1. Capital Gain taxes are delayed until you actually sell the stock.
2. Corporate taxes are being reduced because companies are moving profits to foreign jurisdictions.
3. Estate taxes & income taxes are being avoided by the creation of charitable foundations.
The 2nd and 3rd points are very valid, and I wish the author had spent more time on them. Unfortunately instead, the author spends much more time on point 1, conflating wealth with income, and avoiding the obvious argument that capital gains are eventually taxed - the rich are not escaping that.
...unless point 3 (foundation) occurs. And that should be the main story.
Squabbling over a wealth tax is not useful. The real issue is that the super rich create these personal "foundations" that act as never-taxed income holes, and then use them as personal and political tools.
In total, there's nothing very revealing about this article. It's everything we've already known. IMO, we need to curb foreign tax havens, and severely limit tax exemptions for charitable donations.
A more interesting question is how did ProPublica get a copy of Jeff Bezos' tax returns. Seems like a leak at the IRS?
> Capital Gain taxes are delayed until you actually sell the stock.
> Squabbling over a wealth tax is not useful.
I agree that a wealth tax is not the way to go. But there are other ways to skin this cat. The big takeaway I got from the article missing in your summary is that the wealthy take loans secured by unrealized gains in order to finance their lifestyle.
So what if we found a way to make a rule that using unrealized gains as collateral for a loan was, for tax purposes, the same as realizing the gains? (You might need to tweak the rule for fairness but the basic point remains.)
I think aggressively closing loopholes in the current code could go a long way (you mentioned a couple, like charitable donations and tax havens).
> A more interesting question is how did ProPublica get a copy of Jeff Bezos' tax returns. Seems like a leak at the IRS?
Yes the actual tax records are what make the story interesting, even if the data only confirms what “everyone knows” — at least there’s actual data and empirical analysis of the scope.
According to this accompanying explainer, the leak is anonymous:
> A second question certain to arise is the motives and identity of the source who has provided this data to ProPublica. We live in an age in which people with access to information can copy it with the click of a mouse and transmit it in a variety of ways to news organizations. Many years ago, ProPublica and other news organizations set up secure systems that allow whistleblowers to transmit information to us without revealing their identity.
> We do not know the identity of our source. We did not solicit the information they sent us. The source says they were motivated by our previous coverage of issues surrounding the IRS and tax enforcement, but we do not know for certain that is true. We have considered the possibility that information we have received could have come from a state actor hostile to American interests. In particular, a number of government agencies were compromised last year by what the U.S. has said were Russian hackers who exploited vulnerabilities in software sold by SolarWinds, a Texas-based information technology company. We do note, however, that the Treasury Department’s inspector general for tax administration wrote in December that, “At this time, there is no evidence that any taxpayer information was exposed” in the SolarWinds hack.
The problems faced at a certain level of wealth are so alien that it's not uncommon for their solutions to sound totally nonsensical - even actively harmful - to anybody outside of that demographic.
In light of this, I don't think we can so easily dismiss delayed taxation of capital gains as unimportant and irrelevant. Maybe it is, but I think we need more information to solidly come to that conclusion. Even one of the things you (rightly, I think) identify as a problem seems to have some serious synergy with such a delay. What happens if one of these charitable foundations ends up with stock? How long of a delay might that taxation have then? And is there any way for them to get some liquidity out of that stock without actually selling it? Can they take out loans with it as collateral, for example?
I'm not actively making claims here, but rather trying to show the situation is complex enough that we can't write off seemingly innocuous mechanics simply because they appear innocuous. It's complex, and weird, and needs deeper information and data to really understand.
> we need to ... severely limit tax exemptions for charitable donations
Why do we need to do this? Wouldn’t the natural incentive-based result of this be a huge reduction in charitable donations? It’s essentially an asset transfer from charitable causes to the government. I’m not sure I understand why that’s default good.
> voiding the obvious argument that capital gains are eventually taxed - the rich are not escaping that.
In one sense yes, but if they're living happily on a tiny fraction of their wealth then they can hang on to the rest until an opportune time to cash out. Governments come and go, taxes are imposed and abolished, loopholes open and close. If they can afford to play the long game then "eventually" may be very different to what would happen if they cashed out today.
> The real issue is that the super rich create these personal "foundations" that act as never-taxed income holes, and then use them as personal and political tools.
Opinions may differ, but one major point is that our tax system is a joke.
If we can put a movie about flying humans to the moon on Netflix, why can't we implement a tax system that isn't a Byzantine train wreck?
> avoiding the obvious argument that capital gains are eventually taxed - the rich are not escaping that.
I used to think this too until my wife inherited some stocks from her grandmother. Turns out the strike price is reset when you inherit and you dodge all of the capital gains tax.
This turned out to be a major win for us because her grandmother had acquired the stocks when she worked for AT&T back in the Ma Bell days and had not paid attention to them for 50 years. The paperwork was a complete mess and we had zero idea what the strike price would have been on stock she got as part of her normal income some time in the 50s and had been split up and recombined so many times in the mean time.
Capital gains are eventually taxed if you ever sell, but some individuals will just hold and take out loans against their enormously large amount of collateral to avoid incurring capital gains tax.
Great summary and sensible conclusion. The problem is much of the NYT and ProPublica writing are wrapped in sensationalism and start from an extreme left position on the subject.
I'm totally supportive of "taxing the uber wealthy"... But govt needs to take the long approach on this. Eventually, people die and inheritance kicks in. That's where these generational mega wealth transfers that don't do much good for society can be mitigated.
The document leak probably has a banal explanation. Some insider with access to the documents...
Luckily US cannot police other countries (not that it didn't try) to prevent people from taking advantage of more competitive tax regions outside of US.
US obsession with taxing people and businesses to the ground is a strong contributor for so much capital escaping US.
I feel like this article does 4 things:
1. Foment rage at the inequalities of the tax system (very easy to do) through their simple narrative
2. Flag to wealthy people who are paying their fair share to look at how to further improve their tax efficiency.
3. Create political damage (which seem to lean democratic) to the individuals who are doing everything legally?
It seems like ProPublica is trying to continue to lay the groundwork for a wealthtax campaign by fomenting further rage around the inequalities of US tax system.
Aside from that I have deep concerns about the source of this information and why it was used. Seems like IRS taxes have been weaponized and are readily available. Everyone should be deeply concerned about how ProPublica got this information.
Actually, most HNWI capital growth is not taxed, ever. It is a mistake to think any meaningful percentage of the wealth is sold or transferred, except on a stepped up basis to descendants, who likewise will hold it indefinitely. This does concentrate wealth.
That depends on what you mean. The US government (and a lot of US citizens) think that the tax on money Apple earns on selling iPhones in Europe belongs to the US, not France. But I feel if an iPhone is sold in a French building by a French person to another French person, with money transfered between two French bank accounts, all of that in French society, that that tax money belongs to the French and the US needs to keep its grubby paws off of it. No bullshit 'if you bring it back in the US we will forgo half of the tax on it and protect you internationally from the fallout'.
Yes... and it's important to remember that unrealized stock gains aren't really wealth either. It's not like Bezos can go out and buy 100 billion things from the McDonald's dollar menu. The money is locked up in the shares and he has so many that any attempt to sell more than a few could really depress the price of the stock.
If anything, he's sort of a curator of the wealth for everyone in the Amazon world. Yes, he's able to live very well, but the simple value of his unsold shares doesn't capture his true ability to buy things.
Note that assets in a foundations and donor advised funds are not reported in anyone’s net worth online calculators.
There is no way to predict somebody’s net worth and all the lists are wrong. There are only a few public things and they are all snapshots in time that assume it’s still true forever. An actor on a big movie? The list will say “we estimate they made 20 million, lets list them as a net worth of 20 million forever”, a non obfuscated real estate property record either in someones name or linked to them? Okay we are counting that. Aside from that they are just counting shares of public companies that large % holders are required to disclose. Outside of those slivers you’ll still never know if they were a savvy and passive investor in other public equities just like you are trying to be. You’ll never know if they made 1,000% more on tech stocks. You’ll never know if they assigned shares and cash to a charitable organization they control. You’ll definitely never know what subsequent trades the charitable organization made.
But even without pointing at charities: Hedge Funds, VC and Private Equity firms are not reported nor are any business interest. These things can pay out arbitrarily and also have large amounts of funds in any limited partners name.
This seems like a state-sponsored hack to reveal this information (Solarwinds?). Way too much information for one IRS employee to leak.
I would be incredibly surprised if anyone who had that kind of access to IRS returns (ie searchable database for everyone) would leak the 25 top earners. It does add up for the career risk to take that risk on especially as its not leaking anything illegal just shining a light on the injustices of the system.
“We do not know the identity of our source. We did not solicit the information they sent us. The source says they were motivated by our previous coverage of issues surrounding the IRS and tax enforcement, but we do not know for certain that is true. We have considered the possibility that information we have received could have come from a state actor hostile to American interests. In particular, a number of government agencies were compromised last year by what the U.S. has said were Russian hackers who exploited vulnerabilities in software sold by SolarWinds, a Texas-based information technology company. We do note, however, that the Treasury Department’s inspector general for tax administration wrote in December that, “At this time, there is no evidence that any taxpayer information was exposed” in the SolarWinds hack.“
The article also points out that "in the coming months" it'll reveal more. Although I agree this isn't that interesting, just judging by the income reported Buffett, Bezos, Musk, paid 19%, 23%, and 30% respectively (not counting obviously massive stakes in unrealized gains)... the outlier here is Bloomberg at 3%.
Due to the step-up-basis law, the government does not collect any capital gains not realized prior to death. So if you make 10 million in capital gains on a lucky early stage $5,000 investment, and die without any other assets, the (US federal) government will collect zero in taxes from you, your estate or your heirs.
Other countries have a time limit for how long you're allowed to sit on unrealized gains. In Ireland, for example, you have to pay capital gains on unrealized gains at the 7 year mark.
> 1. Capital Gain taxes are delayed until you actually sell the stock.
By far, the greatest increase in wealth (and inequality) is due to capital gains.
> [...] capital gains are eventually taxed
Normally, one might sell assets before a decline, and at that point gains (and therefore taxes) may be realised.
This is avoided by HODL stock in holding companies (such as Berkshire Hathaway) which can rotate assets without ever incurring capital gains (or indeed income).
What about the point about taking out loans to avoid paying income tax, since money from a loan isn't income. Isn't that one of the major points?
I don't get how do they pay the loan off though, without paying taxes on the money used to pay off the loan. How does that work? Any loan I take out, I'd have to get income and then use my income to pay off the loan.
> Squabbling over a wealth tax is not useful. The real issue is that the super rich create these personal "foundations" that act as never-taxed income holes, and then use them as personal and political tools.
Politicians have them as well. Their foundations rarely if not ever cater to their stated mission. Instead, politicians use them as legal bribery vehicles.
> Unfortunately instead, the author spends much more time on point 1, conflating wealth with income, and avoiding the obvious argument that capital gains are eventually taxed - the rich are not escaping that.
Isn't it the point that wealth creates more wealth? and the more you have the more you can make? thus not paying taxes leaves you with more to play with?
This article does not conflates income and wealth, stop saying that. This is NOT what it says.
Thats' the whole damn point, they say that the system "tax the income" is flawed because it allows to borrow as much as your wealth allows, and live your life exactly as if you had that in income, without ever paying the income tax.
I am quoting "Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell"
Unless you are a wage or salary earner, it is trivially easy to avoid having to pay taxes, at least in the USA. Same with the much lauded “inheritance tax” and even, to a lesser extent, sales taxes. It costs about 4000us a year to maintain the legal structures required to pay essentially no taxes, except sales taxes in some locations. In many cases, for lower levels of income, just having a small business can negate income tax burdens.
Taxation always has been, and continues to be, a burden for the servile class to bear. The rich or enterprising pay taxes only when they are ill prepared or choose to, often to reduce scrutiny.
The " I should pay more taxes" rhetoric from the wealthy is merely virtue signaling, it is totally legal to pay more taxes than you owe, and you can even reclaim the money later if you need to. There is nothing preventing anyone from paying the taxes that they feel that they should owe, in excess of legal requirements.
By and large, sales taxes are more evenly applied, but that too is far from perfect.
The devil is in the details. Should one attempt to tax unrealized capital gains, what is a workable way to do so? Would there be massive credits for paper losses? How does one value illiquid shares? Minority shares of private companies?
The capital-gains step-up definitely is worthy of reconsideration. It is unclear to me why an asset's basis should change simply because someone died. If heirs don't sell, they won't owe the tax, but it makes sense that they would at the time of sale.
Buffett has thought long and hard about these questions -- how to address inequities in tax burdens without breaking industry. Don't miss his reply to ProPublica (cited within the article): https://www.documentcloud.org/documents/20798866-buffett-sta...
Seems that the most common retort in this thread is to hammer down on the principle that unrealised gains should not be taxed.
This is directly addressed in the article. Unrealised gains can still work as collateral for loans. The spending habits appear as if your unrealised gains were bonafide income. At what point does the distinction between wealth and income become arbitrary?
There seems to be a large amount of "missing the point" in this thread. As a wage labourer my wealth growth is significantly hampered by taxation. For the small group of people with net worth tied up in financial assets, taxation doesn't slow their growth in any meaningful capacity. If we ignore any ideological predispositions and instead simply ask what limit this system is approaching I think the answer seems terrifying.
A common sentiment here is that inequality is not a problem in and of itself. "How does Bezos wealth possibly impact me?". Having seen the difference in equality in Scandinavia, USA, and South Africa I would beg to differ. Inequality eats at a society at all levels. The rich I met in America seemed less happy than the poor in Sweden. In South Africa even more so.
I’m not sure why this is considered some giant revelation. Anyone who owns and holds stocks that do not pay dividends is aware that you only pay capital gains taxes when you sell. Why is this a surprise?
I’m not against heavily revising the tax code, but I’m not sure a wealth tax is the way to do it. I’d rather we tax the utility of money rather than the quantity (e.g., a billionaire who spends millions on cancer research will not have that money taxed, but one who spends millions on yachts and super cars will pay 90% tax). Society could then vote to determine what things should have high and low taxes.
I don't understand why so many people applaud hefty inheritance taxes, with some far-left voices demanding inheritance taxes well above 90% or even 100%. It feels to me like this is sending the signal to "use it or lose it". While everyone is talking about cutting unnecessary consumption you're effectively telling people to spend all their money on frivolous luxury items because they can't pass it on to their children anyway. As someone with children, my main motivation is living within my means and keeping the rest of my assets as a retirement/rainy-day fund, or, after my demise, to have it passed on to my children. If you tell me I can't do that I might as well just buy an expensive sports-car tomorrow...
These low % media likes kinda only tell half the story because it ignores the fact that it's largely a deferral rather than avoidance. e.g.
>Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell.
This isn't some evil billionaire trick. Anyone can load up Robinhood, buy some shares, not sell and they too can achieve this 0% tax paid miracle. Mostly because the 0% is a complete misrepresentation of what's happening. It's counting the gains now, and ignoring the tax you'll be paying later. And that's true for billionaire and man on the street.
The difference comes down largely to the extent to which wealth drives options available. Buffett doesn't need to sell shares because his car broke down or to put food on the table at month end. i.e. Largely an inequality issue granting those with wealth way more options & control over actions and thus the resulting tax outcomes.
Doesn't change the outcome - working class pays disproportionately, but that imo is a wider and more serious inequality issue. One that isn't helped by noise from "evil billionaire tax dodger" articles like these
Hmm.. I wonder why we have problems. Well, maybe it's because we're taking half the money and giving it to the billionaire class. And no, your new tax idea won't work.
If you plan to take anything from anybody, you're going to have to use force or threats of violence. This only works against the powerless, not the powerful. That's tautological. I don't care what your 'solution' is.
However, there are plenty of organizations that easily raise money without coercion. They are called businesses. They do this by selling stock and borrowing cash. The government also does this. They print dollars and sell bonds. No difference![1]
This is not theoretical anymore. T-bill issuance has been sailing along at nearly $2T per month for the last year.[2] That's 100% of tax revenue in two months. And yet, CPI is hardly affected. No, it can't go on forever, spending must be controlled, but tax revenue is actually irrelevant. Inflation occurs when supply exceeds demand. Demand for dollars comes from economic growth and investment. Eliminate the tax burden and dollar demand will soar. The only difference is that we will no longer be subsidizing the untaxed foreign and domestic users of the dollar economy.
So just stop collecting it. It's obsolete. Stop forcing productive people to fund the ultra-rich, and let the wealth naturally accumulate to those doing the work. No 'trickle-down' economic theory needed if you don't force everybody to carry it to the top in the first place.
[1] for a tighter analogy, consider Eth as legal tender for smart contracts
I not an advocate of a wealth tax, but there was something brought up in the article that is very interesting and requires more discussion.
If you own a billion dollar in stock and you want to spend $8 million this year, let's assume long term capital gains and a cost basis of 0. You sell $10 million worth of shares and are taxed 20% federally, costing you $2 million in taxes. Giving you $8 million to spend.
Or
You get a credit line $8 million, against your stock, without selling it, at a 3% interest rate. I draw down the line of credit and pay $240k per year to the bank. Before the new mortgage interest deduction was capped, you could get a credit line against your house and deduct the interest, thereby potentially only paying a portion of the $240k, because you'd get about 1/3 back in deductions; let's say $160k.
When tax professionals see that you could pay $2 million in taxes this year or $160k in interest per year, it becomes a no-brainer.
It seems like the answer is to close that different or live with the loophole.
As a tangental point, I would like to point out that the United States has ~5 trillion in tax revenue annually. From which we spend the most per capita in categories such as education, and healthcare. We are continually rated worst in the developed world in those categories per dollar spent. We don't really need any more tax revenue.
There can be an argument for redistributing the tax burden, but it's really a secondary argument to the poor value of our money once it hits the public sector.
Bezos claiming the child tax credit is gold. Bernie got finger-wagged in the primaries for wanting universal benefits, because others said the rich shouldn’t be able to take advantage of them too. Well, guess what, CTC is a means-tested program - millions of families have to go through BS paperwork to prove they’re deserving of it - and the richest man on earth is somehow able to claim it too! Hilarious.
Stratospheric wealth inequality is much more a consequence of monetary policy than tax policy. When the apparent goal of policymakers is to prevent large sustained drops in the value of financial assets, then those who primarily own financial assets will see their wealth effortlessly increase while the majority of the population who trade labor for money will remain in place.
It's disappointing to see how these sort of articles mix "wealth growth" (i.e. a paper gain such as the increase in the value of your house), with income tax. How easy it is to mislead people to take a side on the rich vs poor politically-driven fight.
There's an angle I'm not really seeing talked about - any wealth vehicle that allows the wealthy to defer their tax burden to a substantially later point in time creates massive incentive for those individuals to push for reduced taxation on that vehicle in the long-haul. It's one thing to want reduced taxes because it'll save you 8% on your %6M income each year, but another to want reduced taxes because it'll save you 8% on 30 years of deferred taxes.
The trick is to have enough assets so that you don't have to sell them for money. You get a loan against your assets (which in today's climate very likely has a smaller interest rate than you'll see in appreciation of your assets) to live off of, which is tax free. You pay that loan back over 10 years and each year you sell a small portion of assets to limit your tax and/or you take out other loans to help pay for previous ones.
Imagine you have $2,000,000 in liquid assets that appreciate around 6% annually on average. You borrow $100k at 3.5% over 10 years. In year one you'll pay back ~$13,500. So you sell %13,500 in assets which won't even be taxed.
In year 2 you borrow another 100k and sell some assets that lost value during this time using tax loss harvesting and/or you borrow even more money to help pay back interest and principal on older loans. You can continue this indefinitely as your compounding assets are returning much more than your loan interest.
In essence, with enough in assets you can easily create a perpetual income machine that has no or little in terms of taxable income. With clever accounting, tax loss harvesting, and smart deductions/credits you can avoid paying taxes more or less through debt-as-income.
Wealth hoarding is a source of lost productivity. I don't care how you slice it.
And this is not inherently a bad thing. People are entitled to save.
That is until the amount that's being hoarded is disproportionately large.
It's difficult to come up with an agreeably fair solution. But with decades of inaction, the problem is only growing. It's to the point where an objectively bad solution might be better than the continued inaction.
[+] [-] koheripbal|4 years ago|reply
1. Capital Gain taxes are delayed until you actually sell the stock.
2. Corporate taxes are being reduced because companies are moving profits to foreign jurisdictions.
3. Estate taxes & income taxes are being avoided by the creation of charitable foundations.
The 2nd and 3rd points are very valid, and I wish the author had spent more time on them. Unfortunately instead, the author spends much more time on point 1, conflating wealth with income, and avoiding the obvious argument that capital gains are eventually taxed - the rich are not escaping that.
...unless point 3 (foundation) occurs. And that should be the main story.
Squabbling over a wealth tax is not useful. The real issue is that the super rich create these personal "foundations" that act as never-taxed income holes, and then use them as personal and political tools.
In total, there's nothing very revealing about this article. It's everything we've already known. IMO, we need to curb foreign tax havens, and severely limit tax exemptions for charitable donations.
A more interesting question is how did ProPublica get a copy of Jeff Bezos' tax returns. Seems like a leak at the IRS?
[+] [-] drdec|4 years ago|reply
I agree that a wealth tax is not the way to go. But there are other ways to skin this cat. The big takeaway I got from the article missing in your summary is that the wealthy take loans secured by unrealized gains in order to finance their lifestyle.
So what if we found a way to make a rule that using unrealized gains as collateral for a loan was, for tax purposes, the same as realizing the gains? (You might need to tweak the rule for fairness but the basic point remains.)
I think aggressively closing loopholes in the current code could go a long way (you mentioned a couple, like charitable donations and tax havens).
[+] [-] danso|4 years ago|reply
> A more interesting question is how did ProPublica get a copy of Jeff Bezos' tax returns. Seems like a leak at the IRS?
Yes the actual tax records are what make the story interesting, even if the data only confirms what “everyone knows” — at least there’s actual data and empirical analysis of the scope.
According to this accompanying explainer, the leak is anonymous:
https://www.propublica.org/article/why-we-are-publishing-the...
> A second question certain to arise is the motives and identity of the source who has provided this data to ProPublica. We live in an age in which people with access to information can copy it with the click of a mouse and transmit it in a variety of ways to news organizations. Many years ago, ProPublica and other news organizations set up secure systems that allow whistleblowers to transmit information to us without revealing their identity.
> We do not know the identity of our source. We did not solicit the information they sent us. The source says they were motivated by our previous coverage of issues surrounding the IRS and tax enforcement, but we do not know for certain that is true. We have considered the possibility that information we have received could have come from a state actor hostile to American interests. In particular, a number of government agencies were compromised last year by what the U.S. has said were Russian hackers who exploited vulnerabilities in software sold by SolarWinds, a Texas-based information technology company. We do note, however, that the Treasury Department’s inspector general for tax administration wrote in December that, “At this time, there is no evidence that any taxpayer information was exposed” in the SolarWinds hack.
[+] [-] bradleyjg|4 years ago|reply
Not so, because of the step up basis at death. That provision allows the capital gains tax to be not just postponed, but eliminated.
[+] [-] jollofricepeas|4 years ago|reply
The facts are:
“By the end of 2018, the 25 [wealthiest Americans] were worth $1.1 trillion.
For comparison, it would take 14.3 million ordinary American wage earners put together to equal that same amount of wealth.
The personal federal tax bill for the top 25 in 2018: $1.9 billion.
The bill for the wage earners: $143 billion.”
[+] [-] foerbert|4 years ago|reply
In light of this, I don't think we can so easily dismiss delayed taxation of capital gains as unimportant and irrelevant. Maybe it is, but I think we need more information to solidly come to that conclusion. Even one of the things you (rightly, I think) identify as a problem seems to have some serious synergy with such a delay. What happens if one of these charitable foundations ends up with stock? How long of a delay might that taxation have then? And is there any way for them to get some liquidity out of that stock without actually selling it? Can they take out loans with it as collateral, for example?
I'm not actively making claims here, but rather trying to show the situation is complex enough that we can't write off seemingly innocuous mechanics simply because they appear innocuous. It's complex, and weird, and needs deeper information and data to really understand.
[+] [-] nlh|4 years ago|reply
> we need to ... severely limit tax exemptions for charitable donations
Why do we need to do this? Wouldn’t the natural incentive-based result of this be a huge reduction in charitable donations? It’s essentially an asset transfer from charitable causes to the government. I’m not sure I understand why that’s default good.
[+] [-] taneq|4 years ago|reply
In one sense yes, but if they're living happily on a tiny fraction of their wealth then they can hang on to the rest until an opportune time to cash out. Governments come and go, taxes are imposed and abolished, loopholes open and close. If they can afford to play the long game then "eventually" may be very different to what would happen if they cashed out today.
[+] [-] smitty1e|4 years ago|reply
Opinions may differ, but one major point is that our tax system is a joke.
If we can put a movie about flying humans to the moon on Netflix, why can't we implement a tax system that isn't a Byzantine train wreck?
[+] [-] jandrese|4 years ago|reply
I used to think this too until my wife inherited some stocks from her grandmother. Turns out the strike price is reset when you inherit and you dodge all of the capital gains tax.
This turned out to be a major win for us because her grandmother had acquired the stocks when she worked for AT&T back in the Ma Bell days and had not paid attention to them for 50 years. The paperwork was a complete mess and we had zero idea what the strike price would have been on stock she got as part of her normal income some time in the 50s and had been split up and recombined so many times in the mean time.
[+] [-] sobellian|4 years ago|reply
[+] [-] anonu|4 years ago|reply
I'm totally supportive of "taxing the uber wealthy"... But govt needs to take the long approach on this. Eventually, people die and inheritance kicks in. That's where these generational mega wealth transfers that don't do much good for society can be mitigated.
The document leak probably has a banal explanation. Some insider with access to the documents...
[+] [-] Trias11|4 years ago|reply
Luckily US cannot police other countries (not that it didn't try) to prevent people from taking advantage of more competitive tax regions outside of US.
US obsession with taxing people and businesses to the ground is a strong contributor for so much capital escaping US.
[+] [-] boringg|4 years ago|reply
It seems like ProPublica is trying to continue to lay the groundwork for a wealthtax campaign by fomenting further rage around the inequalities of US tax system.
Aside from that I have deep concerns about the source of this information and why it was used. Seems like IRS taxes have been weaponized and are readily available. Everyone should be deeply concerned about how ProPublica got this information.
[+] [-] robbintt|4 years ago|reply
[+] [-] jorvi|4 years ago|reply
That depends on what you mean. The US government (and a lot of US citizens) think that the tax on money Apple earns on selling iPhones in Europe belongs to the US, not France. But I feel if an iPhone is sold in a French building by a French person to another French person, with money transfered between two French bank accounts, all of that in French society, that that tax money belongs to the French and the US needs to keep its grubby paws off of it. No bullshit 'if you bring it back in the US we will forgo half of the tax on it and protect you internationally from the fallout'.
[+] [-] xhkkffbf|4 years ago|reply
If anything, he's sort of a curator of the wealth for everyone in the Amazon world. Yes, he's able to live very well, but the simple value of his unsold shares doesn't capture his true ability to buy things.
[+] [-] vmception|4 years ago|reply
There is no way to predict somebody’s net worth and all the lists are wrong. There are only a few public things and they are all snapshots in time that assume it’s still true forever. An actor on a big movie? The list will say “we estimate they made 20 million, lets list them as a net worth of 20 million forever”, a non obfuscated real estate property record either in someones name or linked to them? Okay we are counting that. Aside from that they are just counting shares of public companies that large % holders are required to disclose. Outside of those slivers you’ll still never know if they were a savvy and passive investor in other public equities just like you are trying to be. You’ll never know if they made 1,000% more on tech stocks. You’ll never know if they assigned shares and cash to a charitable organization they control. You’ll definitely never know what subsequent trades the charitable organization made.
But even without pointing at charities: Hedge Funds, VC and Private Equity firms are not reported nor are any business interest. These things can pay out arbitrarily and also have large amounts of funds in any limited partners name.
[+] [-] boringg|4 years ago|reply
I would be incredibly surprised if anyone who had that kind of access to IRS returns (ie searchable database for everyone) would leak the 25 top earners. It does add up for the career risk to take that risk on especially as its not leaking anything illegal just shining a light on the injustices of the system.
[+] [-] 9wzYQbTYsAIc|4 years ago|reply
From their other article, https://www.propublica.org/article/why-we-are-publishing-the...
“We do not know the identity of our source. We did not solicit the information they sent us. The source says they were motivated by our previous coverage of issues surrounding the IRS and tax enforcement, but we do not know for certain that is true. We have considered the possibility that information we have received could have come from a state actor hostile to American interests. In particular, a number of government agencies were compromised last year by what the U.S. has said were Russian hackers who exploited vulnerabilities in software sold by SolarWinds, a Texas-based information technology company. We do note, however, that the Treasury Department’s inspector general for tax administration wrote in December that, “At this time, there is no evidence that any taxpayer information was exposed” in the SolarWinds hack.“
[+] [-] ccn0p|4 years ago|reply
[+] [-] HWR_14|4 years ago|reply
[+] [-] unknown|4 years ago|reply
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[+] [-] hnmullany|4 years ago|reply
[+] [-] ffggvv|4 years ago|reply
i would trust the gates foundation to use money 1 million more wisely than the government just wasting it
[+] [-] inigojonesguy|4 years ago|reply
Probably familiar to many of you, but I have my coke and mentos moment while I read it, in 2021. Here is a link to archived pdf, for others like me
https://web.archive.org/web/20210112042733/https://www.lopp....
[+] [-] saint_abroad|4 years ago|reply
By far, the greatest increase in wealth (and inequality) is due to capital gains.
> [...] capital gains are eventually taxed
Normally, one might sell assets before a decline, and at that point gains (and therefore taxes) may be realised.
This is avoided by HODL stock in holding companies (such as Berkshire Hathaway) which can rotate assets without ever incurring capital gains (or indeed income).
[+] [-] socialist_coder|4 years ago|reply
I don't get how do they pay the loan off though, without paying taxes on the money used to pay off the loan. How does that work? Any loan I take out, I'd have to get income and then use my income to pay off the loan.
[+] [-] chaostheory|4 years ago|reply
Politicians have them as well. Their foundations rarely if not ever cater to their stated mission. Instead, politicians use them as legal bribery vehicles.
[+] [-] gxs|4 years ago|reply
One little trick here is to take out huge loans using things like stock holdings as collateral.
You're not paying tax on the money, and you can pay it back a bunch of difference ways that can limit how much you pay.
There are nuances to this, it's not as straight forward as I mentioned, but that's the general idea.
[+] [-] leroman|4 years ago|reply
Isn't it the point that wealth creates more wealth? and the more you have the more you can make? thus not paying taxes leaves you with more to play with?
[+] [-] dgan|4 years ago|reply
I am quoting "Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell"
[+] [-] K0balt|4 years ago|reply
Taxation always has been, and continues to be, a burden for the servile class to bear. The rich or enterprising pay taxes only when they are ill prepared or choose to, often to reduce scrutiny.
The " I should pay more taxes" rhetoric from the wealthy is merely virtue signaling, it is totally legal to pay more taxes than you owe, and you can even reclaim the money later if you need to. There is nothing preventing anyone from paying the taxes that they feel that they should owe, in excess of legal requirements.
By and large, sales taxes are more evenly applied, but that too is far from perfect.
[+] [-] ISL|4 years ago|reply
The capital-gains step-up definitely is worthy of reconsideration. It is unclear to me why an asset's basis should change simply because someone died. If heirs don't sell, they won't owe the tax, but it makes sense that they would at the time of sale.
Buffett has thought long and hard about these questions -- how to address inequities in tax burdens without breaking industry. Don't miss his reply to ProPublica (cited within the article): https://www.documentcloud.org/documents/20798866-buffett-sta...
[+] [-] temp10298385|4 years ago|reply
This is directly addressed in the article. Unrealised gains can still work as collateral for loans. The spending habits appear as if your unrealised gains were bonafide income. At what point does the distinction between wealth and income become arbitrary?
There seems to be a large amount of "missing the point" in this thread. As a wage labourer my wealth growth is significantly hampered by taxation. For the small group of people with net worth tied up in financial assets, taxation doesn't slow their growth in any meaningful capacity. If we ignore any ideological predispositions and instead simply ask what limit this system is approaching I think the answer seems terrifying.
A common sentiment here is that inequality is not a problem in and of itself. "How does Bezos wealth possibly impact me?". Having seen the difference in equality in Scandinavia, USA, and South Africa I would beg to differ. Inequality eats at a society at all levels. The rich I met in America seemed less happy than the poor in Sweden. In South Africa even more so.
[+] [-] Xcelerate|4 years ago|reply
I’m not against heavily revising the tax code, but I’m not sure a wealth tax is the way to do it. I’d rather we tax the utility of money rather than the quantity (e.g., a billionaire who spends millions on cancer research will not have that money taxed, but one who spends millions on yachts and super cars will pay 90% tax). Society could then vote to determine what things should have high and low taxes.
[+] [-] heipei|4 years ago|reply
[+] [-] Havoc|4 years ago|reply
>Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell.
This isn't some evil billionaire trick. Anyone can load up Robinhood, buy some shares, not sell and they too can achieve this 0% tax paid miracle. Mostly because the 0% is a complete misrepresentation of what's happening. It's counting the gains now, and ignoring the tax you'll be paying later. And that's true for billionaire and man on the street.
The difference comes down largely to the extent to which wealth drives options available. Buffett doesn't need to sell shares because his car broke down or to put food on the table at month end. i.e. Largely an inequality issue granting those with wealth way more options & control over actions and thus the resulting tax outcomes.
Doesn't change the outcome - working class pays disproportionately, but that imo is a wider and more serious inequality issue. One that isn't helped by noise from "evil billionaire tax dodger" articles like these
[+] [-] Cantinflas|4 years ago|reply
That's not how income tax is calculated, the whole article doesn't make any sense at all
[+] [-] jl2718|4 years ago|reply
If you plan to take anything from anybody, you're going to have to use force or threats of violence. This only works against the powerless, not the powerful. That's tautological. I don't care what your 'solution' is.
However, there are plenty of organizations that easily raise money without coercion. They are called businesses. They do this by selling stock and borrowing cash. The government also does this. They print dollars and sell bonds. No difference![1]
This is not theoretical anymore. T-bill issuance has been sailing along at nearly $2T per month for the last year.[2] That's 100% of tax revenue in two months. And yet, CPI is hardly affected. No, it can't go on forever, spending must be controlled, but tax revenue is actually irrelevant. Inflation occurs when supply exceeds demand. Demand for dollars comes from economic growth and investment. Eliminate the tax burden and dollar demand will soar. The only difference is that we will no longer be subsidizing the untaxed foreign and domestic users of the dollar economy.
So just stop collecting it. It's obsolete. Stop forcing productive people to fund the ultra-rich, and let the wealth naturally accumulate to those doing the work. No 'trickle-down' economic theory needed if you don't force everybody to carry it to the top in the first place.
[1] for a tighter analogy, consider Eth as legal tender for smart contracts
[2] https://www.sifma.org/resources/research/us-treasury-securit...
[+] [-] relaunched|4 years ago|reply
If you own a billion dollar in stock and you want to spend $8 million this year, let's assume long term capital gains and a cost basis of 0. You sell $10 million worth of shares and are taxed 20% federally, costing you $2 million in taxes. Giving you $8 million to spend.
Or
You get a credit line $8 million, against your stock, without selling it, at a 3% interest rate. I draw down the line of credit and pay $240k per year to the bank. Before the new mortgage interest deduction was capped, you could get a credit line against your house and deduct the interest, thereby potentially only paying a portion of the $240k, because you'd get about 1/3 back in deductions; let's say $160k.
When tax professionals see that you could pay $2 million in taxes this year or $160k in interest per year, it becomes a no-brainer.
It seems like the answer is to close that different or live with the loophole.
[+] [-] jppope|4 years ago|reply
There can be an argument for redistributing the tax burden, but it's really a secondary argument to the poor value of our money once it hits the public sector.
[+] [-] hurril|4 years ago|reply
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[+] [-] nemo44x|4 years ago|reply
Imagine you have $2,000,000 in liquid assets that appreciate around 6% annually on average. You borrow $100k at 3.5% over 10 years. In year one you'll pay back ~$13,500. So you sell %13,500 in assets which won't even be taxed.
In year 2 you borrow another 100k and sell some assets that lost value during this time using tax loss harvesting and/or you borrow even more money to help pay back interest and principal on older loans. You can continue this indefinitely as your compounding assets are returning much more than your loan interest.
In essence, with enough in assets you can easily create a perpetual income machine that has no or little in terms of taxable income. With clever accounting, tax loss harvesting, and smart deductions/credits you can avoid paying taxes more or less through debt-as-income.
[+] [-] rybosworld|4 years ago|reply
And this is not inherently a bad thing. People are entitled to save.
That is until the amount that's being hoarded is disproportionately large.
It's difficult to come up with an agreeably fair solution. But with decades of inaction, the problem is only growing. It's to the point where an objectively bad solution might be better than the continued inaction.