Jesus, this could be up there with your worst posts. You do realise that not being a money hungry cnut that spends their time milking the teet, and should be in private enterprise is actually a good trait for a politician? Do you realise what sort of state a country could be in if all politicians only wanted good for their country, and didn't give a shite about lining their own pockets? Maybe not your capitalist, Muskian utopia, but those not on Silicon Valley wages would probably have a nicer life.
Elon Musk's epic bacon adventures
- Thread starter Eboue
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No one should be a politician for 60 years. Even worse, if in those 60 years he has achieved feck all.
I know, I am not a wannabe commie, so by default it makes my post terrible.
It's pretty hard to argue with someone in good faith when they make posts like this and comments like yours in previous posts so we'll just have to agree to disagree. It's clearly an ideological thing, which I have no constructive words for in response really.
I would like to know how people plan to tax unrealized wealth though, all too often it comes across as populist nonsense. If it can be done in ways that don't kill the golden geese then fine but damned if I've seen a workable proposal.
I've no idea myself, I only even have a rudimentary understanding of it. All I know is if I were as wealthy as Musk, or Bezos, I'd be spending a significant amount of my money helping those in poverty.
I agree on an unrealised gains tax is a stupid tax to impose. But that's not the point others (or I) are making. And the truth is, Musk, Bezos (et al) are clearly tax avoiders and not necessarily tax evaders.
Which is why we, from a societal-wide point of view, need to expand our tax capability, looking beyond traditional forms of taxes and start looking at a wealth tax. If a person's wealth (note: not income) crosses a threshold then it should open up to a new tax banding. This would lead to a fairer and more equitable system, as the current hypercapitalist way is outdated and not fit for purpose. The current tax models have been set in stone for ages and never took into account people like Musk, Bezos and the other 5% who have such exorbitant wealth. That needs to change.
Ultimately, a wealth tax would be the same as a tax on unrealized gains. The reason is that these people have 90%+ of their wealth (for many, 99%) tied to their shares in their company. I think introducing such a tax would cause problems on several ways:
1) You are asking people, who are capable of running well their company, to sell part of their company just because the stocks have gone up. What if tomorrow (or more likely during the next recession) stocks go down? Are you gonna give them a refund?
2) By doing so, you are either using the state to get partial control of the company (getting stocks), or diluting the control of the company by putting more stocks in the market (with the owner being forced to sell them).
3) This inevitably mean that the shares of the company go down (because many are put in the market), in turn harming smaller investors (and your pension fund who likely is partially based on index funds of stock market). Probably the only winners here are predatory hedge funds who will use the situation.
4) This causes another problem that the control of the company going from capable CEO-founders to people who are there short term, or speculators who care nothing about how company is gonna do long term. In turn, many great companies will get gradually destroyed.
So while it would be nice to see Musk or Bezos losing part of their wealth, it would also harm the markets, small investors and ultimately the economy. I do not see how anything good comes from this, which is why I think it is a bad proposal. To be fair, those who propose such things know this too. They also know that it has 0% of happening (you won't be able to get 1/3 of either chambers voting such an absurd proposal, then needs to be signed by the president, then likely go in the Supreme Court where it would get defeated). So it is pure populism, the billionaires are bad, let's tax them, without a plan how to do so (you can't) and how it would help people (it won't).
What I would like to see instead is taxing the stock buybacks. Companies like Apple purchase stocks on value of 70B or so per year. Stock buyback and dividend is roughly the same thing, sending money back to the shareholders (by dividends, you send them money directly, by doing stock buybacks, their percentage of shares in the company increases so it is mathematically the same thing). But unlike dividends, stock buybacks are not taxed, which is why many companies prefer doing that instead of dividends (to be fair Tesla does not do this, and Amazon is not big in this too). This is a borderline loophole, that would make sense to close, and would have some chance of being closed if someone seriously would push for it. But because it is not as easy to explain as 'billionaires bad, tax them', and because it actually could happen, no one talks about this.
Don't the Dutch have a different tax concept on this? They tax fictitious gains, whether you had actual gains or not.
https://www.valuespreadsheet.com/bl...ould-warren-buffett-prefer-to-live-in-holland
If making people pay their fair share has such terrible consequences for the international financial system at large, maybe that system is intrinsically and fundamentally flawed to begin with and needs to be changed itself?
What is the fair share though? Right now, unrealized gains are not considered a fair share. Not in the US, not in the EU, not in Norway, not in China, not anywhere I am aware of.
I mean, you lied of undermined you point by not even bothering to research this. There are countries that tax unrealised gains.
I love that 'Commie' and 'Marxist' insults are fashionable again 
Anyone who wants a fairer world is a damn communist i tells ya!!!!
Anyone who wants a fairer world is a damn communist i tells ya!!!!That's interesting, although this means that you actually get taxed less. 1.2% in unrealized gains, vs 25% in realized gains. In the hypothetical example that the articles gives, Buffet would actually end with twice as money under the Dutch tax rules. Which is the opposite of actually asking billionaires to pay more in taxes.
I mean when you have the ability to spend 99% of your wealth and still have more money than most people will ever earn in their lives, a fair share is probably at least 50% of that, in my opinion.
If you mistake their wealth for cash, sure. But when the wealth is in stocks that is not the same. Just that the stock value will decrease (it happens when founders sell), which means that the wealth gradually evaporates. Furthermore, the founders would lose control of their companies gradually, by being forced to sell shares, and thus have less voting rights. More often than not, that is bad news for the company.
Thing is, it is a very complex situation that has become from Sanders, Warren and others you are either with billionaires or with the people.
Taxing companies more (for example buyback shares), or a capital gain in inheritance (when it is over some threshold) should be less controversial, easier to implement and actually work better in practice.
Dude, let's be realistic here and understand what makes up their wealth. As @Revan has pointed out, most of their wealth is in equity.
I'm sure there's better ways to do this. First of all, the big tech companies are so valuable partly because they just outright dominate their respective industries. There's no existential threat for Google in the West. If there were 5 search engines chewing market share of eachother I don't think the Google stock would be as highly priced. So what you essentially want is less mega-corporations and watch the net worth of the founders decline.
I'd also argue the highest priority is getting rid of tax havens worldwide and start fecking taxing these mega corporations more heavily whereever they operate.
The Dutch also have VAT. I think America doesn't have that on a national scale, I think the states themselves have different sales taxes.
Yeah, Bezos and Musk and the likes are cash poor, they literally can't touch any of their wealth.
I think it is in states level, too. But that should effect only when you buy some product, so not sure how it applies here.
They can touch their wealth. But to do so they need to sell stock/options. Which means that they get taxed the moment they touch their wealth (rate is 10-25%, they likely are in 25% considering that they belong in high-tax bracket).
I don’t mistake cash for wealth, just like you aren’t really mistaking tax avoidance for tax evasion. I am not sure why I bothered to continue as your line was drawn in the sand from the off
Thanks for the write up, but you yourself are positioning an extreme example here and extrapolating it. The fundamental principle that underpins a wealth tax (as I see it) is to bridge the gap between the rich and the poor, and to reinvigorate the economy and redistribute wealth...which is ultimately what we should be aiming for in an egalitarian society.
I'm going to use a hypothetical example with arbitrary numbers, but the principle that underpins the example is what I'm getting at.
Firstly - for a Musk or Bezos who have most of their wealth tied up in their own companies stock - let's say hypothetically, the current tax models exist, but there is also a wealth tax for people who own over £10m in stock, whether it's their own companies stock or whatever (and let's just totally ignore property portfolios, bonds, gilds, forex, crypto what have you for the sake of simplicity). This is saying anyone can own up to £10m worth of stock totally tax free, and will be paying income tax, CGT (but I would actually change this tax if this wealth tax is implemented), IHT etc at the normal rate.
What I'm suggesting is that for anyone that crosses that £10m barrier, a wealth tax kicks in of 2% up to and including £100m, meaning the absolute lowest you pay is £200k is payable at the lowest end and £2m at the top end. If you're a owner of your company and your shares are worth over £10m, the benefit of this wealth tax is (as I see it) two fold -
1) Your liquid assets / cash reserves can pay off the wealth tax payable - basically taking money out of an idle bank account which is earning interest and putting it back into the economy.
2) You sell shares to cover the cost - basically taking untapped wealth held in a share and putting it back into the economy.
And yes, I've plucked this £10m-£100m banding out of thin air to make a point, but I would have a further banding of £100-500m where the rate would be 1.9%, and then £500-1bn of 1.8%, and so on (but bear in mind these figures are crude, and arbitrary, and it's the underlying principle which is what I'm getting at).
To your point 1 - if your shares go up from £10m, to £20m, then again, the process repeats and in that years time you would have made income from your business via wages, BIKs, dividends, as well as the benefit of each share you've owned being worth double than what they were last year. So, a win-win for the owner of the business as well as those in poverty as this wealth that's tied up will be redistributed in society. If your shareholding falls under the £10m barrier, then there's nothing to pay. If the value falls from £20m, to £15m, then your liability is reduced from the previous year. But stays at that 2%. Also, bear in mind, the tax of 2% for idle cash is probably less than that same amount of cash is earning interest sitting in a bank account for these high net worth types.
To your point 2 - this goes to my earlier point on you've positioned an extreme example. The state wouldn't be the owner of the shares, but would receive the monetary amount required from either the release of cash reserves sitting in an account, or the wealth held in a gain from the selling of a share to cover the liability. Again, the principle is about redistributing the wealth and reinvigorating the economy. In terms of control of the company, Bezos and Musk only own 10% and 17% of the equity of their respective companies (but may have a higher proportion of the voting shares), and Bezos only recently stepped down as CEO of his anyway, so I don't buy into the control argument. I'd be interested to know what shareholdings companies in the £10m-£100m are owned by >50% shareholders. I don't have that info to hand.
To your point 3 - I'm not sure I agree - whilst there would be a stock price decrease, if, and only if, the 2% liability has to be covered by a sale of shares...which when you're operating in the Bezos, Musk stratosphere wouldn't likely be paid for by the sale of shares. And we're talking about 1 point in the year here. If your company has an amazing year, and you see your share price increase by 10,15%, the amount it would decrease due to a sale will be much smaller. Tesla's share price for instance increase by 740% in 2020. Amazon's was 74%. The amount of decrease is a minor dip when compared to their overall increase.
To your point 4 - Part of this is answered in my 'to your point 2' section. But in the history of finance, there's never been a major destruction of a great company due to the reason you posited. The main destroyers companies tend to be ineffective or corrupt management, poor cash flow, or changing macroeconomic/technological environments. I'd be interested to see any examples that have led to the destruction of a company due to the reason you said.
Now the flip side of all of this if a person hoards cash instead of tying it up in stocks - how would they be affected by a wealth tax that starts at £10m. If they had £10m cash sitting in an account, they could either -
1) Pay the £200k to the government - again, taking cash out of an idle bank account and paying it over to the government, thus stimulating the economy via public utilities and services.
2) Spend £200k reducing the balance to be £980k...via investing (which comes with its own tax breaks if they are EIS, or SEIS), on charity (which comes with its own tax breaks), on buying a fancy new car (which comes with VAT), but this is all driving to the same point - essentially taking this trapped wealth and redistributing it into society.
I'm not saying the above is a well thought out strategy that is robust enough to work in every facet of society, but the underlying principles of a wealth tax are sound and make sense. The way we're currently headed as a society is pretty depressing. Going by current estimates, Boston Consulting Group have said by now (i.e. 2021), that 70% of US wealth is held by their richest 1%. Other estimates say it's the top 10% in the US that own 70% of the wealth. Whatever the true statistic, the only way to get some of that wealth back into the public domain is via a wealth tax, that will serve both the rich and the poor. It's by the redistribution, that the economy can be reinvigorated as well as alleviating poverty.
Their wealth does not solely exist as stock in their companies.
Not really- they deliberately don't take salaries to avoid income tax.
It seems strange to me to argue two people with combined wealth of over $300bn should not pay any personal tax because they might have to sell a few shares. They hardly live the lifestyles of cash-poor folk.
99.99% of it will be, which is how they avoid paying tax. If they were taking money from shares they would have to pay tax for it as it's not an unrealised gain any more.
As other people have said, they should probably be forced to pay themselves a minimum salary or take money from shares at a percentage which is known about in advance so the market knows what has to be sold per year. They can of course buy straight back in as the gains would have been taxed as soon as they cashed out.
So you're trying to tell me that these people notionally worth 100s of billions don't even have 1b in assets and liquid wealth? I think that's nonsense. So they might have to sell a few evil lairs to pay a tax bill, lesser mortals have to do that all the time. Bezos managed to sell billions in Amazon stock to fund his little jaunt into space, I couldn't give a flying feck if he has to do that to pay a tax and ends up double taxed.
The business world is not going to crumble if these people have to regularly liquidate some stock to pay a tax on their wealth. There isn't a person in the world that can really claim they are paying their fair share, when us regular people actually lose half of the 'wealth' we work for each year to taxes.
That's the point, he would have been taxed on that when he cashed out and if they do have 1b in liquid wealth, they would have been taxed on that too at the time. I think we're agreeing that they need to be taxed more, but the vast majority of their wealth (way more than 1b) is not liquid and that's what needs to be looked at in regulations.
They definitely avoid tax, but when you have cashed on 1b why would they want to cash out another 200b when they have everything they want already? There is no benefit to them in having more and the current rules don't force them to do it.
You just made a big point out of the fact that no countries tax unrealized gains. A lot of of countries do tax wealth, though, and even though it's far from all countries it's not a very controversial tax among economists. It's seen as an ok alternative, with some obvious drawbacks (like most taxes, unlike the Pigous and arguably land tax).
So, if a wealth tax ulitmately is the same as a tax on unrealized gains, then a tax on unrealized gains is perfectly normal, perfectly fine as far as taxes go, and a tried and true option. Let's go, then, yeah?
This is actually an interesting post, thanks. My rebuttal:
1) In general, a small (percentage-wise) tax in unrealized gains might be ok. I was mostly talking about the absurdity of taxing the unrealized gains as if they were realized gains (10-25%), an 1-2% might be ok (which would be the equivalent of Dutch wealth tax).
2) Saying that, fundamentally I am not sure if ideologically I would support such a thing. The mantra of capitalism has been that the state can tax you on profit, but they won't take your property. With such a tax, they are actually doing so, by forcing you to sell part of your company.
3) I agree that the current system is not properly working, and the top 1% should not hold 70% of the wealth (I actually thought it is more). It is not fair, and it is a ticking bomb. Not surprisingly, it has made many Westerners being found of socialism/communism which is far worse. When things aren't right, people are unhappy and things that are far worse would appeal to them. In any case, this could easily cause civil unrest, in fact, if we have learned anything from the history, we should do things to spread the wealth better, or pay the price in the future.
However, I am not sure that a tax on unrealized gains is the solution. Personally, I think all of the following should be done before:
a) Tax stock buybacks. This is dividend in disguise but untaxed. There is no reason to be untaxed, so tax it. There are literally hundreds of billions of dollars spent by big tech companies alone in stock buybacks, and this should be taxed at the same rate as dividends.
b) Close the loopholes that companies use to avoid taxes.
c) Possibly, tax companies who are investing money in other sectors. Companies like Amazon do not turn much profit because they are expanding all the time and putting every 'profit' back in operation. If Amazon retail is profitable but they are using that profit to grow Amazon cloud, they do not pay taxes in retail. Close this loophole (definitely easier said than done). Companies like Berkshire Hathaway (or Tencent in China, or Softbank in Japan) use money to buy other companies, in turn not getting taxed for that amount of money, cause it is operating expenses, not profit.
d) Put a big inheritance tax. I am not saying to tax someone when they inherit a car or a house from their parents. But if Elon Musk dies today, his kids are gonna inherit 300B (although it might be 100B by tomorrow after stock's decrease), and there is no reason to not tax this. In fact, I would go as far as to tax this as income tax, which has a much higher rate and is dependent on the US state (and most of Europe), it should be around 40%. Poor kids, they would still be fine with 60B, I guess.
e) Anti-monopoly laws. Actually, we have the laws, we just need to use them. If Google, Amazon, Apple, Facebook, Microsoft are harmful for society (I do not think they are to be fair), then split them. This has happened in the past, but now it is barely mentioned. I am not sure that this actually managed much more than evaporating wealth, but for sure, it will make the ultra-rich, less rich.
Not solely, but mostly. In case, of Musk, pretty much his entire wealth is tied to Tesla, SpaceX, and his other companies. He has a shit house, for example, that probably would cost 100k or so. In case of Bezos, while he has many properties, still I would think that 99% of his wealth is tied to Amazon and Blue Origin (otherwise he woudn't be selling stock from Amazon that get taxed 25% or so to fund Blue Origin). There are others who are diversified like Gates, but even there, it is mostly stocks and bonds.
I do not think there are many (if any) people who hold 1B in cash. Though there are companies who do so, in some case over 100B.
What's the point, my whole point is that I don't care if they have to sell taxable assets to fund other tax bills, because they are literally swimming in money.
Part of the reason you have these mega corps and sky high valuations is it's a networked world now with billions of potential customers (as well as low interest rates inflating asset values). Thats different to the past.
It's not really that different. Standard Oil was as important as any of the tech companies are now. And it got there in a similar way to the tech giants, by taking advantage of a world that was changing too fast for legislation to keep up. When legislation did catch up (or attempted to), they broke the company up. There's no reason why Google, Amazon and Facebook should have such immense power. And the hell of it is that their power is just growing.
This is Elon Musk thread, but his negative impact is mostly limited to people who directly work for him and him being a cnut. Tesla and SpaceX aren't going to topple governments. Facebook, in comparison, has basically poisoned global discourse, possibly irreversibly. Amazon is trying to be US company store. Luckily European labour laws have basically stopped them from doing the same here, but they're trying.
I'm not going to bother looking this up, but if we compare Tesla or Amazon to the Dutch East India Company or whatever I doubt we'll find that Musk and Bezos are getting rich because they just can't help it (sorry)/ because the world has changed. They're getting rich because we let them, not because of any new tech.
Well standard oil if I remember right was mostly a US based combine addressing a US market - google, apple etc are fully globalised. That said I agree these companies need to be reigned in, but I'm not sure it's as easy to break them up given network effects, and global footprint, as it was for standard oil. Certainly they need far tighter regulation and they are going to get it. But that's for another thread.
Tesla looks ludicrously over valued, mind.
There’s a certain irony to you discussing Standard Oil in this conversation, considering its founder (actual founder, not someone who joined a few months later and now takes all the credit) was a renowned philanthropist and used huge sums of his wealth to help people.
If you mean they are getting rich because we let them build companies that people want to invest in and buy products from, then there is nothing new in that. Rockefeller was richer in relative terms than Musk is now and the break up of standard oil actually made him richer.
The whole argument collapses when you consider that these people could just take loan to pay the tax and use their shares as collateral.
Never understood the hero worship for elon. Yeah like the american dream and all but he's made out to be martyr because he has to pay more in taxes. Anyone with 1 billion dollars is quite easily set for life let alone someone with 280 billion
He can't help amassing this fortune, he holds shares in the company and if the shares increase in value, then his assets increase in value too.