While it may be a cowardly way to divert responsibility I don't agree that this is so bad. This problem can only be solved by cooperating, otherwise companies can just shop around for the cheapest taxation rate.
if your goal is to have a few conglomerates rule the world, then this is a good way to do it. Not sure how that is much different from a powerful "state" though
Companies must create valuable things people want, or be out of business in a very short time.
Companies compete for shareholders by satisfying as many customers as possible. If states can compete for the best deal for international business, companies can better serve people, and those states can house centres of international trade.
It’s not just abstract talk, but incentives that drive us to live different everyday lives than people in guild-economy medieval times, or past slave economies, or how people lived in the GDR or other eastern bloc countries.
You wanted to write “shareholders”, right?
Tax the wealthy. Don't let them take "charitable" deductions or use tax-exempt IRAs. 100% inheritance tax above $4 million.
Think about it like this: when I want to buy a house, I buy a house. When a billionaire wants to buy a house, they create a property management company (as a subsidiary of their existing business interests) that buys and rents out the house, negotiate for their existing business interests to fund it, and then they rent the house from that PMC.
Excess liquid assets sitting in a large corporation’s treasury, are essentially sitting in the wallets of its directors. They’re left there only because the tax implications are better if they’re moved toward their purpose-build vehicles at the last moment possible.
No it doesn't. It equally affects both large shareholders and small shareholders. E. g. pension funds will get lower gains, and regular dudes 401k (or whatever they are called in your country) will get smaller yields.
I don't have numbers, but I suspect the richest people get only small percent of large corporations income.
They'll pay tax on that realized income. And if they build up all that wealth in stock value, then if we don't tax it while they are alive we'll take it when they die, so we'd take away the incentive to hoard all the wealth with those schemes.
"That’s what taxing corporate income (or more targeted, corporate assets)"
Incorrect. Targeting corporate assets hurts heavy industry. Targeting income hurts low-margin business like grocery. And we already have a tax on corporate profits: capital gains tax on dividends and stock appreciation! It mostly affects people who are doing well and less so people and companies doing poorly. It automatically compensates for market changes (sector doing great paid more, a whole sector slumping pays less).
I don't think you quite understood the scheme here: they never own the PMC. They don't gain the appreciation value of the house or anything like that. It's not an investment to them. They just got someone else to set up the PMC and buy the house, for the positive side-benefits that come from having arranged to assume (at least partial) directorship over that PMC.
Maybe it's easier to picture it at larger scale, with an explicit example: say you're a famous property developer who has built a bunch of hotels with your name on them. In one sense, those are businesses for their own sake. But in another sense, those are your vacation homes. You can stay in them, for free, any time you like, which the hotel will likely book as a business expense (hosting one of its directors for an official evaluation of operations on behalf of shareholders.)
That business expense will also extend to any perks the hotel offers its ultra-premium clients (often a class only set up in the first place as a way to justify giving directors these perks) — e.g. hotel-employed drivers assigned to pick the billionaire up from the airport, and then attached to them to fetch whatever they need as long as they're there.
If you build a bunch of hotels that provide you a free place to stay anywhere you go, then you don't need vacation homes. You never need to buy them, rent them, own them in any sense. They're never realized as income, any more than a "company car" or "company-supplied laptop" that you need to give back when you quit is income.
By itself, this would be ridiculous; it'd be like starting a car rental agency just to have a "company car."
But, because these are also profitable businesses for their own sake, you can get investors (incl. your own investment businesses) to put money into them, such that you never need to put any of your own (post-tax) money into them. You don't actually even need to personally be a shareholder in the hotel chain, "only" a director of it, to reap these benefits! And, if you're also a person with a lot of connections — someone with a rolodex of reliable CEOs and executives to staff these businesses with — then you never need to worry about actually building or running the business, either.
This is how billionaires — or at least, capitalist billionaires — get away with never realizing much income (or even having very many estate-tax-able assets as part of their net worth!) at all. They just cause corporations to invest money in other corporations, never actually touching any of the money or the resulting assets themselves, but rather ending up in arrangements where business expenses of the invested-in corporations are being spent directly on their own happiness, mostly by having temporary use of the business's assets whenever they like, as some non-transactional, pure-expense part of the business's operation. The vast majority of their assets are soft power — social influence — realized/"invested" by putting people into power in roles in businesses, where those people in power in those roles can then give them perks in return.
(And, if they ever need real liquid assets for some reason, then they just make arrangements with other billionaires to 1. start non-profits; 2. get some underemployed accomplices [e.g. relatives] employed at their non-profits in high-paying [but not to the point of being individually highly taxed] roles; and 3. get corporations that owe each billionaire favors, to direct charitable donations to one-another's nonprofits. Then, since this income is entirely the result of cronyism, the accomplices will listen when the billionaire directs them on how to spend their income — and thus the billionaire can spend it as if it were their own income, as they please; usually not on assets, mind you, but rather usually for expenses that personally benefit the billionaire, e.g. things like huge parties or political lobbying. This is the classic "high-society wife" setup, but it can be extended to hundreds of accomplices.)
>make arrangements with other billionaires to 1. start non-profits
Which is why they (and corporations) should not get tax deductions for donating money!
[0] i.e. https://www.microsoft.com/en-us/microsoft-365/business-insig...
Sure, if you’re one of the fifty people in the world who personally have hundreds of billions in liquid assets, you’ve “escaped” needing to do this sort of thing. But much of the reason that there are so few people who’ve “escaped” this, is that most millionaires don’t aim to just keep getting more liquid assets until they enter this category, because they feel like all the taxation they’d be hit with in the process is “leaving power on the table.” They rather aim to “control” or “leverage” as much money/power as possible at a remove, by minimizing the amount of that that ever personally becomes part of their portfolio. This usually mostly caps their personal net worth (as they’re directing deals to pay into companies they control, rather than ever profiting personally from said deals) but their “social multiplier” on their net worth continues to grow over time.
If you’ve ever seen the net-worth curve for some very-obviously-capitalist entrepreneur/VC/investor, and noticed that it plateaus over time — this is what they’re doing. They haven’t quit making money (unless they’ve declared an intent to “switch modes” and spend all their time on spending their money on improving things they care about, like John D. Rockefeller, or Bill Gates.) People who’ve managed to make huge sums of money, tend to love making money; making money is in their blood. They just find, eventually, that making that money personally is no longer a very efficient way of gaining control over ever-larger sums of wealth.
> Using company property for personal use is a taxable fringe benefit.
Again, the point is to make all “personal use” into business use, by setting up your life so that everything you do is claimable as a business expense by the business, rather than an asset transfer. Sleeping? Managing your hotel. Eating? Managing your restaurant. Getting driven around in a limo? It’s a mobile meeting room where you’re having business meetings!
But, to be clear, on the levels that UHNWI people spend money on, these sort of personal expenses aren’t really what I mean by “arranging to control company resources to personal ends.” They’re cute tricks, but they’re not the “big stuff.”
The “big stuff” is more like: directing where a corporation will spend its lobbying dollars (business expense), to get petty municipal-planning bills you want passed, so you can have the house you want in the place you want, with the NIMBY rules you want in place (personal end). Or directing a property development company to work with a city to get a certain nascent greenfield area zoned and infrastructure put in (business expense), so that you can then build a house in that area (personal end).
Note that in those cases, you don’t gain any asset from the business expense in any legible way. You’re just leveraging your corporate soft power to enable you to do the things you want to do with your own money — to make purchases that would have been impossible, possible.
If you’re Jeff Bezos, you can do this out of your own pocket. But most people would find it a lot more efficient to just have those lobbying / property development dollars never go through their bank account.
Sure.
> 100% inheritance tax above $4 million.
If you don't think this would cause "massive distortions everywhere", I have some bad news...
Please don't tax the wealthy. I have a couple friends who are in top 0.1%. They have enough money for the rest of their lives. If you start taking money from them, they will simply stop working and start spending more time with friends and family.
The correct goal is not to take money from the rich (which can be achieved by taxing them; this is what Bolsheviks did and it resulted in millions of deaths from starvation), but to get rid of poverty.
Taxing the rich won't help with poverty. Because if even if top 1% will be paying 100% taxes and still continue to work, total government tax income will be increased by 20% or so (that's from richest 1% get 30% of income). That's not a lot, and these money will be spent inefficiently by the government (as government always does).
The government already has more than enough money, but it spends it inefficiently, and this issue need to be addressed (by fixing the system), for example:
* fix gerrymandering
* replace FPTP voting with some variant of ranked choice voting
* increase the limits of the candidate money collection (currently they are very limited for the candidates, but unlimited for parties)
So when more independent or less dependent on parties candidates are elected, more issues can be fixed, for example:
* fix many regulations which drives hospital prices up
* fix regulations which makes lives of ISP monopolies too easy
and so on.
Things are getting bad enough to where "cutting ones nose to spite the face" starts to make sense, redistributing the misery the rich have insulated themselves from.
Just my feeling on the situation.
They know it already, most of my friends are classical liberals/conservatives.
> they will be the scapegoat for the mob
You are probably in the top 10% (as most people here on HN), so a lot of people here might become the same scapegoat.
> Things are getting bad enough to where "cutting ones nose to spite the face"
I'm not sure things are getting bad. Poorest people now are more rich than poorest people 30 years ago.
Like in the US now average electrician makes 70K a year. That's a lot of money. And anyone can be electrician.
They say income inequality raises, which is bad, but it might be not that bad, because common inequality measures do not includes the costs of free stuff given to poorest people from the government, like better free hospitals which they can use in case of emergency.
> starts to make sense redistributing the misery the rich have insulated themselves from.
As I said, taxing the wealthiest (especially with extremely high taxes like proposed by certain "liberal" activists) will not make poor people more rich. It will make poor people even more poor because of economic recession.
Different measures are needed.
Because from your position it seems absurd.
From mine it seems like the only move left to make.
What is the evidence that now is worse than say 30 years ago for the bottom 50%?
It is perceived that it is worse now. But is it objectively worse?
went up.
Income
went down.
So I guess you're right, objectively things are much better, it's just my perception of paying 80% of my income to rent that's the problem.
If you need high education, you just take credit, and pay for it with your salary which is much higher than it was 30 years ago.
And if you think that you won't be able to pay for credit because it's not possible to find a decent job with liberal arts degree, then probably you don't need that education.
> Cost of housing went up
I suspect that's because construction workers are paid well now. So instead of studying classical literature in high school, maybe study bricklaying.
> Cost of healthcare went up
This is the issue, but "taxing the rich" won't solve it. It need to be properly regulated. The fact that insulin costs $100 has nothing to do with taxes for the rich people.
> Income went down
Seems like it is not true. There's a chart: inflation adjusted median household income.
https://fred.stlouisfed.org/series/MEHOINUSA672N
It goes up.
> perception of paying 80% of my income to rent that's the problem
Man, I don't know your situation.
Sometimes people pay for something they shouldn't.
Like buying a shiny new car while old car only need occasional repairs, or buying top new iphones while cheapest android is 1/10 of that.
When I was young I rented a flat which costed me about 70% of income, while I could rent a room for 30% of my income, or a flat for 30% of income and two hours commute. But it didn't matter because I was young, and I would not do that now. If that's your case, you may need to reconsider your worldview. If it's not, than I don't really know your situation to comment on that.
Looks like the issue is not that "I want to get rid of poverty" but rather "I want to get rid of rich people".
Why is that a problem?
well it's a problem because I am in that group.
it's clearly not a problem for you or your friends, hence why I believe that cutting the nose to spite the face is the only way to make you and your friends care. Otherwise you'll spend the rest of time saying everything is perfectly fine, when me and a bunch of people keep telling you THAT WE ARE NOT OKAY.
Do you get it now?
I'm having a hard time finding where in the chart that happened across the last 30 years. https://en.wikipedia.org/wiki/Real_wages#/media/File:United_...
That graph makes no statement whatsoever about whether real income in the bottom 50% has gone down, stayed flat, or risen over the 30-year period under discussion. For that, you’d look at a real income chart over the 30 year period, which would show that real income has increased over that span.
If incomes at the bottom rise by 20% vs 10% inflation and incomes at the top rise by by 100%, the income at the bottom went up in real terms, though the share of income at the bottom will have gone down.
this is why I think it will be hilarious when the kids start revolting, and burning shit down folks like you will be looking at graphs and going "how can they be upset, look at this graph! these gig economy renters should be jumping up and down with joy according to my statistics...ungrateful bunch!"
Yours as an individual may not have. No one is saying you're ungrateful as an individual when your experience is different to the group's average.
> Like in the US now average electrician makes 70K a year. That's a lot of money. And anyone can be electrician.
I would not consider electricians as an example of poor people. And no, not anyone can be an electrician. It takes training and licensing, and many people can't jump those hurdles. (Not to mention the fact that if everyone became an electrician, very few of them would get any work.)
Exactly.
> not anyone can be an electrician
Who can't?
> It takes training and licensing
So?
By the way, just googled, entry level electrician apprentice with zero experience (you are required to do that for some time to get your license) gets about $30K. That's not a lot, but that you can do with almost zero training, and it in several years it is significantly more.
> and many people can't jump those hurdles.
Maybe they can be paintworkers then. 38K of income is not as lavish as the life of electrician, but that's should be good enough who cannot get an electrician license.
> Not to mention the fact that if everyone became an electrician, very few of them would get any work
Truck driver, nurse, carpenter, crane operator, plumber, car mechanic, firefighter and so on. There's a lot of thing you can do with little or no investment.
This model of the world assumes that "rich person" means someone with high income and "raise taxes on the rich" means raising the top marginal income tax rate. I don't think either is true and I struggle to imagine how you could be familiar with the financial details of the .1% and think otherwise. This model cannot survive much contact with actual rich people.
People rich enough to be included in "tax the rich" mostly get their money from capital gains, and I don't believe that any rich person anywhere would ever decide not to invest their capital because the capital gains rate is too high. Even if capital gains were taxed at 90%, what else would you do with capital? Dollars sitting in a checking account cannot "spend more time with friends and family".
OK, so we are talking now not about income tax, but about capital gains tax? That's quite a different topic.
But, also, no, capital gains tax should not be increased.
Because you cannot become rich by investing into index.
You become rich by founding a company while working 16 hours a day and getting a large share of it. And after many years of that work with lots of failures and a lot of personal losses, you become rich.
Some people try this path, many fail. If you tell them you can continue doing that, but in the end you will get slightly more than a regular dude working 8/5, they will think, why bother.
Alternatively, you can become more rich by investing your personal money into something risky (like buy a share of your friend garage startup). Again, if cap gains tax will eat your gains, you won't do it next time. Why bother, better buy a condo and wait for it to grow.
Increase cap gains tax, and you won't have new trillion cap companies in the US.
Blanket dismissals aren't helpful. As the guidelines state: "Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something."
>I will simply point out that we could raise the capital gains rate 5% tomorrow, and it would still be lower than it was when Amazon and Google were founded.
Well Google was founded in 1998. In 1998 the long term capital gains rates were 20% for those in the highest bracket and if held for over 5 years went down to 18%. Today's long term rates are 23.8% for those in the highest bracket. Where are you getting your numbers?
https://taxfoundation.org/federal-capital-gains-tax-rates-19...
I was under the impression that the Google founders started in January of '96, when the rate was 28%, and '98 was when they legally incorporated. Perhaps they originally intended Google to be a non-profit, and only changed their minds in reaction to the rate cut in 1997?
> A good critical comment teaches us something.
Interesting complaint. What was yours intended to teach me? Other than your nitpick, you forgot to include the part where you actually disagree with my point (that asteroidbelt's dire prediction that entrepreneurs would have no desire to launch ambitious commercial ventures if we raise the capital gains rate is not supported by recent history).
All the same, if they're still working when they don't have to, they're doing it for something other than money, so I'd bet that they would stay on anyways
I mostly agree with you on this point. However, we can't do that without reforming the tax system. For example, Seattle is one of the most regressive places to live in the country, people in the lowest brackets pay 30%+ in local taxes but people over six figures pay 2.8%. People in single-family zones (wealthy) are slowing the supply increase in apartments which is allowing prices to rise. You can't get rid of poverty without going through the wealthy.
Getting rid of poverty requires taxing money (and taxing nothing else). This doesn't have anything to do with redistribution schemes. Rather, the act of hoarding money in a 0% interest environment is regressive and makes it harder for all other participants to do the same. When everyone saves their money, it gets harder to save money because deflation will reduce your income and thus ability to save money. New money must be created to catch up with savings demand but all the demand for loans and mortgages has been saturated at this point.
The only entity that can take on further debt is the US government but it refuses all the time, forcing unconventional monetary policy at the last remaining institution that actually cares about the economy. Remember why the Fed was founded? To prevent irresponsible government spending and fight the resulting inflation. It was not created to create inflation, that's the governments job.
Just think about a simplified real economy that produces housing and food but nothing else. At some point you have more housing and food than you know what to do with and people stop building and making food leading people to quit their job but also losing their ability to buy food and housing. The village chief (the government) then decides to just build a luxurious house for himself with the help of the surplus workers because he doesn't want to see them starve.
This is an allocation problem. We expect everyone to pay for their own living expenses but we do not guarantee that they can do so. We cannot send them welfare and be done with it because the busy people building the few housing that is actually needed feel like they should also get rewarded for simply existing (more likely they get angry at the welfare recipients). Because we want everyone to work to earn money, we must create bullshit government jobs that ensure full employment.
Only when we run into scarcity of materials and full employment do we need to cut back on spending and an institution forcing the government to cut spending already exists, it's called the Federal Reserve. Wouldn't it be better if we didn't have to rely on our politicians to do the right thing and instead we have a mechanism that kicks the private sector in the balls when it is asleep? Absolutely but it would require the above mentioned "wealth tax" on bank accounts with large amounts of money. I don't care what they do with the money, heck, I don't even want them to pay the wealth tax because then the government has to come up with a way to spend the money, defeating the purpose of the wealth tax. They can buy stocks and pass the hot potato to someone else until they find somebody who actually wants to spend the money.
Agree. especially about inheritance[1]. However, as I've said before corporate taxes are double taxation, corporation are paying their dues as every person involved with the corporation is freed from the liability of the business's actions by way of the state allowing liability limiting corporate entities to exist. When the business assumes liability from the owners, it also assumes tax responsibility.
>has caused massive distortions everywhere:
yeah, like in the global level of CO2, or the amount of plastic in the ocean, or the amount of mercury in fish, or....