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Comment by mikeash | Hacker News Reader

Is it really that awful to want wealthy people to pay at least as much in taxes as the middle class?

They pay way more total money, and most people are complaining about capital gains taxes but that's not really income is it? It's risked capital that has already been taxed at the corporate rates.

Salary isn't income either, it's risked labor that should be deductible as a business expense.

I have always gotten paid for every hour I've ever worked, but I've lost money on investments. In fact, one of the reasons for a wage is so that your risk is limited. In theory you could get paid purely in stock grants and bear the risk that entails.

Can you explain the bit about already having been taxed at the corporate rates? I've seen others mention that but I never quite got it. Say a person buys $1 million of AAPL at $50, then sells at $500, netting $9 million of capital gains. Where and when were the corporate taxes paid on that $9 million?

If you assume (as many do) there is a relationship between the stock price and the profits of the company, then corporate taxation serves to reduce profits, reducing the stock price. So, instead of rising to $500, it may have risen to $750. The forgone (and invisible) $5 million of appreciation was the loss due to corporate taxation.

(Obviously, the above is too simplistic to actually rely upon, but that's how corporate taxes reduce investor returns, effectively resulting in double taxation in many people's mind, including my own. I still believe that's part of the reason LTCG are and should be taxed at a lower rate than ordinary income.)

Stock prices are also influenced by supply & demand. The situation you describe works for just one company paying no corporation tax, but if every company suddenly has no corporation tax, every company's profits increase, so relative demand should stay the same, leaving prices the same.

Stocks can pay dividends which are a direct result of their profits, and so the corporate tax rate effects the amount of actual money that gets paid out. Stocks that don't pay dividends are an interesting case, that is the investors allow the company to reinvest their earnings for growth with the expectation of future dividends.

I can see how this can work, for a stable domestic company that's not reinvesting its profits, but don't both foreign earnings (which affect the stock price but are not taxed by the US) and profit reinvestment defeat that whole idea?

"The average tax rate, including payroll taxes, for the middle 20 percent of U.S. families will be 15.9 percent in 2015, according to an estimate by the Tax Policy Center, a nonpartisan research group in Washington."

Saverin's paying 15%. Sounds like the goal is met.

This is hilariously disingenuous. He's paying 15% on current value and renouncing his citizenship to avoid paying his taxes on its fair market value when the IPO hits.

I'm not by any stretch of the imagination against people making money, but you have an obligation to pay it forward to the society that enabled you to do it. Defending this sort of behavior smacks of the wealth-worshipper disease and there's not a lot worse than that.

In what way is he not paying back the society that enabled him? He's paying the designated rate, which will be hundreds of millions of dollars, on the present value of the what he's earned.

What would be satisfactory? That he paid based on the ipo price? What the stock is worth at the end of ipo day (likely inflated)? What it's worth a year from now? 5 years? 10 years? What would be fair?

What would at least be better would be to pay the designated rate when he sells, rather than paying the designated rate on a severely deflated valuation of the company, but only after being given the opportunity to sell his shares at a much higher price.

If I understand the situation correctly. He is basically going to be allowed to pay capital gains on $X after selling for something like $10X, making his rate more like 1.5%.

Why do you care? really?

Because taxing rich people at or below the rate of middle-class people is part of what allows wealth to become more and more concentrated as time goes by, which has bad consequences for the country in which I live.

Are you really that unaware of how taxes work? Have you never paid taxes before? He's not being taxed at a certain rate because he's rich. The taxes are for capital gains income. If you as a middle class person, or someone on welfare had 100k shares of FB stock, they'd be taxed at the same 15% as if a billionaire had them. If a billionaire went out and earned their income with a job paid at $10m cash a year... then guess what? They're going to pay the same 35-38% rate on that income that you would pay. Its not about the wealth, its about how its made. If you really are concerned about wealth, try to figure out how the system works first before criminalizing those who have

I'm fully aware of how this stuff works. The fact of the matter is that wealthy people are likely to obtain the vast majority of their income from capital gains, and middle class people are likely to obtain the vast majority of their income from labor. Thus, by taxing capital gains less, you wind up taxing the rich less. No, it's not written into law that way, but that's how it works out.

If you want to continue the discussion, do you think you could try to do without the personal attacks? They're very irritating and completely uncalled for here.

A rate is not the same thing as a value. 15% of $1B is a hell of a lot more than 15% of $50K.

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