zeke5123a
1yr ago
Citing to Nixon ignores the last 45 years of tax policy which has been broadening the base while lowering the rates. So yes, you can have higher capital gains rate without expropriation if while you own a company you can extract a bunch of value out of it tax free. But that is different compared to now.
In the context of a broad base, the relevant example is Clinton. And that rate was much lower.
And the details matter a lot less about the proposal put forth here. It is a campaign document; not legislation. The key point is she is supporting a 25% tax on unrealized gains. The rest is details that will change if this bill goes forward. But it is noise that tries to let supporters weasel out of this difficult discussions.
zeke5123a
1yr ago
Well I think it is more than rhetoric. I think it is an insight to their psyche. They think men of commerce are greedy me first people who therefore need to be crushed by the state to get them to do the right thing. But you can’t do well in commerce unless you care a helluva about your customers. Crushing state regulations make it harder to serve your client.
zeke5123a
1yr ago
Yet not the argument made by your interlocutor. Isn’t charity something that is in the rules here?
zeke5123a
1yr ago
You just messed up again.
I said you got your facts wrong. Then you changed that to “don’t accuse me of playing fast and loose.” So I responded now after two mistakes that you are playing fast and loose.
But now you are claiming you only got one thing wrong. Well you got two. And you made a third mistake in your post. You said you got a fact wrong that actually weakened your point. You were saying 44% tax isn't confiscatory because the tax rate under Clinton wasn’t confiscatory and was only 9 points off.
But in reality it was between 16 and 24 points off. That factual mistake undermines your whole argument in a very material way. The core of your argument goes poof. But now you are claiming your mistaken fact actually weakened your argument?
Maybe it isn’t malicious but your posts and arguments on this topic are very sloppy and unaware of basic facts (eg that California freezes property taxes or the tax rate under Clinton).
zeke5123a
1yr ago
Bro — you made a whole post saying “Clinton was a moderate and had tax rates at XYZ.” Your rates were massively off and despite that probably won’t change your conclusion. So yes you are playing fast and loose with the facts.
zeke5123a
1yr ago
You could solve this with indexing basis to CPI. But right now we have a relatively simple system. Low rate of tax on gain (in part to reflect not all book gain is economic gain). It isn’t perfect but it functions and works. Trying to tax gains at higher rates and then indexing basis is a new system that create problems not the least of which is the complexity.
zeke5123a
1yr ago
I’m not convinced by the Georgist answer. But in any event, taxes don’t necessarily move assets to highest and best use but can change the nature of an asset invested in.
zeke5123a
1yr ago
Generally when a campaign puts forward a proposed policy it is called a proposal.
zeke5123a
1yr ago
Oh the simpler answer could be the right one. But I just found it interesting that the policy proposed gives power to the Dems allies.
zeke5123a
1yr ago
No. The capital gains rates for individuals (what we are talking about) under Bubba ranged between 20%-28%. Much lower than 44%.
zeke5123a
1yr ago
It didn’t apply to revenue but income. Revenue would not be an income tax and therefore would be required to be apportioned amongst the states.
zeke5123a
1yr ago
Yeah for small amounts. If it was a 1% tax AND stayed there, then a bit less of an issue. The problem is a 25% rate quickly mucks up the economics of margin loans.
zeke5123a
1yr ago
Yeah. Basically this tax both destroys wealth and moves wealth form individuals to institutions (eg super tax exempts such as calpers, BlackRock). This changes control over the investment.
zeke5123a
1yr ago
The valuation questions become legion. One method people suggested to solve these issues is simply that any value the taxpayer asserts is a value the taxpayer is obligated to accept if a third party asks to buy. Basically each year you set the option price for your company. Maybe the option only stays open for say a month.
But that’s ridiculous per se since there could obviously be liquidity reasons that forces a founder to have a lowish value in their non public shares. But now due to liquidity they give a free option to competitors to buy their interest for 80 cents on the dollars.
zeke5123a
1yr ago
The only loophole is there is a step up upon death. Get rid of that and someone pays the tax on an exit.
zeke5123a
1yr ago
See my comment to 2rafa. I think margin loans of this size are a different game compared to steady state.
zeke5123a
1yr ago
That depends in part on how capital loss rules would work. It’s one thing to take a margins loan of 50m on a 1b to fund a fun lifestyle. It is another thing to take a 250m margin loan just to pay taxes. What if the stock drops to 500m? If you get a refund of 12.5m, then you can pay down debt to retain same debt to equity. But I doubt there would be a refund.
So now you introduced a lot more risk to the founder in holding onto shares. And that’s before you even account for the founder taking out some cash to have fun.
zeke5123a
1yr ago
He would be forced to sell on the open market. And when you have a much smaller stake in a company you are more likely to go on to different pursuits. The company then is run by PMC.
zeke5123a
1yr ago
You don’t start out with 100%. You start out with much less because you need funding.
zeke5123a
1yr ago
Theory — the new unrealized capital gain tax is designed (or will have the effect of) forcing people like Elon Musk to surrender control of corporations resulting in PMC control instead of founder control.
As some detail, there is a proposed 25% tax on unrealized gains for the super wealthy coupled with a 44% tax on realized gains. So let’s say you own 10b of a 100b company. If you do nothing you will owe 2.5b of tax. But if you sell 2.5b, you’d actually owe more! So you end up having to sell a pretty big chunk of your stake. This means that before companies get really large founders have to sell a big chunk of their equity preventing super wealth. It also changes incentive structures for founders making them more likely to cash out.
Once they cash out, PMC will take control. PMC coexists with modern democratic policy. Therefore, the democrat tax proposals help ensure corporations are run by allies.
zeke5123a
1yr ago
Do we really truly observe this behavior in the wild though? The paradox seems very ipse dixit (I too can set up a weird game and have undergrads take it and result in odd outcomes).
zeke5123a
1yr ago
It also isn’t anything new! It is ignoring history—not just someone upset that someone is encroaching on their turf.
As opposed to the state actors who are selfless paragons of virtue and love for mankind?
By and large, you get ahead by serving your client. If you don’t, you don’t get ahead in business.
More options
Context Copy link