1m independent of the performance of the assets over the year in question, which then exempts the payer from capital gains taxes upon sale. So we can call this taxing unrealized gains, but it's a bit imprecise in that they aren't taxing the gains themselves (which are unknown, and could be losses), but rather wealth at a prior point in time based on a fixed formula. If the asset in question went up 20%, the Dutch gov isn't going to tax the excess or force realization on any specific timeline. They'll just keep taking their 1.7% every year on whatever is there on Jan 1st.
There also aren't a lot of countries doing anything like this as touching upon non-real estate investments, and most European countries that have experimented with them are in the process of reversion (e.g., Norway, France) as it basically hasn't proved workable in most instances.
So maybe I should have left something like this as a footnote to clarify.
There's no evidence it hasn't proved workable. The left coalition has promised to increase the wealth tax back again to recent levels if they gain power in the September election.
Edit: Just got banned from his blog for making this comment... https://i.imgur.com/ZkaLuRT.png
Wealth taxes face three classic problems: (1) they're very hard to set in any fair sense given complexities of markets and assets, (2) they can induce liquidation in ways that are net bad for the economy, and (3) capital flight.
3 seems to have been a problem in Norway (https://archive.is/L6kyZ), as it was in France and elsewhere in Europe prior. If your tax system causes a net decrease in receipts because you're golden geese have fled, that's a workability problem!
Of course, the taxed are going to say that they don't like paying taxes.
Real evidence of capital flight in larger amounts than the taxes gained are harder to come by.
That includes unrealized gains.
It’s totally unclear to me why you think the distinction here somehow invalidates the ProPublica piece.
(Note that ProPublica mentions wealth taxes at the end, and then immediately dismisses them. Their object here really was/is gains taxation in a direct sense.)
My point was that this isn't tax avoidance, that there are reasons we don't tax unrealized gains directly, and that virtually no countries do it that way.
It's true that a few (and very much declining) number of countries have some form of wealth tax that includes some amount of unrealized gains. The Netherlands, for example, marks-to-market on Jan 1st of the tax year then doesn't actually track gains/losses over the next 364 days. So that obviously isn't a direct tax on gains. But it's certainly adjacent, and I said in the parent comment here.
This is exactly how Wyden’s proposal works as well, so I fail to understand the point you think you are making.
Personal wealth taxes are literally a tax on personal wealth including unrealized gains.
“I was wrong” is much easier to type than your confusing reply. :)
ProPublica says "we'd love to see more of A, which is separate from B, as B doesn't seem especially workable".
A and B are not the same, even if one encompasses the other in some meta sense.
A is actionable in a direct sense. And if you wanted to do it in a direct sense, the M2M date you'd pick would not be the first day of the tax year. And you wouldn't use a fixed formula that ignored actual results of the asset.
What does "meta" mean in your usage? I may be missing some point you are trying to make. Personal wealth taxes encompass unrealized gains taxes, not in a "meta" sense, but in actuality.
Do you disagree?
> ProPublica says "we'd love to see more of A, which is separate from B, as B doesn't seem especially workable".
I took that to be ProPublica saying "one way to increase the total effective tax rate on the ultra-rich would be to tax unrealized gains. Wealth taxes do that; here are some downsides of wealth taxes as implemented elsewhere."
This strikes me as...fair and balanced reporting?
> A is actionable in a direct sense.
I don't know what this means. Hypothetically the US could have either a personal wealth tax or (only) a tax on unrealized gains.
> And if you wanted to do it in a direct sense, the M2M date you'd pick would not be the first day of the tax year.
No, I agree with this. The Swiss system uses mark-to-market at the end of the tax year. So...point you?
If ProPublica suggested the beginning of the year instead of the end of the year, I overlooked that. Good job catching them on this error, I guess? Or something?
> And you wouldn't use a fixed formula that ignored actual results of the asset.
I don't know what you mean by this. Can you rephrase?
"It's true that a few (and very much declining) number of countries have some form of wealth tax that includes some amount of unrealized gains. The Netherlands, for example, marks-to-market on Jan 1st of the tax year then doesn't actually track gains/losses over the next 364 days. So that obviously isn't a direct tax on gains."
I wrote,
"What? How else would a tax on unrealized gains work if not mark-to-market at a fixed day of the year?"
How do you believe an unrealized gains tax would work if not mark-to-market on a fixed day of the year?
Backing up even further, as I said, this is extreme hair splitting. Major economies do have wealth taxes, which include a tax on unrealized gains via mark-to-market. Is your point just "lol ProPublica r idiots nobody taxes just unrealized gains"?
At 1.7% a year it gives you quite a few years before it would even reach the same level of taxation as income / capital gains tax.
To make it concrete: last year I made $200k in short term capital gains in stock market. It was taxed at my high marginal tax rate of 35%+, that I had to pay this year.
In Dutch system I would be much better off: I would pay 1.7% on that increase this year and continue paying 1.7% for 20 years before that would equal the amount I paid this year.
And if I managed to, say, 4-8x that $200k in 20 years (at 15% you double the money in 5 years, at 7.5% you double in 10 years, which is a return on S&P index fund), I would be even better off in Dutch system.
So US system, at least regarding stock (which is how all those billionaires in ProPublica article created their wealth) is better only if you hold your stock for 10-20 years, which is generally regarded as a good thing. It both provides stability for stock price and shows the confidence of a person in the business.
- Yes, I don't know exhaustively, but a number of countries with wealth taxes do not have gains taxes.
- Your comparison is a little bit mistaken, I think; you're looking at the tax only on the gain, whereas (obviously) the tax would be on the entire principle. I'm too lazy to do the math, but a wealth tax is easy to factor in, since it's a fixed reduction in total yield on wealth. The long-term historical return on capital in the west is about 4%/year; a 1% wealth tax is thus averaging about 25% of that. Gains taxes are typically lower than that amount. (Note that in the US the long-term gains tax is 20% at the upper bracket.)
And also includes everything else.
You pay the same tax if you have $1m in shares that you bought long ago for $10k or $1m in shares that you bought last month for $2m.
We are publishing the tax secrets of the .001% - https://news.ycombinator.com/item?id=27434307 - June 2021 (463 comments)
Tax details of US super-rich allegedly leaked - https://news.ycombinator.com/item?id=27440881 - June 2021 (ongoing)
Isn't the author's primary point that everyone knows its unfair in this manner (Similar to how most of the world is) and the violation of privacy isn't justified because it didn't reveal anything new that wasn't extensively documented already?
> Why is it wrong that Jeff Bezos has to sell stock or have an actual income paycheck to pay for his wealth tax?
Is it your position that only people who are invested in public companies should have to pay wealth tax? If not, how do the people who have stock in private companies that cannot sell their stock expected to pay the wealth tax? If so, why would anyone invest in a public company?
Taxes on Stocks Explained for Beginners that Know NOTHING About Taxes https://youtu.be/EKYMbsjUUtE?t=46
> > Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell.
--yes, precisely because they're not income until then.
> but incurious about why the laws are that way (not just in the US, but across the developed world.
--this is a great characterization, this settling for grasping what little one superficially comprehends about a complex subject does indeed come across as incurious. They never apparently rose to ask the next 3 or 5 questions that should immediately follow. If one's curiosity stopped at question 1 or 2 that's pretty underwhelming.
This author argues that ProPublica “misunderstand” the difference between taxing unrealized gains and taxing income. I’ve seen this same argument on HN comments, as though knowing what a 1040-B is somehow makes one a tax policy expert.
Of course, there are countries that tax wealth directly, so “taxes paid as a percentage of wealth” is certainly a valid metric! And if the public are concerned about tax policy disparities between the ultra rich and the rest, it’s the only metric to look at[1]; as everyone knows, the ultra rich tend to earn their wealth primarily as capital gains, so a metric like “effective tax rate on earned income” would simply not be very informative across social classes.
I’m really surprised that this argument has taken off; it feel almost like some sort of astroturfing campaign. There’s no reason we shouldn’t talk about effective tax rates on wealth, even though this isn’t how the US tax code works; indeed, that’s really the point of the article.
1. As someone else noted, looking at returns on capital vs labor after taxes and transfers over time is a better approach to understanding trend, but as a snapshot view, I think this is quite reasonable and easier for readers to grasp.
1. Most countries that have tried wealth taxes have either abandoned them or have had to constantly readjust them due to logistical difficulties and capital flight. They're elegant in theory, but very difficult practically.
2. The problem with ProPublica's coverage is that it was a tax policy argument masquerading as a news story. If they wanted to advocate for whatever policy position, that's fine! But to paint specific individuals as underpaying in taxes is deeply disingenuous. It poisons the civic well and gives casual readers the sense that something nefarious is happening.
3. Violating right-to-privacy laws to illustrate a policy proposal is bad! Really bad!
2) No, it’s illustrating the consequences of current tax policy. I read (or misread?) your argument as “effective tax rates on total wealth is the wrong metric” (and you go on to suggest that looking at such a metric puts one as an ignorant). Why is this the wrong metric? Economists like Piketty and Milanovic—going back to Kuznets—have looked at returns on capital vs labor. Effective tax rates on capital are one such component. Why is it disingenuous to look at such a metric?
3) Really? I dunno. https://www.oyez.org/cases/1970/1873?
Delaying tax is part of normal tax avoidance strategy. A tax that is endlessly deferred, or deferred until there is a tax amnesty, is one that is avoided (or evaded). Deferring the payment of tax is good for the payer both for managing cash flows and from increasing the freedom tax accountants have in finding favourable terms when taxes are paid.
The main use of the term "avoidance" is its contrast to "evasion": the distinction is between those things an accountant does to benefit the client that are legal and those that are illegal. If you misrepresented your affairs to the IRS in order to defer a tax liability for a year, that would be tax evasion.
(FWIW, I used to be a tax accountant.)
> But imagine that we forced lots of people to sell shares every April to pay for their gains. There’d be more sellers than buyers as everyone raced to raise cash, and prices would go down, and our collective wealth with it. No one really wants this. (To the degree that anyone wants it, it would be the rich — as they have the collective borrowing power to buy back shares on the cheap while poorer folks can’t.)
Such a scheme shouldn’t introduce an imbalance: with how liquid and efficient the stock market is, these exchanges would be known about well in advance and easy profits would be arbitraged away. It’s like saying that stocks of hot dog makers peak near the Fourth of July.
Now, this is a valid concern for illiquid assets, but:
1) The previous paragraph makes clear the argument refers to the stock market, and
2) It’s not fair to compare the most naive, reckless way of assessing a wealth tax, which forces such sales of hard to value assets.
The GME HODLing "apes" aren't creating wealth either, just transferring it
Also, the IRS wants quarterly estimated taxes, so that you don't owe a lot in April. The TLDR of the rules is if you owe more than 10% in April, you did it wrong and you'll pay a penalty subject to details I'm leaving out. That would tend to move from one sell day to four sell days throughout the year.
And some people like to get things done early, or have offset tax years or notice a trend that selling for Q2 estimated taxes the day after Q1 estimated taxes are due gets a better price, etc.
In short, I wouldn't worry too much over this. Mark to market rules for things that aren't so easy to price would be a much bigger concern.
In some cases people are already required to mark some assets to market, doing so ends up causing to have large losses which wipes out their income entirely in some years. ... again resulting in some years with no tax in spite of being wealthy -- it's ultimately offset with higher taxes later, but in some individual years you end up with the same issue the article is complaining about but actually created by the MTM.
If that surprises you, realize that when you've marked an asset to market at a higher price-- you've also increased its cost basis to that higher price, so if it returns to the price you bought it at you now have a loss. Without the MTM at that point you'd simply have no gain, but not a loss.
(and if you don't allow writing of the loss you've created an utterly ruinous cost for owning any risky-- or even merely volatile asset)
This statement alone is IRS-gate. Privacy breach at it's finest.
I've directly engaged with 100+ comments today. I stand behind my work in ways that virtually no writers do. All I ask in return is a basic bit of respect in the form of default rules of engagement. Forcing me to address the same concern in two places is bad form. When I informed you of that, you implied (per your own screenshot) that I was trying to get away with something underhanded. I don't need to be treated like that, so I blocked you in the space I control.
You can be as butthurt as you'd like! You can complain about it wide and far! Or you can reflect. It's up to you!
Yeah, I copied a reply from HN about an inaccuracy you hadn't adressed/fixed. Is that really a bannable offense?
You still haven't addressed it either, you're still misrepresenting political talking points of the Conservatives in Norway as established, undeniable facts.
For my other comments, you've just deflected.
You've made your points. I've replied to all of them. Readers can judge.
Calling someone “butthurt” here used to invoke moderator action, as a direct point, but you’ve wormed your way in to the “can do whatever” club by having a Substack, I guess. It’s ironic how many rules you’re applying to others while overlooking those of this forum as a guest. Your comments are being flagged for a reason.
Also, Christ, it must be extremely tiring painting exact lines for other sapient individuals to follow and arguing with them if they don’t. Why not just roll with how things develop and try to be reasonable as best you can rather than hold the entire commenting public to your demands, which is plainly unsustainable? People are engaging with your work and you seem to be ... annoyed by that?
As happens though, I think standing behind one's work is important, and that the investment is worthwhile on the net. So I engage more than most do, and I quite literally pay people when they help me see flaws in my work (or even just when they raise a really helpful point). This is good for all. But it's only sustainable when those on the other side engage in good faith. I told someone (who was already being super snarky) that I was centralizing their comments as they'd made the same one in two places. They responded with something deeply uncharitable. So I blocked them in one place but still addressed their concerns here (while linking readers from SS to here so they could follow). If that's not enough for you, lol ok.
As for butthurt, look, I've been on HN for a day. I don't know anything about the culture here. I don't even know what flags you're talking about or how to find them. No mods have gotten in touch with me about anything. If they did, I'd happily hear them out. But I'm never a dick to anyone who isn't a dick first, and even then I still try to engage in good faith if there's a real concern within their dump.
Do people really think Jeff Bezos is worth 60+ billion when there is no liquidity to buy all of his stock at that price?
I'd guess you'd probably need the entire top 10% of all taxpayers to end up with the returns of 50 persons who've published them.
In any case, one thing this doesn't seem to point out is any significant nexus between most of the content of the article and the private data. Okay, various parties reported almost no income in some years-- We knew that. They talk about trusts used to escape estate taxes, but don't support it with their trove of private information.
As the OP says, the Propublica piece is essentially a standard tax policy op-end that could have been written today without the benefit of any new private information. The connection to the private data seems weak at best.
Even without that loophole there are probably a bunch of tricks their financial planners have to minimise taxes (e.g. using trusts/charities, various tax free allowances).
Or alternatively, because they essentially get to defer taxes for as long as they like (by refinancing the loan), it means they have the full tax free amount of cash available up front to buy more wealth generating assets.
but you still pay the estate tax? Otherwise you get hit by the capital gains tax AND the estate tax.
But in general, I assume that most of the perks of that wealth are really attached to the ownership/management of the corporation that produced the wealth.
As the article aptly points out, deferring unrealized gains does not necessarily lead to tax avoidance. Either you eventually sell your assets and pay capital gains, or you die and gains are taxed via estate tax.
However, by transferring your assets to a charitable trust, you can avoid both capital gains tax and estate tax. Yes, your heirs will have to pay ordinary income tax when withdrawing from said trust, but due to the US's progressive income tax, said tax rate can be quite low.
Please correct me if I'm wrong.
Or, you wait until the government makes a 'temporary' change to the tax code that allows you to reduce your tax more than normal and do it then. Which, to my understanding, is what actually happens...
Elon Musk pays half a billion in taxes on $1.5B in income, which is 33%! But no, they divide his tax payment over all his assets to come up with 3%.
Maybe we should try that same math with other mid-career middle class tax payers? Oh, pay $50k in taxes on $150k in income. That’s not a 33% rate. The “true tax rate” is determined by dividing by your investment account, 401k, pension vesting, RSUs, vehicles and real estate holdings. Well holy shit! Your tax rate is low single digits too? Amazing.
What if they don't sell. What if you pay in shares based on price increase over the year and we then transfer those shares into a sovereign fund. Obviously that would be a progressive tax to mimic what is already done for income tax. That fund could then manage those assets and could potentially redistribute them in people's 401K (US)/RRSP (Canada) or make them grow to pay for pensions/fund projects (like Quebec CDPQ). In the first case (redistribution), people are unlikely to all sell at the same time (there could even set a hold period to be sure) and since the transactions would be small overtime it is unlikely to stir the market. For the second option, then the fund would manage it more like any large portfolio and it has an incentive to keep the stock high so it would not dump their new stocks (it would also benefit from stock buybacks).
The fundamental end goal of taxation is to reduce inequalities in a society to keep it functional and peaceful. As we are seeing unprecedented levels of inequalities that tells me that the system is broken. You can call it tax delay all you want, but if I can delay taxes for 50-60 years it has sufficient negative impact on society at the scale we are talking that it should be reformed.
This is not at all clear. To many others, the fundamental end goal of taxation is to fund the government. The trillion dollar question is: is our goal to make the poor richer or the rich poorer? There’s broad disagreement on the answer to that question, and without acknowledging this, we’re really just shouting past each other.
Having a strong middle class is a deep factor for the stability of a country. Inequalities is easily linkable to social unrest.
Rolling back these tax rates has led to recession after recession and ever increasing gaps between the 1% and everyone else, and the middle class is shrinking.
It doesn't seem like it's such a hard line to draw between all of this.
Again, in the grand debate about whether we ought to make the poor richer or the rich poorer, both sides would agree that "having a strong middle class is a deep factor for the stability of the country". Although I appreciate that you may not believe this (and you're entitled to your opinion), many are of the opinion that it's actually entirely possible to have a strong middle class by establishing a floor without pulling down the ceiling. That's the contention.
> Inequalities is easily linkable to social unrest.
What we're less certain of, is if this is due to inequality, or if it's due to existence of poverty alongside prosperity. If everyone below the poverty line was magically lifted out of poverty while preserving the existence of billionaires, would that lead to social unrest? It's worth checking in with Sweden, which has more billionaires per capita than the US, no wealth tax, imposes broad-based taxes on the middle class, and not particularly known for having social unrest.
What if I reject your premise that those are opposite, and that I can heavily tax the rich which at the same time making the poor richer?
The vast majority of European countries, especially those with generous welfare states, fund their programs via broad-based taxes that fall on the middle class (https://taxfoundation.org/scandinavian-countries-taxes-2021/). They also happen to have more billionaires per capita than the US.
I didn't set up the false dilemma. If you want to discuss them as two different propositions (as you seem to), that's fine.
Your link discusses the Scandinavian countries. Those have a GINI (income score) about half that of the US. Of course they have broad-based taxes. That seems to be a requirement. It's just not an argument that they are prioritizing minimizing the degree to which the rich are made poorer.
> Your link discusses the Scandinavian countries. Those have a GINI (income score) about half that of the US. Of course they have broad-based taxes.
I want to address everything you just said, but these two points stand out.
The GINI coefficient is not a particularly useful metric precisely because the US could halve its GINI simply by increasing the income of its poorest people. It tells us nothing about the degree to which a country goes to make its rich poorer.
Which brings me to your second point; Scandinavian countries have the GINI scores that they do precisely because they have welfare that can only be feasibly funded by broad-based taxes (even Bernie Sanders admits this https://www.cnn.com/videos/politics/2019/06/28/sanders-middl...). And the only way you get a society to adopt broad based taxes is if you decide the variable you want to optimize is making the poor richer, rather than the rich poorer.
In America, especially among the center-left, there's a strong aversion to adopting taxes on the middle class — it's the only way one can fund the kinds of programs that reduce GINI — precisely because the rhetoric is less around making sure the poor are taken care of, but rather around making sure "the rich pay their fair share".
So that's the reason why it's presented as mutually exclusive goals. Once society agrees upon an OKR, it will converge around any solution that satisfies that OKR. As long as our OKRs are defined around how rich the rich are, rather than how poor the poor are, the solutions we converge around will look less like the GINI-reducing Scandinavian countries (which have high middle class taxes and VATs), and more like the US, which happens to have the most progressive taxation in the developed world[1][2].
[1] https://www.washingtonpost.com/news/wonk/wp/2013/04/05/ameri...
[2] https://faculty.washington.edu/vmenaldo/Inequality%20Researc...
I'm confused by why you think you're disagreeing with me. My point is that efforts to make poor people richer can be totally separate from efforts to make rich people poorer. Of course broad-base taxation can raise poor people's standard of living. That's my point, it's totally orthogonal to whether we want to have additional taxes on the very rich to prevent wealth inequality.
I completely appreciate that you may think it's a worthwhile cause (or not, who am I to ascribe your views), but I'm just pointing out that it's worth separating "making the poor richer" from "making the rich poorer"; as you rightly pointed out, they are different goals. Some people even want both!
Among those that adopt zero-sum thinking, there has unfortunately been a conflation of the two aims by suggesting that the only way to make the poor richer is to make the rich poorer. What I am pointing out is that not everyone adopts this zero-sum thinking, and the best way to identify whether one does is by asking the question: "is the goal to make the poor richer, or the rich poorer?".
Based on your argumentation, I concede that a more complete question is "is the goal to make the poor richer, the rich poorer, or both?". Many folks are in column A, many in B, and many in C. Until we acknowledge that, we're just shouting talking points past each other based on assumed moral premises.
But isn't the purpose of a democratic government to keep society functional and peaceful?
Sweden has more billionaires per capita than the US, no wealth tax, and levies broad-based taxes on the middle class. The top marginal tax rate kicks in at 1.5 times the average wage, whereas in the US the top marginal tax rate kicks in at 9.2 times the average wage. And yet, you might probably define Swedish society as "functional and peaceful".
This is a popular talking point, but one that has thus far been soundly refuted by empirical results.
https://twitter.com/AlecStapp/status/1401596911522615299
No amount of money will install a political leader that cannot win votes.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2605401
https://fivethirtyeight.com/features/money-and-elections-a-c...
Second of all, the influence of lobbyists on how laws are formed is "well known" as a talking point, and nothing else. There aren't any hard empirical studies that draw a causal line.
In fact, to really drive home that point, I'll reiterate a sentence I wrote in a previous reply to you, but with a minor addition:
Sweden has more billionaires per capita than the US, no wealth tax, and levies broad-based taxes on the middle class. The top marginal tax rate kicks in at 1.5 times the average wage, whereas in the US the top marginal tax rate kicks in at 9.2 times the average wage. Lobbying on policymakers is unregulated (http://www.aalep.eu/lobbying-landscape-sweden). And yet, you might probably define Swedish society as "functional and peaceful".
Once investment goes down, all goes down hill: productivty, wages, tax revenues etc.
Wealth taxes are also very distortive, the incentives to avoid them are large and the capacity to do it is plentiful: you could get your wealth in a crypto synthetic in another country and that would be it.
In the end, this is likely whats going to happen anyway to prevent hit pieces, getting targeted by media, etc.
What is salient is that people talk about taxes as if it were a christian sacrifice that it must be made: is it a virgin, a goat or a first born. Government in the US today is spending a lot more than it has in decades, even before Covid!
Any debate about adding tax pressures is simply more statism.
1. Proof of the hypocrisy of top billionaires lobbying for higher taxes on their competition.
2. The typical American pays almost twice as much in taxes as they are able to keep for themselves, while top billionaires get 100x in the opposite direction.
I saw this as evidence that the tax system is just feudal wealth transfer to our owners. Their 'solutions' are also terrible, but there is strong evidence that we don't need it at all. Income tax is currently less than 10% of treasury funding.
The smartest people on this planet are not working for the IRS they are working for the rich avoiding said taxation.
I hope you all know that that would kick gentrification into hyperdrive and force a whole lot of people out of their homes.
I mean, it's a useful facet of our tax regime to understand. And it's an important part of how rich people end up paying a much lower tax rate than others. But the idea that this is some nefarious scheme that they've uncovered by stealing Jeff Bezos's tax returns is....just completely ridiculous. Anyone who understood the US tax system even a little bit should have known that this was exactly what was happening.
Oh and you can write off unrealised losses against realised gains.
Ya, definitely. Although Biden's tax proposals may change that. If ProPublica wanted to put out a piece arguing for a higher capital gains rate, i'd be totally fine with that, but that isn't what they did.
> Oh and you can write off unrealised losses against realised gains
I don't think that's true, at least not in the US. Do you have a citation for that?
This definitely sits in “evasion” rather than “avoidance”, but it’s such a common practice that accountants recommend it like it’s just another normal service they offer.
Is that how it works though, 'even' in the US (where in my understanding there are a lot more options for deductions than in the European tax systems I have experience with)? Can you just deduct any expense that you can somehow however far fetched are connected to your investments? Usually once you start looking into the details, it turns out that it's not so outlandish as people (in the camp of the Pro Repulica piece, i.e. the 'tax others more' crowd) try to make it seem.
Out of curiosity, what would a wealth adjusted tax rate be for a dual income family that owns a house?
Could you expand on that?
That's your assertion, not a fact. It's a bit circular to use your assertion to support the idea that this is a quality article.
Example:
"takes a disproportionate amount of effort to refute" -> This is a pretty decent definition of toxicity -> Silencing it is really the only effective way to deal with it.
Edit: I'm not asserting that this particular case is in fact toxic. Anyway, it's subjective.
In the abstract, something is toxic if it disrupts or makes impossible desired processes even in very small amounts. Trolling is obvious, conspiracy theories are closer. Some things inherently generate more heat than light, suck oxygen out of productive conversation. You don't have to be a radical leftist (I'm really not at all), you can just watch it happen here or any other forum.
The ProPublica article calls out Warren Buffett for tax avoidance, even though he simply had less income. I question the integrity of the writers who want to slander Buffett, who has been extremely outspoken about increasing the taxes rich people pay. There exists no tax on unrealized gains, and Buffett did not realize gains, so why would they try to make an example out of him by falsely accusing him of hypocrisy?
How do you claim someone is avoiding a tax that does not even exist?
While they might have a point about needing to tax unrealized gains, they certainly went about it in an inappropriate manner, more suited for a tabloid rather than a respectable outlet for journalism.
https://www.propublica.org/article/the-secret-irs-files-trov...
And here's the NY Times coverage of it:
https://www.nytimes.com/2021/06/08/us/politics/income-taxes-...
The whole thing is yet another Internet rant.
Otherwise please use the original title, unless it is misleading or linkbait; don't editorialize.
This is a significant drawback in HN's system and we're intending to fix it.
I'm the one who originally used 'trolling' above. The definition of 'trolling' is an interesting question: It's a new meaning for that word (relative to most meanings for most words), it's a loaded word, and an important one. Maybe I should have used a more precise word.
Whether it's 'trolling' or 'incendiary' or 'inflammatory' or 'link bait' or etc. - even if unintentionally - the result is the same. That's out of bounds for HN titles. If you want a sense of HN's approach, see these comments by moderator dang:
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
Stepping-up the basis amounts to exactly that, and is unfortunately not mentioned in the article. Too bad the author doesn't have friends in finance to challenge his thinking.
(Qualify your pronouns and referants, peeps.)
Let's say that a billionaire sells $1 billon of appreciated stock a year before their death, and pays the full capital gains tax on it. They die, and their heirs inherit the $1 billion of cash. Would you argue that it would be unfair for these heirs to have to pay an additional inheritance tax on this because this would be "double taxation"?
Presumably not, or if you did, presumably it would be because you believe that inheritance tax is inherently bad, and not because the tax was already payed. Alternatively, consider the same scenario where the was no capital gains, and instead the stock was sold at the same value it was purchased at.
This isn't to mean your conclusion is necessarily wrong, but I think you should look closer at your argument to see if it's as strong as it should be.
Though I'll note that the scenario you pose never really happens. A billionaire isn't going to cash out a billion dollars of stock just to have cash to sit on. They're either doing it to spend in on consumption (nothing to inherit anyway) or to buy a different asset that would itself have capital gains assigned.
https://savingjournalism.substack.com/p/what-this-newsletter...
Also, why should I or do you trust them over ProPublica? These ranting-style articles are written as if the author possesses the Truth, but analogous to the XKCD about technical standards, all we have is one more point of view.
To me, at this point in Internet history, the ranting, ridiculing style is a strong negative signal. Also, criticism of Silicon Valley billionaires seems to draw responses that try to discredit the news media. (I always wonder: Where then do they get news?)
[Edited slightly for politeness.]
It's a self-funded project. As for trust, I pay bounties for corrections for a reason. And I keep a public list of all past bounties paid. Readers can review and decide how much to trust accordingly.
Sorry to grill you when we just met, but what is your background, if you are willing to share publicly (I understand if not)? I just like to know who I am reading, especially on the Internets!
You seem to have emotionally reacted to criticism of your own work (which is par for journalism) by declaring that journalism doesn’t get it and needs to be “saved” (from who?). I’m concerned by your personification of a bad experience and the malevolence you’re ascribing to an entire profession as a result, while on the way to sticking your fingers in the same pie. You are coming across as an unreliable narrator in several ways. Even beyond that, you’re going up against ProPublica, not Daily Mail, and it’s very clear from your piece (which I read end to end) that you dove into it in bad faith looking for your intended outcome.
It is this comment alone that convinces me you will fail, because you don’t understand why you weren’t engaged and why a lengthy rebuttal to incoming was a waste of your time. You seem to have a chip on your shoulder based on writing about Elon and the Thai thing and not having it go as you’d like which, in the grand scheme of things, matters precisely zero. That you offered money to those journalists as part of that process simply reassures me that you were blocked in their email because that is a fucking stupid thing to do, and I wish that were more apparent to you. You did dumb things by your own account. That almost certainly wasn’t personal — it’s just that money and its involvement in journalism is extremely sensitive for very, very obvious reasons.
Source: Journalist.
fyi: The commenter says below, in a dead comment, "The best part is that I made up that I’m a journalist just to screw with you .... I’m a product manager at a FAANG, dude, and I screw around on this forum for fun."
> building a news org with better incentives and more accountability
Interesting. How do you envision changing incentives and accountability?
> I came to realize that they have the privilege of just never having to engage with criticism no matter how rendered.
I think the journalists and news publications receive and address enormous amounts of criticism. I see it all the time. Realistically, they can't address all of it, and yes it's very annoying to be ignored. (But if they wrote about me in particular, got it wrong, and ignored my response, that would be especially infuriating.)
> I wrote about Elon Musk and the Thai cave rescue in 2018
I notice the OP article effectively, if not explicitly, sides with Musk (and others) against ProPublica. Is there a connection?
I'm writing a piece about that on Thursday actually. TLDR is a mix of paying for corrections (really just "more correct information flow") and maintaining a super readable changelog. Also a different reader premise. We'll try to present stories almost in the form of Wikipedia, if each page were managed by a really engaging writer with a good grasp of the subject, who was being fed high-quality feedback.
> Realistically, they can't address all of it, and yes it's very annoying to be ignored.
I've written about this pretty extensively, and IMO while I'm sympathetic about all the Twitter hate that some of them get, journalism let go of its public editors for a reason. And it's next to impossible to get a staff editor to seriously review anything no matter how you approach. Their whole culture is "ship and move on" at a deep level. And that kinda-maybe made sense in the paper distro days. But it doesn't really serve the reader now compared to what a truly native digital solution could look like.
> I notice the OP article effectively, if not explicitly, sides with Musk (and others) against ProPublica.
I side with him sometimes, and sometimes I don't. And sometimes where I do I still have a lot to criticize. I ultimately just try to call balls and strikes (with the correction policy keeping me honest). But as a rule, I think tech journalism is pretty poisoned against rich entrepreneurs now, and that the major corrective work in the info market is explaining how they're getting misrepresented, and why.
Bug bounties for news - great idea. Many eyes make bugs shallow, and news is more 'open source' than code in one respect: it's much more easily and broadly comprehensible.
> We'll try to present stories almost in the form of Wikipedia, if each page were managed by a really engaging writer with a good grasp of the subject, who was being fed high-quality feedback.
Yes! I've thought about that: News sites are still newspapers printed on the web: Articles are generally static. Beyond a few corrections and additions, they don't take advantage of the new medium.
So a Wikipedia-style, continuously updated article would be great. Using the current static articles, if I want to learn about an issue I have to track down and read lots of articles which contain much redundant content. Wikipedia is not reliable. Why isn't there an article from a reliable source with the current state of things?
The one drawback is that readers need a way to learn what changed since their last visit - whether that was an hour ago, yesterday, or a month ago. I'm not re-reading the whole thing and trying to divine the differences. Diffs are too hard to read. A micro-blog of updates is my first approximation solution: Edit it to reconcile updates-of-updates and to prioritize them (a minor correction should be listed behind major new information). 'Here's what happened since you left: ...'
> Their whole culture is "ship and move on" at a deep level. And that kinda-maybe made sense in the paper distro days. But it doesn't really serve the reader now compared to what a truly native digital solution could look like.
I agree, and that's another element I would like to see added: A feedback loop with readers, like any blog would have. The NY Times has the potential to be the forum of real experts and leaders. Imagine an international relations article with comments from former ambassadors, people with direct experience of the immediate situation, even prominent leaders, along with high-quality public comments (higher than anything else on the web - serious comments only); add to that responses from the authors and editor, and appropriate updates to the story. That would be as valuable as the article itself, and the NYT would become the leading forum, arguably the only serious one, on the Internet.
The NYT (and other publications) do themselves a great disservice by allowing comments that are beneath the quality of the article, diluting the content on their sites. If they provided a high-quality, serious discussion forum, experts and leaders may think it's worth their time to participate - and may feel compelled or be left out of the debate.
> public editors
I paid attention to the NY Times' public editors. IME and IIRC, they weren't practicing journalism, they were more like unempowered customer service: They would report information that fell into their laps, not seek and investigate it, and they accepted responses from NY Times' employees in the same way - 'the editor didn't respond', and that was it. I don't miss them.
Maybe it's just too hard to do it politically within the organization. The news organizations do have plenty of outside critics; it's arguably redundant to have an internal one.
> rich entrepreneurs
Hmmm ... hardly victims. Arguably the most powerful people in the world right now. The trend of protecting the rights of the powerful is a bit bizarre to me. The people who need help aren't on Facebook's board.
Heh. Cui bono, am I right?
Like obviously the super rich legally avoid paying taxes using intricate loopholes, but that doesn't mean people shouldn't bring up the fact that the entire system is screwed up. The article's primary criticism of ProPublica is premised around the fact that these loopholes exist, and that they're legal....but doesn't give consideration to how absurd they are. (not talking about taxing unrealized gains, that's just idiotic) I don't have an issue with how they framed this.
If the author is going to call out bad journalism, he should focus on the media conglomerates being taken over by de-facto communists...pushing leftist propaganda from the top down (CNN, NBC, ABC, NYT, etc). And the sad thing is, people on the left can't see it because what the MSM selectively reports plays into their worldview. What a fucking travesty.
Not paying taxes on unrealized gains is an intricate loophole? You can take advantage of it right now by buying stocks and... holding on to them.
>bring up the fact that the entire system is screwed up
We think the system is screwed up, so let's use any sort of misrepresentation we can to help our narrative. After all, the ends justifies the means right?
I have a basic theory that 'journalists' don't generally understand math or finance. For one, if they did, they wouldn't choose to become journalists. As a result, they surround themselves with a bubble of low math and finance skills and are prone to misunderstand and conflate basic concepts like assets and income.
The richest Americans aren't paying their fair share of taxes. That's the story. That's the central truth we should be talking about, but instead we want to spend time complaining about a bunch of periphery minutiae.
The privacy angle is also distraction. Public figures should enjoy less privacy than the rest of us. That's not just my opinion, it's basically a given in societies that care about holding their powerful to account.
Was the Pro Publica piece a hit piece? Maybe, but I don't care, because once again the central premise is indisputable. Rich Americans don't pay their fair share of taxes. We should be 'hitting' them.