Comment by greggman | Hacker News Reader

Comment by greggman | Hacker News Reader

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Agreed. I've never seen this kind of reaction from strangers or friends.

I also don't understand the tax reference. Yes, there are taxes on company income. There are not taxes on money sitting in the bank from the previous year. This is no different than a job.

If I earn $50k this year the gov takes say $20k and I have $30k left over. If I do absolutely nothing the next year the government doesn't take money from that $30k.

Similarly if I run a company and have gross income of $100k and expenses of $50k leaving $50k the in the bank the gov will take a percentage. The next year the gov will only tax NEW INCOME.

At least that's my understanding. I'm not a tax expert nor a lawyer and I can only go from my experience in California. Other places might be different.

He was referring to the inflation rate. What he was saying was (as far as I understood it), if you safe e.g. $10k now, in e.g. 10years you could not buy as much with it as you could at the time you earned the money. Therefore, you "lose" money (or rather purchasing power) by not using it.

And that's why no one should be sitting on their money...invest it! Keep enough for emergencies (6-12 months of rent/food is the general mantra) in your bank account and put the rest in your IRA/401k and/or non-tax advantaged index funds.

I suspect it depends a lot on where you live. In Los Angeles no one blinks an eye at the no-salary-and-following-your-dream life. I highly suspect Silicon Valley is much the same.

Yeah, unfortunately most of the United States isn't Los Angeles or Silicon Valley.

The parent's reference to taxation has no basis in reality; your understanding of taxation is correct.

You are only taxed on income. If you have money in the bank, and you receive more money, that new money gets taxed. If you own a company, and it increases in value from $1M to $2M over a year (but you don't sell it), you are not taxed, because you haven't received any actual income.

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