Comment by binlog

People absolutely make that argument about property taxes. That's where deferrals or abatements for e.g. elderly or low-income homeowners, or caps on property tax increases come from. Someone may own a home that property taxes price them out of, forcing them to leave their community because they can't actually conjure money from a higher priced home.

I think a lot of tax authorities also don't really aggressively reassess that regularly without a sale, so it also kind of ends up baked in that if you didn't pay that much for the property, it's only theoretically worth that much.

The only reason it works with real estate is because they can put a lien on the house and block the sale of it. They don't have any useful mechanism to stop the sale of a share of stock, but since the government is involved in the transfer (due to the registering of the new house deed) of a house, they can stop that one.

I feel like there's think tanks thinking up talking points that sound reasonable to convince internet communities against taxing the wealthy.

If I sell my house, there's a reasonable expected range of money I can expect for it.

If a majority stock holder in a company sells all of their stock, the price first the first share sold is likely going to be completely different (and substantially less!) than the last share sold.

Property taxes are use taxes, not wealth taxes. Apples and oranges.

> It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes.

I don't like property taxes either, and at minimum would rather they were called something else, and preferably replaced with per-service charges where possible.

But either way they exist to pay for things, and not to just degrade the value of your property simply because you worked to own it.

It's like saying cash isn't real until you spend it. Which is true in one sense but not what they mean.

The obvious correct solution is to tax securities-backed loans the same as selling the securities.

Maybe we should tax your mortgage, too!

>security backed loans

Which currently require interest payments of ~6-8% APR. Meaning that you need to be able to invest that money that is being borrowed back into the economy to hopefully get a return more than that. And if your investment fails you will have to realize a different investment. The interest being paid doesn't get hoarded either and is used to make other investments, pay employees, build products, etc.

The idea that a bunch of people are just hoarding their money and not reinvesting it back into the system is flawed. Taxes actually have the opposite effect to contributing to the system. Taxes are like if someone was to come and start hoarding money under their mattress for himself and not contribute back to society.

Just wait until you find out what $20b in necessarily liquidations does to Meta's stock price and your S&P500 ETF.

> They play a clever little game where they borrow against those shares to live on

Yes, everyone in the US can play the same clever little game by taking out a loan against a property and deducting the interest against their income.

> and the estate value is reduced so the heirs won’t pay as much (or any) estate tax

This is just madness. The estate value is reduced so their heirs won't get as much. You still pay inheritance tax on what you get. Anyone can avoid inheritance tax by just not passing anything on.

Article I, Section 9, Clause 4 of the U.S. Constitution would like a word (assuming you’re contemplating a federal wealth tax; states could do it, at the risk expressed in the headline of the article we’re discussing).

Your 401k/Roth IRA (subtracting early withdrawal penalty) amortized over the loan period literally do count when considering qualifying income for a conventional mortgage. This is not a taxable event. You do not actually have to make distributions. It's just standard procedure that it counts when determining whether you can pay the loan.

> Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth.

Quite the opposite: Socialist politicans and their media lapdogs have dishonestly convinced you that wealthy people are escaping taxes en-masse by taking out loans and that this can only be stopped by eye watering wealth taxes. They frequently use a motte and bailey confusing unrealized gains (which certainly exist in huge amounts but are also significantly fiction) with tax escape via loans collateralized by securities.

But it's not true: were there meaningful tax escape that way it could be addressed by establishing rules with conditions where taking a loan against securities can be treated as realizing gains (and adjusting cost basis accordingly). Doing so would be minimally disruptive and distorting and have relatively little legal complication (at least compared to wealth taxes!).

But the reality is that the claimed tax escape isn't happening (at least not at any significant scale) particularly in the current interest rate environment, so a reasonable policy change to address it would be a no-op.

... and to grow and maintain their political standing they specifically need to push a NON-SOLUTION because they can't campaign on something that was simply done and solved, and to retain your (highly monetizable) attention they need to rile you up against an Enemy, and certainly never address the state's addiction to wasteful spending and buying votes with tax dollars as one half of the revenue vs expenses equation.

Incredibly terrible example because you are allowed to borrow money against a 401k, up to $50000 with no penalties as long as you pay yourself back at whatever schedule you have determined for yourself

So why isn't the suggestion to tax the loan instead of the asset (that is 10x more volatile than say property)?

Don't overlook the fact that the borrower pays interest on the loan.

> Especially with how the market has been lately, the gains erase any burden of the loan.

And when the market goes down, you get a margin call and get wiped out.

>into essentially unlimited untaxed cashflow

Loans must be paid back. Loans are cash flow neutral (cash flow negative with interest) over the maturity. That's why loans are not counted as income.

What evidence do you have that people borrow against assets as some tax avoidance strategy? What are the details of this brilliant, often repeated plan? In particular, where do you get interest rates that are low enough to make it worth it to avoid capital gains even with an asset that's grown 100x over its cost basis (and are you accounting for reinvestment of income like dividends that can't indefinitely defer taxes, creating regular tax lots with higher basis that you could sell first)? e.g. are they getting better interest than SOFR somewhere?

> Well then why are people able to borrow against it and then also deduct taxes on the interest on that borrowed amount?

I doubt they can borrow against the full amount of it, because that changes. They'll be borrowing against a much smaller value, so the lender has a safety margin. Same as if you have a mortgage you pay less interest the less you borrow vs the value of your house, except I imagine it will be far more conservative.

> Also I pay property taxes. Somehow the worth of the property goes up every year and gets gets taxed accordingly. Then why can’t wealth get the same treatment?

Well, three things.

Firstly, as an aside, it's incredible that you would want this. That is a bad system. You should get taxed according to the services you consume, along with a flat rate for common services, rather than punished with taxes for daring to spend money on improving your house.

Secondly, "wealth" is far less tangible than property prices. Property prices are very well understood. A share price can fluctuate wildly, and saying "well your net worth for today is the number of shares you have times the last share sale price" is just a terrible measure.

Thirdly, what will those shares be worth to sell when they are taxed? Investing is a gamble. Housing is different: we need housing to live, and we want a nice house. No one wants shares. They want a return, and for it they'll stump up a giant amount of money, that will fund many jobs for years, and generate lots of taxes, and who will want to do that when their share will be eroded year on year? There's no benefit to shares except the return. Decreasing the return will have a direct impact on innovation and jobs.

> Yeah, it's all illiquid illusory non-wealth when they have to pay taxes, but when they want to buy a newspaper or social network they suddenly have 40 billion in hand.

Yes, businesses are allowed to buy and sell things without being taxed on the sales. If you want to change that rule, you are going to change a giant number of things purely to get at the billionaires you've spent the last few years being trained to hate.

> Forced liquidation hurts more than the sticker price, but with billionaire taxes, that's a feature, not a bug. They make the most sense as a check on concentrated power rather than a revenue driver.

It's missing the planetwide jungle for the trees if you think giving politicians the ability to reach into ownership percentages of businesses and deciding how much they want to charge you for owning a business is a check on power.

Except that would trigger a massive reduction in investment, which would be very damaging to the economy.

Depends -- can I use the 10B as collateral?

> Good way to find out it this is the case: take it away. Not real, right? Why would they mind?

Take what away? I'm saying if I own 51% of Tesla, you cannot tell what amount of money that amounts to until I sell it.

There is no way to take anything like that. Net worth is quite similar with me saying you are worth 1 billion dollars, but you have zero money in the bank. What do you take, super-rich billionaire person?

Because that would involve seizing assets? The parent meant it's not "real" in the simple-minded sense that people think it is: the average person imagines Elon Musk and other billionaires have a checking account that keeps increasing by tens of thousands of dollars per second because that's the only frame of reference they have. The reality is the wealth is mostly tied up in assets that ain't exactly liquid. Yes yes, they apparently have access to this supposed infinite money glitch where banks will endlessly loan them money without requiring interest payments (which would require liquidating assets for payment and therefore triggering a taxable event, the very thing people think never happens for billionaires). But the fact of the matter is the wealth isn't money in a bank, and therefore not "real" in the sense the parent was referring to. But it is at the same time something they would miss if it was just "taken away", much the same way you'd miss the numbers in your 401k if voters decided you had a few too many millions saved up for retirement.

You will find that the centi-billionaires will find a different way to turn their illiquid wealth into personal power and value in a way that avoids that tax.

Well one thing is, they'd sell shares to pay the taxes. Then dilute their own ownership of the thing (Tesla, Amazon) and it would serve as another form of wealth distribution.

> If I use cash to buy 1B dollars in Microsoft shares today, am I not worth a Billion dollars...?

Who says that the price you paid per share was the actual market value of the shares? For example, let's say that you inherited 10 million options to purchase Microsoft stock at $1/share, and in so exercising the options (by writing a check for, say, $10 million to Microsoft), you then end up with 10 million shares, which on paper, with the current stock price close to $500/share, would be worth close to $5 billion. But could you actually get that much money from selling 10 million shares? Definitely not overnight - so many shares getting dumped on the market at once would materially affect the stock price. The $5 billion number is a hypothetical that depends on other people backing up the hypothetical numbers with their own money (i.e. buying at the hypothetical price) - it is not the same as "I have $5 billion in a bank account and could use that to go buy a yacht and buy political ads etc. with it"

even still, the government can propose a value, and if the owner thinks its worth less than that, the government can immediately confiscate the asset and pay that price as compensation.

if the owner thinks its worth more than what the government proposes, they can pay tax on the higher amount.

its still not that hard

> If I use cash to buy 1B dollars in Microsoft shares today, am I not worth a Billion dollars...?

No. It will be higher. Say you spend your money on shares advertised at different prices, buying the cheapest first, like this:

  800000 shares at $500        $400,000,000
  300000 shares at $750        $225,000,000
  200000 shares at $1000       $200,000,000
  100000 shares at $1250       $125,000,000
  33333 shares at $1500        $ 50,000,000

  Total number of shares:      1433333

  Net worth (1433333 * $1500): $2,149,999,500

Your "net worth" is over double the money you just spent.

That's why net worth is stupid.

If you have $2bn worth of the same listed stock and go sell half of those, now you have a net worth of $1400m because your gargantuan order drained the order depth, tanked the stock value and triggered a panicked selloff at the stock market which further drove down that stock's price.

You can't take net worth away because it's just an estimate of what someone is worth. It may eventually be possible to turned into dollars and cents without losing too much in the process, but almost universally it can't immediately be exchanged in such a fashion.

Even more so when we're talking shares in a company that is not yet public, e.g. a founder's shares. At that point the valuation is complete speculation, based on what the company may be worth in some hypothetical future IPO. There's no actual price discovery since there's no public trading of such shares.

Net worth is usually not fully realizable unless it is in the form of cash. The larger the net worth, the smaller the realizable fraction usually is. In some cases, including some highly visible billionaires, the realizable fraction is likely tiny.

I agree that that's the major problem; the poverty is inexcusable. But that's not caused by the $300B (or whatever) of equity. It's caused because the homeowners of the Bay Area decided that once they got a house, nobody else should, and that they should get to exclude others from the opportunities they had.

This same thing was observed during the Gold Rush in California in the 1800s; extreme wealth also resulted in extreme poverty. And there's a great way to solve this: tax the land and redistribute it equally to everyone. Land can't be moved, it's something that belongs to all of us, and you can't make more of it.

This is almost completely traceable to Californians' failure to allow sufficiently dense housing to be built on their doorsteps. The only thing Larry did was bring prosperity to the region.

(I'm in agreement with the thesis of the article)

More taxes should solve that.

Read somewhere that SF spends roughly 50k$-80k$ per homeless person per year.

Taxing more doesn't solve a massively inefficient system at it's core. Just like US education, we spend more than any country on earth, why is it still bad?

Answering that question with a "if only we had more money" is a really poor argument. The CA tax fundamentals are bad, pooring more cash onto the fire will not fix that.

This has basically nothing to do with with market cap of Google or Larry Page's percentage ownership of it; and the state government taxing it more will not make this situation any better.

None of that is Google's fault.

Landlords could have collectively agreed to keep rents at $1K/month and not lobby against building more housing complexes, but they decided to be greedy instead.

that has ZERO to do with the tax system... You can't be serious? Have you looked at the data at all? have you seen how much money is spent "combatting" homelessness in San Francisco?

just not his problem. not a single motherfucker on this website lives their life as if wealth disparities are a genuine problem anyways. you are motivated by resentment

Then you'd have two (or three, or four) companies that Larry owns 5% each of that are collectively worth $4T.

Why does it matter how much the shares of his company are worth? They just represent ownership of a company. It's not like their existence is somehow holding back wealth from the market or from other people. And if he wants to sell the shares to make some cash, then he's going to have to pay taxes on that, which is good for everyone else. And he wouldn't do that unless he planned to spend or invest the cash receives, which is also good for everyone else. I fail to see the harm.

I think one could argue that taxation should be higher, and harder to dodge, and I would agree with that.

But once you start saying that some people shouldn't have more than others to some degree, that's a very slippery slope. Where do you draw the line? Why is it okay for middle class Americans to buy nicer clothes and move into bigger apartments when people are out there starving? If it's not okay for someone to have the net worth of Qatar, why would it be okay for someone to live in an apartment that's worth more than a poor township in South Africa?

At some point we have to accept that inequality exists, and that although almost everyone could do something to minimize it, there's an ethical and practical line that needs to also respect individuality to a large degree, if we want people to feel incentivized to do things, to feel ownership, to maintain autonomy. And where to draw that line is tough to say exactly, but it probably shouldn't be a line, it should probably be smooth, or at least smooth-ish. So I feel like we're just coming back around to progressive taxation. Which we already have.

Sure, yeah, but which of the two numbers I was multiplying together is, in your mind, too big, and should be made smaller, and by what mechanism?

What if they provided value of 10x of the GDP of Qatar?

Why?

When your job pays you a dollar, you get an actual dollar. Your job never claws that money back. Unrealized capital gains are not money, and they routinely get clawed back. Unrealized capital gains just means someone in New York traded GOOG/GOOGL at a higher price than they did yesterday.

And, sure, super-rich people can in theory use the appreciated stock as collateral for loans and not pay taxes, but in practice Larry and most other centi-billionaires actually sell loads of stock and pay a lot in capital gains taxes because having your status as super rich dude who owns a huge yacht be totally dependent on Google's stock price is a dumb risk to take on, and it's worth paying some taxes to eliminate that risk.

He has single digit percentage of the company but double digits percentage of voting stock. My understanding is that he and Brin are holding together barely above 50% of the latter and understandably do not want to lose the control.

Larry has sold tons of Alphabet stock and paid lots of capital gains taxes. This is easily available public information. The whole buy-borrow-die thing is sort of a stupid myth. Actual centibillionaires diversify because the risk of having a huge concentrated position is much greater than the liability of having to pay some capital gains taxes.

Well, why does something have to be done about this, exactly? Who is getting hurt here? It's not like borrowing is increasing his net worth. Just like anyone else, he has to pay back what he borrows, he immediately owes an equal debt. And that requires actual income, which gets taxed.

There's also the fact that alphabet should have been broken up into about a dozen companies over a decade ago

Larry would still be rich as heck, but probably... less rich..

Google doesn't have much power. It can't arrest you or pass laws or vote. It just happens to produce a lot of profits for its shareholders (who are, overwhelmingly, average people with 401Ks) and a lot of profits means a big market cap.

If we need revenue to fund useful government programs, great, let's tax Larry. But I don't understand what problem is solved by expropriation qua expropriation.

Last time I checked building companies that offer goods and services was considered good for society.

I actually lived in a society where this was illegal and we were all starving and freezing.

From what I can find, the top wealth tax rate in Norway is about 1.1%. That seems pretty dumb to leave your home country to avoid paying 1.1% tax per year. For entrepreneurs that now have enormous equity (100s of millions of Euros), my sympathy is low. They can easy sell a tiny fraction of their equity to investors to pay the wealth tax.

> And care about the rule of law. You cannot pass retroactive laws, you cannot pass laws that target individual people. If you pass a general law...

A wealth tax is not a retroactive law, nor something that targets an individual person. It's a "general law" in your parlance. Think about it.

> If you pass a general law (which could very well have reasonable objections), people have to have a chance to leave.

I don't think so. By what legal authority is that required?

> "I'm passing this law that is effective the exact millisecond I sign it, tough shit if you don't like it" is tyranny and despotism. But based on your comment I think you know that.

No, it's not, and don't be ridiculous. When they passed laws against date-rape, would you have judged it "tyranny and despotism" unless the law was delayed to give the date-rapers time to finish up the date-rapes they'd planned?

There's no justice in giving the wealthy the maximum opportunity to pick and choose the laws that apply to them.

> people have to have a chance to leave.

They did give people that chance.. That's kind of what the entire article is about. They literally did leave.

ah yes, all the tech billionaires of this era, had they been given the heads up that there success would have led to a level of concentration of wealth and power previously unknown to humanity, and that the populace would likely call for some changes to tax law to address the largely unforeseeable structural economic effects of this level of change they brought, would certainly have opted out, leaving the US, and moving to another less tyrannical part of the world, where, by the unique magnitude of their genius, they would have brought all their great works to the glory of other nations and not to America with its overly entitled peasants and social media sharecroppers; clearly the rule of law in Europe and China would have allowed them to fully manifest their unparalleled vision of technological greatness without any concern of a rug-pull by authorities challenging their well-deserved hegemony

The richest people in the world sure are lucky to have good people like you out here fighting to protect their rights