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Thread: The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax

  1. Top | #161
    Loony Running The Asylum ZiprHead's Avatar
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    Quote Originally Posted by Ruth Harris View Post
    Quote Originally Posted by jonatha View Post
    Quote Originally Posted by Ruth Harris View Post
    My son was given renumeration for software reviews in cryptocurrency. It was not taxed until he sold it.
    Ruth
    Legally it should have been.

    Tax should have been paid on its fair market value at the time of receipt. At the time of sale any gain or loss would have been realized and taxed.
    In most cases, you would have been right. But the cryptocurrency he was given was considered valueless at the time of receipt. Each share was worth only thousandths of a cent. They did anticipate that the value would grow exponentially, which it did.

    What ZiprHead is proposing would have caused my son to owe taxes at the end of the year for the increase in value of the cryptocurrency since his acquisition even though he had realized no actual useful cash income. That is where my objection lies.

    Ruth
    He would owe taxes on the value the day it was issued just as income is taxed at your payday.

    And yes, the gains in the value of his income should also be taxed
    When conservatives realize they cannot win democratically, they will not abandon conservatism. They will abandon democracy.

    Poverty exists not because we cannot feed the poor but because we can't satisfy the rich.

  2. Top | #162
    Cyborg with a Tiara
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    Quote Originally Posted by Harry Bosch View Post
    Quote Originally Posted by jonatha View Post

    And as I tried to mention earlier, Loren is wrong. Banks do take stock as collateral, if you've got enough of it. Wiki Archegos...
    I worked at a bank a few years ago that did not take stock as collateral. But you're right, many banks do take direct assignments of company stock (publicly traded of course).
    What banks do take, is the fact that you have lots of stock as a reason to extend unsecured debt. You get a benefit from owning a lot of sock. A tangible, cash benefit. They use your “net worth” to determine their lending policy.
    - availabiliy and size of unsecured loans
    - loan and mortgage interest rates
    - credit card interest rates.

    It’s absolutely certain that my equity in my house and my equity in stocks have brought me cash benefits from banks. If I’m short on being able to pay my kid’s college tuition this semester, you can bet the bank will float me, and for a fairly low interest rate.

  3. Top | #163
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    A few days ago I made a key point, on which only Loren Pechtel has commented.
    Quote Originally Posted by Loren Pechtel View Post
    Quote Originally Posted by Swammerdami View Post
    Do you also agree with me on the following?
    Quote Originally Posted by Swammerdami View Post

    Charging a tax on the borrowings is unnatural; and taxing wealth has disadvantages. But, if the wealth has the form of shares in a profitable corporation, then there is a simple approach which achieves a similar end (as a wealth tax) without these problems. Simply place a 12% surcharge on the corporate income tax already in place. If the company is being taxed 8%, increase that to 8+12 = 20%. This VERY ROUGHLY may act like a one-time (NOT annual) 12% tax on wealth.

    We need not cover the details. Obviously the exact net tax (including the effect from the surcharge on market-appraised wealth) would not generally equal the total tax paid in other schemes. But that doesn't necessarily make this scheme wrong; and it may be a good starting-point.
    I dislike corporate income tax, period. In the end it just gets passed on to the consumer and thus it's a regressive tax.
    You have taken zero units of college-level economics. What do I win for deducing that? (Weren't you also the one in another thread that said doubling minimum wage would double ALL prices?)

    This sort of glib thinking is very common; there are many ways to refute it; I'm not sure where to start. SOME of the costs may be passed onto consumers; estimating exactly what portion "SOME" is may be difficulty. But the reasoning "I can't estimate SOME so will assume it to be 100%" is NOT the solution!

    What do you think of the following argument:
    There's no point in taxing executives' income; that tax just gets passed on to the consumer. Increase the executive's tax and his employer will increase the gross pay to cover that added cost. And increase the prices it charges to compensate.

    There's no point in increasing the tariff on imported gidgets. Workers will unionize and demand a higher wage to cover the higher cost of their gidgets. The employer will compensate by increasing the cost of the widgets it sells. Widget consumers, who work for a company that makes flidgets, will demand higher wages to compensate. ...

  4. Top | #164
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    Quote Originally Posted by Swammerdami View Post
    What do you think of the following argument:
    There's no point in taxing executives' income; that tax just gets passed on to the consumer. Increase the executive's tax and his employer will increase the gross pay to cover that added cost. And increase the prices it charges to compensate.
    On this one point, I find your argument less than persuasive. I have worked with numerous large corporations over the past 20 or 30 years and I have never seen executive pay increased due to their purported personal tax burden. Cost of living raises, yes, for all employees - but their personal tax liability has never been a factor in a company's executive pay increases. Virtually all of them base pay increases on performance.

    Ruth

  5. Top | #165
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    Quote Originally Posted by Ruth Harris View Post
    Quote Originally Posted by Swammerdami View Post
    What do you think of the following argument:
    There's no point in taxing executives' income; that tax just gets passed on to the consumer. Increase the executive's tax and his employer will increase the gross pay to cover that added cost. And increase the prices it charges to compensate.
    On this one point, I find your argument less than persuasive. I have worked with numerous large corporations over the past 20 or 30 years and I have never seen executive pay increased due to their purported personal tax burden. Cost of living raises, yes, for all employees - but their personal tax liability has never been a factor in a company's executive pay increases. Virtually all of them base pay increases on performance.

    Ruth
    You did understand that the paragraph you quoted was a parody, right? A parody of the glib "reasoning" we see too much of when the topics turn to economics.

  6. Top | #166
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    Quote Originally Posted by Swammerdami View Post
    Quote Originally Posted by Ruth Harris View Post
    Quote Originally Posted by Swammerdami View Post
    What do you think of the following argument:
    There's no point in taxing executives' income; that tax just gets passed on to the consumer. Increase the executive's tax and his employer will increase the gross pay to cover that added cost. And increase the prices it charges to compensate.
    On this one point, I find your argument less than persuasive. I have worked with numerous large corporations over the past 20 or 30 years and I have never seen executive pay increased due to their purported personal tax burden. Cost of living raises, yes, for all employees - but their personal tax liability has never been a factor in a company's executive pay increases. Virtually all of them base pay increases on performance.

    Ruth
    You did understand that the paragraph you quoted was a parody, right? A parody of the glib "reasoning" we see too much of when the topics turn to economics.
    Actually, no, I did not know that. It was not clear that you were being ironic. Sorry.

    Ruth

  7. Top | #167
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    Quote Originally Posted by Rhea View Post
    Quote Originally Posted by Harry Bosch View Post
    Quote Originally Posted by jonatha View Post

    And as I tried to mention earlier, Loren is wrong. Banks do take stock as collateral, if you've got enough of it. Wiki Archegos...
    I worked at a bank a few years ago that did not take stock as collateral. But you're right, many banks do take direct assignments of company stock (publicly traded of course).
    What banks do take, is the fact that you have lots of stock as a reason to extend unsecured debt. You get a benefit from owning a lot of sock. A tangible, cash benefit. They use your “net worth” to determine their lending policy.
    - availabiliy and size of unsecured loans
    - loan and mortgage interest rates
    - credit card interest rates.

    It’s absolutely certain that my equity in my house and my equity in stocks have brought me cash benefits from banks. If I’m short on being able to pay my kid’s college tuition this semester, you can bet the bank will float me, and for a fairly low interest rate.
    I think if banks can estimate value of net worth in their interest of security, so can the government can estimate value in interest of security of the public fund.

    So, we should absolutely be able to tax such "property".

  8. Top | #168
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    Quote Originally Posted by laughing dog View Post
    Quote Originally Posted by Loren Pechtel View Post
    Quote Originally Posted by Swammerdami View Post
    Do you also agree with me on the following?
    Quote Originally Posted by Swammerdami View Post

    Charging a tax on the borrowings is unnatural; and taxing wealth has disadvantages. But, if the wealth has the form of shares in a profitable corporation, then there is a simple approach which achieves a similar end without these problems. Simply place a 12% surcharge on the corporate income tax already in place. If the company is being taxed 8%, increase that to 8+12 = 20%. This VERY ROUGHLY may act like a one-time (NOT annual) 12% tax on wealth.

    We need not cover the details. Obviously the exact net tax (including the effect from the surcharge on market-appraised wealth) would not generally equal the total tax paid in other schemes. But that doesn't necessarily make this scheme wrong; and it may be a good starting-point.
    I dislike corporate income tax, period. In the end it just gets passed on to the consumer and thus it's a regressive tax.
    There is no consensus that a corporate income tax is passed on to consumers. None. While you are entitled to your opinion, your belief in something does not make it true.
    And your belief that it is paid by fairies doesn't make it true.

  9. Top | #169
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    Quote Originally Posted by Ruth Harris View Post
    Quote Originally Posted by jonatha View Post
    Quote Originally Posted by Ruth Harris View Post
    My son was given renumeration for software reviews in cryptocurrency. It was not taxed until he sold it.
    Ruth
    Legally it should have been.

    Tax should have been paid on its fair market value at the time of receipt. At the time of sale any gain or loss would have been realized and taxed.
    In most cases, you would have been right. But the cryptocurrency he was given was considered valueless at the time of receipt. Each share was worth only thousandths of a cent. They did anticipate that the value would grow exponentially, which it did.

    What ZiprHead is proposing would have caused my son to owe taxes at the end of the year for the increase in value of the cryptocurrency since his acquisition even though he had realized no actual useful cash income. That is where my objection lies.

    Ruth
    Barter is taxable. Being paid in a thing is still being paid, you owe taxes as if you had received cash equal to the market value of the thing on the day it was received.

    However, if the value was low enough the tax at the time of receipt would be zero.

  10. Top | #170
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    Quote Originally Posted by Rhea View Post
    Quote Originally Posted by Harry Bosch View Post
    Quote Originally Posted by jonatha View Post

    And as I tried to mention earlier, Loren is wrong. Banks do take stock as collateral, if you've got enough of it. Wiki Archegos...
    I worked at a bank a few years ago that did not take stock as collateral. But you're right, many banks do take direct assignments of company stock (publicly traded of course).
    What banks do take, is the fact that you have lots of stock as a reason to extend unsecured debt. You get a benefit from owning a lot of sock. A tangible, cash benefit. They use your “net worth” to determine their lending policy.
    - availabiliy and size of unsecured loans
    - loan and mortgage interest rates
    - credit card interest rates.

    It’s absolutely certain that my equity in my house and my equity in stocks have brought me cash benefits from banks. If I’m short on being able to pay my kid’s college tuition this semester, you can bet the bank will float me, and for a fairly low interest rate.
    Margin loans are not unsecured debt!

    If the loan amount becomes too great a percentage of the value of the shares securing it the broker will sell the shares to close out the loan. Some of the idiots on Robinhood recently got an unpleasant lesson in that.

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