Senate Democrats unveil a plan for a new tax on billionaires

https://www.npr.org/2021/10/27/1049505682/senate-democrats-unveil-a-plan-for-a-new-tax-on-billionaires

by anbende • 5 years ago

44 95 5 years ago

anbende3• 5 years ago

I have mostly skeptical about tax plans like this one that tax non-liquid assets. It seems odd to me to tax a person’s illiquid holdings in a company for example. Do we force people to sell pieces of their property to pay the taxes on that property? (In short, for many types of property, yes, but it still has always seemed strange to me)

That said, the more I read about the low or no interest loans against investments that seem to be the primary “income” of the mega-rich, it seems more and more that something needs to be done here.

Or am I wrong? Thoughts?

gjsman-10002• 5 years ago

Another issue on my mind is that non-liquid assets are really hard to assess the value.

Let’s say I had a complete set of Picasso’s paintings for a year. Every painting he did that year, I have.

Who is qualified to say how much each painting individually is worth (other than an auction), and who can say what the total set value is in comparison to the individual value?

Of course this proposal isn’t quite the Wealth Tax that Warren originally wanted but I could see even this tax not being enough in the future.

Blackthorn2• 5 years ago

Seems like that would fall under the non-tradeable asset part, which is paid upon sale rather than mark-to-market.

micromacrofoot• 5 years ago

In theory it could work the same way as land/building assessment for certain assets.

Physical goods can be taxed on sale though, that's easy.

naravara2• 5 years ago

Another issue on my mind is that non-liquid assets are really hard to assess the value.

If the assets in question are equities listed on a public market it's actually quite easy for the government to assess the value.

knome• 5 years ago

Perhaps when getting a loan against collateral, they could tax the value of the collateral. Make it so the loaner cannot receive more than they declare the collateral worth ( which should prevent overly low valuations by making them a risk to the loaner ), and require the loanee to pay taxes against the 'loan-value' of the collateralized resource.

Treating the lien itself as something created by the loanee and sold to the loaner, I suppose.

Blackthorn2• 5 years ago

Do we force people to sell pieces of their property to pay the taxes on that property?

I don't see the problem here. Slowly breaking up ownership like that would be a net good to society.

ericmay2• 5 years ago

Why would it be a net good? (Just curious about your thoughts)

dbingham2• 5 years ago

Do we force people to sell pieces of their property to pay the taxes on that property?

You answered your own question, but to add more context the answer isn't "For many types of property" but for most people the answer is an emphatic yes. For the vast majority of people the only piece of property they own in this sense is their home, and if they cannot pay the property taxes on that, the state sells it on tax sale. So yes, absolutely, we already do this.

The fact that ownership of businesses is exempt from this is part of the inequitable structure of our laws that benefits the wealthy at the expense of everyone else. Because the primary property of the wealthy is currently exempt from property taxes (we only tax the gains, not the assets themselves), but the primary property of the middle class is taxed.

_-david-_5• 5 years ago

The fact that ownership of businesses is exempt from this is part of the inequitable structure of our laws that benefits the wealthy at the expense of everyone else.

This will hurt the middle class who have 401ks or pensions. I get wanting to tax the rich, but this is absolutely going to hurt more than just the wealthy.

drclau3• 5 years ago

For the vast majority of people the only piece of property they own in this sense is their home

I agree with what you said, and just wanted to make a minor(ish) correction: if you exclude homes bought w/ a mortgage which is still ongoing, probably the "vast majority" part does not hold, anymore.

gradys2• 5 years ago

One difference is that you benefit directly and personally from owning your home in that you live in it and don't pay rent. Owning equity in a business doesn't yield the same direct personal benefits.

giantg210• 5 years ago

I have an LLC. Taxing it (more) would be catastrophic. Why should we tax the assets and not the gains?

I actually don't like property tax on homes/land. I dont like the idea of the government forcing people out of their homes (usually the elderly). I prefer taxing based on income/gains because they actually have money coming in and largely removes the government seizure aspect.

azth2• 5 years ago

So yes, absolutely, we already do this.

Just because something is already being done doesn't make it right. Kick someone out of their house which they bought with their hard earned work and money is immoral and abusive and abhorrent.

mytailorisrich• 5 years ago

This is effectively a wealth tax and making people sell assets is indeed one of the consequences of such taxes where they exist.

These tend to be political and symbolic measures as in general they are neither really fair nor beneficial (in Europe the main result in countries like France has been to make people move to Switzerland, Belgium, London, etc).

Edit: A fair way to tax is to tax all incomes equally and not to offer any loopholes. But politically an issue (or not) is that people will still be able to claim that e.g. Bezos only pays x in tax although he is worth zillions, which plays on people not understanding that they are comparing apples and oranges...

swiley3• 5 years ago

The federal government is literally chasing us out of our own country.

SketchySeaBeast4• 5 years ago

Just to be clear, this would be a tax on "people who earn more than $100 million per year or who have more than $1 billion in assets for three straight years."

If you qualify and feel it's unjust, you could simply go and buy your own country.

snarf21• 5 years ago

I agree and it is the wrong approach. Rich people can always find ways to hide their money because they can afford to pay people to help them because of the sheer scale.

I'd rather see us get rid of the like kind exchange and also modify how we handle capital gains. Get rid of the long term rate. How about any time you make money, you have to pay tax on it. It seems more reasonable and simple. Additionally, we should start adding VAT on certain kids of revenue, especially digital advertising. It is far too profitable to propagate hate today. I'd also like to see additional taxes on real estate with an exception for everyone's personal residence. We need to make it too expensive to just sit on an asset everyone needs. I know some places like Vancouver have started programs like this but we need it more broadly. Personally, I'd also like to see an additional tax on buybacks. Companies should have to pay the corporate tax rate plus and additional rate to buyback their own stock.

baldeagle2• 5 years ago

For illiquid holdings, the plan only taxes them at time of sell (which, by definition is when they are liquid). The only thing that is taxed continually are things like stocks, that are pretty liquid (though can be put into structures that make it illiquid, which may be a tax avoidance strategy?)

anbende3• 5 years ago

Right, so this doesn’t hit real estate or private companies (yet), but it would hit many very wealthy people who have large holdings in publicly traded companies (often ones they founded).

Looking at you Bezos…

And it’s true stocks are quite liquid, but if the person never sells to realize gains, they will never be taxed…

dragonwriter2• 5 years ago

That said, the more I read about the low or no interest loans against investments that seem to be the primary “income” of the mega-rich, it seems more and more that something needs to be done here.

The problem isn't that people don't pay taxes on unrealized gains, the problem is that people pay low taxes on realized gains, and usually no taxes on the very large gifts and estates. A tax on unrealized gains of billionaires raises a little bit of money without dealing with the giant structural unfairness in the tax system—which, really, is why it might be politically viable.

Actual tax fairness would be simple and not require a tax on anyone's unrealized gains: special taxes (with low rates and broad exemptions) on long-term capital gains and estates and the givers of gifts would be eliminate, and all of those things would be regular income to the recipient. Windfall gains and gains requiring long-term effort/ownership would be addresaed by allowing everyone the option of advance tax recognition of future income and deferring windfall gains over a period of years, both tools to smooth income.

anbende3• 5 years ago

I’m not sure this solves the current problem of the wealthy living off loans against unrealized capital investments. One of the issues that this plan is trying to address is that these gains are forever unrealized, but the person still has access to billions of dollars as a result…

Or have I misunderstood your point?

retrac• 5 years ago

Do we force people to sell pieces of their property to pay the taxes on that property? (In short, for many types of property, yes, but it still has always seemed strange to me)

Not that strange, really. If your income tax at the end of the year leaves you in the red, you might sell some of your property to balance your accounts.

Just like how plenty a corporation, or rental property, has been sold because it was too expensive to hold profitably. In the case of land in particular, people who make poor use of it and fail to extract a profit probably should be forced to sell it. That's the market correcting their inefficient use.

kyleee3• 5 years ago

Seems reasonable in a business context but normal folks should have a more generous carve out for a single home, single property, etc. assuming utilized for personal use

scohesc• 5 years ago

I find it very hard to support that much spending when they haven't even figured out where they're going to get the money from.

Quit layering more laws on top of other laws. Review the current system because it's _obvious_ it's not working - and update the tax system. Too bad the government has so much corporate money baked into it's procedures that it'll never happen.

I glanced at the article and I'm not sure if I'm incorrect/misremembering, or if it's the classic NPR spin, but wasn't this part of the whole "taxing unrealized gains" plan as a way to pay for this?

thomastjeffery2• 5 years ago

I find it very hard to support that much spending when they haven't even figured out where they're going to get the money from.

How are you defining "figured out"? It sounds like you are expecting that to mean consensus, but the nature of politics is that every politician has "figured out" their own solution. So the only way to consensus is compromise, and that is what we are seeing here.

GaryTang• 5 years ago

I would support this if I didn’t already know it was going to be thrown away by the govt. I would wager the capital is more effectively deployed to benefit society where it currently is.

halfmatthalfcat• 5 years ago

Effective by whose standards? The market?

ldiracdelta• 5 years ago

I think it varies, but I'm open to the idea.

However much we tax Elon Musk is too much, because he is the driving force for many fantastic companies in the USA.

However much we tax Mark Zuckerberg is too little, because he has weaponized the social network for politics and profit.

giantg210• 5 years ago

I'm curious, what are the tax loopholes they talk of for the companies? It seems they are using credits, etc built in by Congress to support policy, like EVs and stuff.

This sounds overly complicated. Why not just fix the capital gains tax structure to match better with the standard tax rate for higher earners? Keeping track of individual's wealth seems a little tricky, especially once people start hiding assets.

varelse2• 5 years ago

QSBS deduction, LLC to Type S conversions etc. These won't be fixed apparently anytime soon if ever.

giantg210• 5 years ago

But how are those used as loopholes? Aren't these policies that were enacted for the the purposes of giving tax breaks to small businesses?

gjsman-10002• 5 years ago

How about we implement a tax for any person or entity with more than 10 homes. More than 10 homes, each additional home has a 1% or more federal property tax against all homes. 15 homes = 5% property tax on all homes. For the big buyers like Zillow or BlackRock this would be business-destroying. Small investors and flippers would be unaffected.

You’d see home shortages end at light speed. And yes home prices may crash but it’s a long term fix. People would probably appreciate it long term much more than this plan.

Or maybe it phases in over a 5 year period. Something though.

swiley3• 5 years ago

This will wipe put any wealth the middle class has. It's becoming very clear that the US has few years left.

whatshisface2• 5 years ago

Instead of taxing asset growth, they should tax the loan trick. For example Elon Musk uses loans taken out with stock as collateral, with no intention to ever pay them back - the banks are happy to take the collateral when the shareholder dies or something, because they're happy enough to put the debt on their books.

Someone1234• 5 years ago

I agree, except the confusing "instead of." You can do both.

whatshisface2• 5 years ago

Taxing asset growth would encourage business people to do all of their valuations "under the table" and never go public, to defer asset growth taxes. Valuations would become a tax accounting fiction.

gradys2• 5 years ago

Agreed. You could tax proceeds from this kind of loan as income and then make repayment tax-free. Or I suppose just tax that too as a form of disincentive.

pjc502• 5 years ago

Fairly sure this is illegal in the UK, and it was the enforcement against such schemes that blew up Rangers football club among others. https://www.gov.uk/government/publications/loan-schemes-and-...

InitialLastName2• 5 years ago

Right, it doesn't seem too difficult or unreasonable to treat the value of something used as collateral for a loan as an opportunity to establish its realized value from a capital gains perspective.

This could also help resolve the issue with taxing non-liquid asset values (like homes), in that you hit wealth when it is utilized (easy to judge) rather than when it is generated (often difficult to judge).

poorjohnmacafee• 5 years ago

Optics of it are bad given the CCP has been accelerating their crack down on billionaires, also known as state-independent power centers. This is the direction they want to take us I guess.

RNCTX2• 5 years ago

The trend in any economic system over time is going to be for those with wealth to extract more from those without it. Ultimately, the end game is either going to be cyclical revolution / violence, or some sort of redistributive tax scheme.

There's no abstract plan that lets Bill Gates own all of the nation's farm land, and lets Blackrock clear-cut all of the forests of the Amazon jungle, and lets Michael Bloomberg mass-arrest protesters of his political party after buying his way into office, and/or lets Google cover the landscape with armed ai-drone protected company towns.

That said, the only reason DNC senators have proposed such a thing is that they have Manchin and Sinema to prevent it from actually being voted on by the 30 other DNC senators who would also oppose it for the sake of their donors.

naravara2• 5 years ago

That said, the only reason DNC senators have proposed such a thing is that they have Manchin and Sinema to prevent it from actually being voted on by the 30 other DNC senators who would also oppose it for the sake of their donors.

No the only reason this bill is being proposed is because Sinema was a hard "no" on the corporate tax rate hike that was in the original bill, but she was amenable to Warren's 'Billionaire tax.'

RNCTX2• 5 years ago

No the only reason this bill is being proposed is because Sinema was a hard "no" on the corporate tax rate hike that was in the original bill, but she was amenable to Warren's 'Billionaire tax.'

And she'll be off to have a fundraiser with the people who want her to oppose this directly, I'm sure. And collect half on behalf of DNC PACs.

knodi2• 5 years ago

Lets face with real tax on the rich is never going to happen in the US as they hold and pull all the lobbying strings.

011000112• 5 years ago

The only way I'd support something like this is if they limited it to taxing investments when they are used. If a person holds onto an inflated asset they shouldn't be penalized. If they use that asset as collateral for a loan then I think it's fair game.

That said, I'd like to see an analysis of what the financial system would look like if we applied that sort of logic to all asset classes and included various entities like corporations, trusts, etc., before I'm fully sold on it.

I really appreciate the desire to reign in the massive wealth inequality in the world today. I'm just wary of these sorts of 'hackish' approaches. I think of the law like I think of source code. It should be clear, consistent, analyzable, and come with a clear set of testable goals and intentions.

swiley3• 5 years ago

There's a serious problem where people are just sitting on valuable land in dense areas, your proposal would exacerbate that.

nayuki• 5 years ago

We need https://en.wikipedia.org/wiki/Land_value_tax to avoid squatting, instead of property tax which considers the value of land + building.

011000112• 5 years ago

Yeah obviously there are tradeoffs. I'd need to see a more thorough analysis of this before I fully support it. It may be the case that there are too many downsides to the proposal. It also may be the case that a few other proposals in concert with this one can achieve the goals in a more comprehensive and productive manner.

numair• 5 years ago

1. Kill the insane Opportunity Zone tax dodge.

2. Kill GRATs. I personally know of at least one person who has been passed a gain of over a billion dollars through that nonsense. And that was a decade ago.

Oh, but wait, both of those things affect major donors...

Yeah, never mind, let’s just waste lots of time distracting the populace with something with a catchy name — “the Billionaire’s Tax” — that will keep lots of polarized discourse going while absolutely nothing gets accomplished.

knodi2• 5 years ago

So much spin on HN today, i hope you all read this before poo-pooing it.

" The tax proposal would apply to just about 700 taxpayers, Democrats say — people who earn more than $100 million per year or who have more than $1 billion in assets for three straight years. It would require them to give the IRS a detailed account of how much the assets they own gained or lost each year, a process called mark to market."

hnuser8472• 5 years ago

That’s what they said about the federal income tax too, back in 1913. Now it’s by far the largest tax that regular people pay on an annual basis.

furgooswft132• 5 years ago

Same shit was claimed about the Federal Income Tax. How'd that turn out?

InitialLastName2• 5 years ago

I mean, it funds a global economic hegemony without being nearly as burdensome as taxes in the rest of the developed world, so pretty great?

azth2• 5 years ago

Next think you'll hear is that they only want to additionally tax the 0.5%, then the 1%, then the 5%, then then.

hnuser8472• 5 years ago

It will start as a wealth tax on billionaires but within five years it will be a wealth tax on anyone with a net worth greater than 100k. That’s how these things go. Take a look at the history of the history of the federal income tax for an example. It started in 1913 as a mere 1% on the lowest income earner. By 1918, the lowest bracket was 6%. Now it’s 10%.

You’ll have to do some adjusting for inflation, but this document lists every federal income tax bracket over the past 150 years:

https://files.taxfoundation.org/legacy/docs/fed_individual_r...

pradn• 5 years ago

Well, maybe. People do vote. You can look at the strong opposition local and state level politicians see with any property tax or state income tax increase. There's a built-in regulating mechanism. Taxes are usually one of the top issues that swings elections from one party to another, so the democratic regulating mechanism works somewhat well, I believe. It's not an obscure topic that can escape democratic oversight, like subsidies for lumber harvesting in a few counties in Montana, for example.

thomastjeffery2• 5 years ago

Look, this slippery slope argument was valid, so the one I'm making now must be too!

I'm not convinced.

caeril2• 5 years ago

Valid point, but I'd note that it's backed off significantly since WW2, when top tax rates were close to 90%.

Tax rates seem to more closely track actual government funding requirements than they do any sort of moral justification of such. The only reason congress is considering this is that TSY yields are starting to creep up, making government funding through debt more expensive.

If 10y yields were still tracking around 1%, none of this noise would be here.

Workaccount2• 5 years ago

Just raise interest rates and use eminent domain to build housing in locally zoned off areas.

Of course we can't do either of these things (gov debt and people with power have money -> own land -> love strict zoning)

akshayB• 5 years ago

Problem is big companies dodge taxes and that needs a fix. Example -- you buy a smart phone you pay sales tax (consumer or normal people), what they should do is put something like 0.5% or some small Federal tax which companies have to pay on sale. Because most of the time companies park their profit offshore and pay nothing in tax.

Aunche• 5 years ago

There's no way a radical bill like this would ever get even close to being passed. Do legislatures in other nations waste this much time virtue signaling? Given her background, I have a hard time believing that Warren genuinely thinks that it's a good idea. I'm sure it will make her more popular though.

0xbadc0de5• 5 years ago

We need more tax revenue to fund our largess says bloated, inefficient government. More news at 11.

_-david-_5• 5 years ago

Would such a law be legal? It seems like it would be a direct tax that is not an income tax.

tmaly• 5 years ago

I would also like to see term limits while we are at it.

chrismcb• 5 years ago

Why? The amount of money this week raise is small. And of course, many will take steps to not pay it, making the asking even smaller. So why? Is it to get the "wealth"tax started so they can grow who it affects? There are already a ton of comments here about how it didn't affect them or it is a good idea to steal wealth from the rich.

Senate Democrats unveil a plan for a new tax on billionaires

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