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Comment by xyzzy123 | Hacker News Reader

I feel like the earnings structure is quite different than it was post-war though. Today there's a larger difference between "income rich" and "capital rich" in terms of their options for avoiding tax incidence.

Like in 1947 a factory owner's profits would show up as high income. Today they wouldn't (money is in share prices and complex financial arrangements / borrowing). The high marginal rates hit the chief engineer instead, who actually works for a living.

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Exactly the true wealth of America is no longer income or property its all shares. It could be argued the American 40T debt is pretty much because of tax avoidance due to hiding wealth in stocks and related possibilities.

Stock value is not real wealth. The stock value is a guess about future profits along the next 10 years. You can't give to workers guessed future wealth. It doesn't exists today.

No argument there, im simply making the observation that a lot of people are avoiding tax by hiding their wealth as shares and this is hurting the gov ability to tax and pay its debts.

Its a really tricky problem to solve. One simple solution would be to tax any loan secured by owned assets as regular income, though there may be situations that hits more average people, say if you take out a HELOC on your home.

It is pretty absurd that one can borrow against a mountain of owned stocks and live of the loan without it being considered income.

The error is to assume that there is wealth to tax. Imagine an island with 3 people, which produces 2 burgers a day, so the poorest one can't get a burger. Now the government taxes the richest person, and buys one burger. who lost the burger?

The burger is taken from the poorest person that was able to buy a burger. Now you have 2 people who cannot buy a burger.

This is why you cannot tax unrealized gains. You are sacking the poorest. Is not matter of how the government gets the money. The problem is that the government spends the money.

The poorest always pay all government spending. Always.

> This is why you cannot tax unrealized gains.

Apparently you can buy islands, super yachts and more with unrealized gains.

That's not how money works. You can't buy anything with unrealized gains.

You can take out a loan secured with assets as collateral, but you're buying something with that debt not unrealized gains. If your asset prices go to zero you still own the yacht because you still owe that debt.

Call it whatever you like the effective outcome is the same.

Words are important, and you're talking about tax law and what could potentially be future regulations.

Get sloppy and we end up with more loopholes and bullshit.

And yet, the billionaires seem to have no problem converting that "guessed future wealth" into super yachts, private jets and political influence.

But only a small percentage of billionaires, spends a small percentage of his fortune in consumption.

It's called "the marginal propensity to consume", which means that as a person gets richer, consumes a smaller percentage of his fortune.

When they do that they're generally getting loans much smaller than their paper wealth says they are worth. For most billionaires I'd be surprised if their wealth has accrued so much in unrealized gains that even a 5% loan, lets say, it tapping unrealized gains rather than their base price.

What? Sure you can. Companies do it all the time, they call it RSUs.

Seems like a good reason to figure out some additional soak-the-rich taxes! (Back in the 30s that was a slogan that Americans could rally behind..! Not so much right in the last several decades.)

But it's also disingenuous to claim that none of today's approaches would show up as high income. A lot of old money would be protected still, a lot of new-money would be hit.

Isn't it telling that there was so much massive development of American industry in the post-WWII era and yet there weren't any Musks or Bezos or Gates? A country that had minted tycoons like Getty and Rockefeller and Carnegie stopped for a while. A guy like Howard Hughes was involved in several areas of development but didn't touch the guys who came before him or after him overall...

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