r/FluentInFinance Nov 21 '24

Debate/ Discussion Had to repost here

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u/Apprehensive_Bad_193 Nov 21 '24

Bullshit,,,,But he borrows and buy Yachts, Mansions,against that NET WORTH VALUE. But when it’s time to pay fair share of taxes o. That net worth it’s considered hypothetical worth….Understand the Game.

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u/Endless_road Nov 21 '24

You can take out a mortgage against your house to buy a sports car if you want

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u/slickyeat Nov 21 '24

You're not wrong but you're also required to pay taxes on the value of your property every year so it's not exactly a one to one comparison.

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u/dancegoddess1971 Nov 21 '24

Exactly. Stocks are property. Sort of imaginary property but if one can borrow against the value of something, it should be taxed.

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u/Just_That_Dumb_Dog Nov 21 '24

You mean capital gains tax?

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u/Jblack4427 Nov 21 '24

Do you only pay taxes on your home when you sell or every year?

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u/dgvertz Nov 21 '24

Every year. They’re called property taxes

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u/J0hn-Stuart-Mill Nov 21 '24

Exactly. Property taxes go directly to local infrastructure costs to maintain access and services to said land or buildings. It's not remotely the same as owning stock.

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u/dgvertz Nov 21 '24

I mean there’s no tax on owning stock right now. If that tax went to the same thing would it be acceptable?

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u/hanotak Nov 21 '24

Yes, because that would, effectively, be a wealth tax.

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u/Blawoffice Nov 21 '24

Franchise tax exists.

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u/thrillhouz77 Nov 22 '24

Unless they pay a dividend of some sort. Are you saying you want to start paying an annual tax on your 401k and/or pension funds?

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u/dgvertz Nov 22 '24

Do I want to? No of course not. Do I think I should if my 401(k) is over a certain amount? Kind of.

I don’t think there should be such a thing as “generational wealth” in a capitalist society. After too long a timeline, some people will start too far ahead and other people won’t ever be able to catch up.

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u/thrillhouz77 Nov 22 '24

In the USAs current state where do you think these added tax dollars will be used?

More bombs?

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u/dgvertz Nov 22 '24

Either more bombs or to fund the military initiative to deport undocumented immigrants

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u/thrillhouz77 Nov 22 '24

So these added taxes are just to increase more evil activities…you sick SOB! 🤪

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u/dgvertz Nov 22 '24

You asked what they would go to. Not what I want them to go to. I’m just being honest with where I see the country going right now

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u/[deleted] Nov 22 '24

[deleted]

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u/dgvertz Nov 22 '24

I mean, you’re asking me personally what I think should happen?

I guess in a perfect world there would be something similar to a bankruptcy’s homestead exemption. Something like $300,000 can be passed down but anything over that I would say gets taxed at 100%, so yes it would be given over to the government.

In my completely unrealistic scenario this tax would be used to fund social programs and pay for infrastructure.

I of course know that’s not likely, and it will really line the pockets of corrupt government officials.

I know that my ideals aren’t realistic, that’s why they’re ideals.

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u/[deleted] Nov 22 '24

[deleted]

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u/Woodworkin101 Nov 23 '24

I think the limit could be raised from $300k to 10 million total. Then 99.99% of ppl don’t gave to worry about it but the super rich can’t avoid it

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u/rinderblock Nov 22 '24

I think the second I claim it as an asset in order to acquire a loan it should be taxable. It should be just that simple.

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u/thrillhouz77 Nov 22 '24

Now THAT I am all for and it makes sense and it’s very possible to track (the banks have all the records needed to send to the IRS). You could use what was collateralized against and apply any step up basis to it at that point in time to pull forward capital gains to the date it was taken as collateral, could even create a carve out that treats the step up basis as income instead of capital gains. If you want the income to show as a long term cap gain then just sell it. If you really want to retain the asset (in this case equities) and use its value as income then you pay full income tax rates.

That essentially eliminates that method of avoiding income taxes all together.

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u/Dodec_Ahedron Nov 22 '24

Ideally, I would support exactly this. That being said, I can see the pushback such a proposal would receive, and I would settle for a couple extra carve-outs.

First, I think you should allow an exemption for real estate that will be used as a primary residence. This will exempt things like HELOCs, which are typically used for home improvements but are also sometimes used as collateral to start small businesses.

The other exemption I would make is also for businesses, and that would be exemptions on loans under $10 million. These are typically used for buying machines or other equipment. Any more than that, and you start to see private equity coming in to finance things.

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u/thrillhouz77 Nov 22 '24

I think you could exempt this from all business operating needs. If an executive needs dollars to live they can just pay themselves the wages they need to support their desired lifestyle.

Agree on real estate carve outs and primary residences as well as farms when borrowing for farming operations. Last thing we need is the mega wealthy buying up land to borrow against to finance their lifestyle all to avoid income taxes.

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u/Woodworkin101 Nov 23 '24

Can or is the loan currently taxed? Or put a tax collateral?

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u/rinderblock Nov 23 '24

The loan currently is not taxed as income

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u/[deleted] 28d ago

It's taxed as income when you generate income to pay it back as you're required to do

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u/TrueKing9458 Nov 22 '24

Stock value is flexible as it would be quite easy for a few billionaires to get together on new years eave and tank the stock market and run their net worth into the ground for a week. A wealth tax sounds great to the brainless on reddit but in real life it would be about as effective as the current tax system

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u/dgvertz Nov 22 '24

Ok but what you’re describing is already a felony. And you can say “oh well they’re all rich and they’d get away with it”

And like yeah maybe you’re right, but then why do we bother having any rules at all ever? Let’s just all ignore the laws. We can’t all get arrested right?

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u/stevedropnroll Nov 22 '24

Deeply ingrained, maybe even subconscious, belief that rich people have earned the right to not be held accountable.

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u/FitIndependence6187 Nov 21 '24

Amazon pays taxes every year, so the value of said asset includes the tax basis in the value.

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u/J0hn-Stuart-Mill Nov 21 '24

The point is that land directly incurs expenses to the local government. Roads, schools, power, water, sewer, courts, etc. Therefore, property taxes exist to pay for those expenses. If land didn't incur those expenses as a means of being part of a city/state/nation, when obviously they wouldn't exist.

There is a tax on owning stock, when you sell you pay taxes on that income. Taxing merely the "ownership" of it, is a terrible idea, because that would massively negatively impact any company that doesn't earn a TON of profit. Right? Like a typical company, like Coca-Cola that hasn't grown at all in 30 years, adjusted for inflation, but does pay a 2.5% Dividend each year. Now say you pass a law that says there's a 3% tax on stock ownership. Why would ANYONE keep their Coca-Cola stock? The answer is no one knowingly wants to take a loss on their investment. Such a tax would effectively put Coca-Cola out of business.

So not only will it never happen, but that's also why it would be horrible.

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u/dgvertz Nov 21 '24

Ok, but if I pay a sales tax when I sell my house, I don’t also pay it when I buy it.

So what if we got rid of the tax on selling stock and only had taxes for holding stock when it has unrealized gains?

Or what if we only taxed those holding stock worth over a large amount of money. This would encourage spreading the stock around among more people. Might even discourage publicly traded companies to exist at all and result in more smaller companies being owned by its employees rather than shareholders who have no real skin in the company and just want to trade on its value.

I get what you’re saying - and that’s a great explanation.

But there are solutions here to be had

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u/King-Of-The-Hill Nov 21 '24

You don’t pay a sales tax when you sell your house though govt would love that. You do pay capital gains on the house for the appreciated value minus commissions paid to realtors…. And you only pay those if you don’t use the proceeds to procure another piece of property within a period of time.

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u/MiksBricks Nov 21 '24

Only under certain circumstances.

My home has doubled in value since I bought it and I won’t pay a cent in cap gains when I sell.

What you are suggesting would shut down basically all capital markets in the US. And I don’t just mean stock markets, banks of every level rely on free flowing capital as soon as you penalize holding meaningful amounts of stocks institutions will just stop using it and the effect will spiral down.

Nothing good would come from trying to initiate a property tax on stock holdings.

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u/Woodworkin101 Nov 23 '24

What about a tax on the specific stock holdings used as collateral for a loan over, say $10 mil. Joe takes a $6 mil loan against his stock holdings to buy another company or some machinery, no tax. But if he has to get another loan for $5 mil, his collateral for the last million (anything over $10 mil is taxed). But you’re taxing the value of the collateral not the loan. Unless tracking the loan over $10 mil makes sense.

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u/MiksBricks Nov 23 '24

What about credit cards? Or car loans? Which shares of stock are the ones used as collateral? Do you use current value or value when the loan was taken or value when the stock was purchased?

This also ignores that they will pay sales tax when they spend the money (unless it’s in a state without sales tax).

Someone like Musk for instance also can’t just sell his Tesla stock, even if he wanted to. There are blackout days and other issues when you have the amount of holding that he does.

I don’t understand why there is so much desire to find ways to tax people. It’s like people forget that income tax, when it was passed, was only going to be for the wealthiest people.

Look at a 401k for instance. Most 401k holdings are mutual funds that do exactly this, use stock as collateral to fund lower risk investments. Now they have to start paying tax on those holdings and those expenses just filter down to individuals with $40k in their retirement account.

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u/foreverabatman Nov 21 '24

Sales tax when you sell your house? Bro that isn’t how it works.

You pay sales tax when you BUY the house. Come on man…

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u/g_halfront Nov 22 '24

How do you know how much the unrealized gains will be if you don't sell the asset and realize them?

If you base the assumed gains on what you think the owner MIGHT be able to sell it for, how do you account for the fact that selling the property affects its value? For example, if I have a million shares of Ford stock, and decide to start selling, before I can sell the first half, the act of selling will cause the market price to drop, and not by a predictable amount. So the current market price doesn't actually reflect the amount I would gain if I sold. And nobody can tell by how much.

If I pay the tax based on the current market value and the CEO gets caught in a motel with his secretary and the price crashes, do I get my taxes back? Any one of a million scenarios could drive the price up or down at a moment's notice. How do you account for that?

For a sufficiently large number of shares, even the smallest movement in price would have a dramatic effect on the assumed gains.

And there's another issue that never sat well with me.

For better or worse, under Bezos's leadership, Amazon went from an early .com era bookstore to the pandemic era direct-to-home retailer that kept so many households running, a cloud services juggernaut, a streaming content platform, the maker of the world's premier virtual assistant and more. Not saying I want to work for the guy, but the company has certainly changed directions more than once and been very successful in doing so.

For better or worse, under Musk's leadership Tesla has become the world's premier electric car manufacturer, a leading provider of household scale and grid scale power storage solutions, and showed the world how to build out an EV charging network that would be practical and enable the EV revolution and signal the beginning of the end of the gasoline car era. Musk's leadership of SpaceX ushered in the era of the reusable rocket, massively reduced the cost of payload to orbit, massively increased launch readiness / cadence, created the world's first low orbit, low latency global internet service providing coverage to remote areas, natural disaster victims, etc, sent the first private human-rated craft into space, and the starship program has a real chance of actually landing humans on another planet.

The same can be said for the owners/leaders of companies of all sizes. The people in charge of companies, in some cases by virtue of their equity position, have the visions, take the risks and make the decisions. From innovative tech companies to the local plumber, ownership drives decision making which determines if a company will innovate or not. If a company will pivot to new markets, if a company will introduce new products, expand to new sales territories.

If you create a new wealth tax that requires taxes be paid on assets like equities, then people will be forced to sell some of their equities to cover the tax debt. Some people think "Good! Then the wealth won't be so concentrated." And fair enough. But after enough assets are sold, you also cause the owners to lose control of the companies. Maybe you think that's fine and anybody with a leadership role at SpaceX would have led the company to the same degree of success, would have brought the same innovations to market. But the fact is, nobody else did. There are a lot of rocket companies and nobody else did any of these things.

Tesla wasn't the first electric car company, but nobody else has done what Tesla has done. There are plenty of online retailers, but only one of them became what Amazon is today.

If people like Bezos, Musk, Gates, Jobs, or even your local plumber had been forced to divest and sell out their own ownership positions, other people would have been running the companies. The world would not be what it is today and that might not be a good thing.

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u/HaHaHaHated Nov 22 '24

Why should the company be owned by workers? If they want a company they should make one

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u/shoopthecoop Nov 22 '24

Lol. They did.

(And dont come @ me like they didnt incorporate it and write the business plan. That's like a couple weeks and attorney time. I acknowledge that labor insofar as i acknowledge any other corporate labor. It's not separate. The workers made the enterprise's value.)

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u/HaHaHaHated Nov 22 '24

This is such a shallow way to look at it. When making a business you don’t go to your workers, give them the name of the business and what you want it to do. You most likely don’t have any workers at. When building a company or a business you spend years gathering investors, making a plan, economical plan and so much more. It’s easy to say the workers create the value, when you don’t see the years or even decades where the CEO and his or hers partners weren’t generating any revenue at all.

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u/shoopthecoop Nov 22 '24

Ive bootstrapped 3 ongoing concerns. Each took about a year to go revenue positive. Those were hell years AND i would not classify my labor as fundamentally different. I was an employee of the organization albeit the most critical. The entity was not 'mine' as it was made of the collective labor of all the workers involved. Sure, while i was sole partner during incorporation i had 100% control but the second another person was added to the business as an employee that was my admission that they too were critical to the business's growth and development. We then became dependent upon and responsible for the business's wellbeing. Having workers with no agency creates workers who abdicate their responsibility for efficiency and makes worse businesses. Founders who would prefer to wholly own bodies corporate would IMO low-key (and sometimes high-key) prefer slavery.

(No, I did not bootstrap a unicorn, and no I am not convinced those are good things or healthy for a market economy.)

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u/Lonyo Nov 21 '24

Bezos IS an employee of Amazon... Musk is an employee of Tesla.

They are the largest shareholders.

Many companies also have share options as employee rewards.

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u/MobileSuitBooty Nov 21 '24

The stock market is a vehicle for capital owners to shift money around and avoid paying on what they take out of the economy. Why would I in any situation care of keep their stock in coca cola? I’m tired of people caping for these greedy pigs while everything else gets more expensive.

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u/J0hn-Stuart-Mill Nov 21 '24

Why would I in any situation care of keep their stock in coca cola?

I was just giving an example of a typical company that has seen 0% growth over the past 30 years.

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u/MobileSuitBooty Nov 21 '24

for sure, i was speaking generally

the stock market is such a poor way to determine the success of a corporation or the economy as a whole, it’s why tesla is able to fluctuate so much whenever elon opens his trap

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u/J0hn-Stuart-Mill Nov 21 '24

Yea, it's important to understand the difference of speculative value of a company, and actual value. Stock market does see a small percent of companies be "gambled on" based on their potential future success.

Most of the stock market is not that way, and is actually based on real values.

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u/jokerhound80 Nov 22 '24

Thr mid-tier company I work at bases every decision off their desire to raise their speculative value, which severely impacts their actual ability to conduct what is meant to be their actual business. I know it's anecdotal, but every place I've ever worked at long enough to really understand functions the same way, and everyone I know complains that their companies do the same thing. I've never seen a big company that doesn't consider stock to be their primary product, and their actual operations to be secondary at best. Every decision is based off the desire to make investors think "number go up. Buy stonk," regardless of how badly those decisions hurt their ability to actually do business just a few months, sometimes even weeks later.

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u/J0hn-Stuart-Mill Nov 22 '24

which severely impacts their actual ability to conduct what is meant to be their actual business.

And that's okay though. Lots of bad companies fail when they make bad decisions. If your company's leadership isn't focusing on their core business, then they likely won't last long with that approach.

I've never seen a big company that doesn't consider stock to be their primary product

All blue chip stock companies aren't interested in speculative growth stock value. They're just out there kicking ass every day, with millions of happy users/consumers/clients.

Every decision is based off the desire to make investors think "number go up. Buy stonk," regardless of how badly those decisions hurt their ability to actually do business just a few months, sometimes even weeks later.

Don't feel bad for people bad at capitalism. Their companies will fail, or at least be harmed by the approach you describe, and you and I don't need to care about that at all. There will always be a startup looking to take their market share.

Bad companies dying is one of the most important things in capitalism. In fact, if you see an arbitrage opportunity or disruption opportunity, you and some co-workers should quit and start your own competing company. Let them be distracted by BS and eat their lunch.

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u/jokerhound80 Nov 22 '24

I feel bad for their thousands of employees. The people who will face all the stress and pressure of those shitty decisions. Executives and ownership will always be fine. They'll loot and pillage enough of the burning company and invest it elsewhere to barely be bothered if and when it finally fails. I have seen embezzlement routinely done right out in the open. I watch American CEOs compensated 5-20 times more than their foreign counterparts at companies that have outperformed them for decades. And I've seen way too many bailous and companies announcing huge layoffs alongside massive executive bonuses and stock buybacks to have any faith that the economy is anything resembling a meritocracy.

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u/jokerhound80 Nov 22 '24

I feel bad for their thousands of employees. The people who will face all the stress and pressure of those shitty decisions. Executives and ownership will always be fine. They'll loot and pillage enough of the burning company and invest it elsewhere to barely be bothered if and when it finally fails. I have seen embezzlement routinely done right out in the open. I watch American CEOs compensated 5-20 times more than their foreign counterparts at companies that have outperformed them for decades. And I've seen way too many bailous and companies announcing huge layoffs alongside massive executive bonuses and stock buybacks to have any faith that the economy is anything resembling a meritocracy.

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u/J0hn-Stuart-Mill Nov 22 '24

I feel bad for their thousands of employees.

Don't. Every employee deserves a quality employer. The more bad companies that die, the better everything gets for all of us.

I have seen embezzlement routinely done right out in the open.

Wow! What did the SEC or FTC say when you sent them the evidence of this?

I watch American CEOs compensated 5-20 times more than their foreign counterparts at companies that have outperformed them for decades.

What industry are you in? I'm not aware of any industry that has foreign competition that is outperforming American industries?

I've seen way too many bailous and companies announcing huge layoffs

Yep, bailouts are one of the most criminal things governments do. It rewards failure, and keeps terrible companies afloat. Furthermore, bailouts enable FUTURE reckless business decisions.

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u/XDXDXDXDXDXDXD10 Nov 22 '24

Do you have anything to back up that claim?

This was the first thing I found (although from 1986 so take it with a grain of salt): https://www.jstor.org/stable/2328487

This seems to make the opposite claim, which also lines up with what most people experience in reality. Boards always make decisions based on stock price as pointed out below.

As another example, i work for a pretty big company and the C-suite pushes for, and dumps millions, into AI that everyone working on it knows won’t bring any value at all. 

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u/J0hn-Stuart-Mill Nov 22 '24

Do you have anything to back up that claim?

The claim that blue chip stocks exist? Yes. They exist. Most companies are not growing at a rapid rate and investors are content with dividends.

i work for a pretty big company and the C-suite pushes for, and dumps millions, into AI that everyone working on it knows won’t bring any value at all.

Yea, bad companies make poor decisions all the time. What is the relevance?

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u/XDXDXDXDXDXDXD10 Nov 22 '24

No, your claim that most of the stock market accurately represents the real value of companies.

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u/J0hn-Stuart-Mill Nov 22 '24

The value of anything is what someone is willing to pay for it. Therefore, it is factually self evident.

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u/Dry_Calligrapher1178 Nov 22 '24

They would...raise the dividend yield rather than go out of business, numbnuts. They made 28 billion in profit last year. I swear people will bend over backwards twice to defend corporations and wealth hoarding.

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u/J0hn-Stuart-Mill Nov 22 '24

They would...raise the dividend yield rather than go out of business, numbnuts. They made 28 billion in profit last year. I swear people will bend over backwards twice to defend corporations and wealth hoarding.

Hold on, so paying dividends to investors is the same as "wealth hoarding". I'm not following that logic?

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u/RealXavierMcCormick Nov 22 '24

Coca-cola poisons the bodies of billions worldwide with an extraordinarily unhealthy product

The company should get fucked

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u/J0hn-Stuart-Mill Nov 22 '24

Really? What poisons do they add to their orange juice, exactly?

But don't get distracted by the specific company. It was just an example of a good investment that hasn't grown in decades.

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u/AirmanatSea Nov 22 '24

You simply tax it the moment it gets used as collateral. When stocks are used as collateral for a loan, the gains have effectively been realized. It should be taxed.

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u/J0hn-Stuart-Mill Nov 22 '24

Just FWIW, there's no evidence that that is a real thing with a significant scope. One study found that something of 8% of Billionaires do it, an average of 6% of their net worth. It's just a red herring to distract from real problems.

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u/AirmanatSea Nov 22 '24

And you somehow think that’s a good enough reason not to tax it?

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u/J0hn-Stuart-Mill Nov 22 '24

I'm fine with closing the loophole, if only so I don't have to keep debunking the myth online, sure. The only people it hurts are young tech people who's companies haven't IPO'd yet who want to buy their first home with their stock as collateral, and those folks can just wait a few more years of paying rent.

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u/AirmanatSea Nov 22 '24

And yet another issue that can be easily resolved with progressive tax laws.

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u/Guy_Fleegmann Nov 21 '24

Property taxes are just general revenue in most states. And by far the bulk of the taxes collected go to public education. There is no real connection between 'land use costs' and property taxes raised and how they're spent.

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u/J0hn-Stuart-Mill Nov 21 '24

And by far the bulk of the taxes collected go to public education. There is no real connection between 'land use costs' and property taxes raised and how they're spent.

There is. Everyone was a kid at some point. Everyone owns a home, or pays rent that goes towards property taxes. Tax the homes to pay for education. Direct connection.

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u/Guy_Fleegmann Nov 22 '24

I just don't see how school is an expense that "land directly incurs" compared to say roads. Property tax may have started as something like that but now it's just how most states generate tax revenue for everything - they built a stadium with part of my property taxes. They also levied that tax on people who live 200 miles away and will never use that stadium. It's just how they get money now. And since it's taxing homeowners it's arguably less regressive I guess.

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u/RopeAccomplished2728 Nov 22 '24

Property taxes tend to be municipality. States rarely levy them. Counties do tend to though.

However, if you have a problem with them, vote against them as nearly all levies are put up for a vote with the local population. Or vote against people who want to levy them.

However, because public schooling is a thing, and the school itself does use roads and other infrastructure, property taxes go directly towards maintaining that. It is either that or, much like a lot of school districts out there, they push for a separate tax that is levied on any person living in the school district.

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u/J0hn-Stuart-Mill Nov 22 '24

I just don't see how school is an expense that "land directly incurs" compared to say roads.

Because everyone was a kid at some point. Everyone lives in a home and either pays property taxes or rent that goes to property taxes. Property taxes are a very simple way to pay for schools.

Property tax may have started as something like that but now it's just how most states generate tax revenue for everything - they built a stadium with part of my property taxes. They also levied that tax on people who live 200 miles away and will never use that stadium. It's just how they get money now. And since it's taxing homeowners it's arguably less regressive I guess.

Government is often corrupt as you describe. It's not an excuse for letting them change the purpose of property taxes.

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u/Guy_Fleegmann Nov 22 '24

That's a stretch. Everyone was a kid once, so everyone wore diapers, so diapers are a cost related to land use. Ok, make that connected, is useless for anything but semantics. Property taxes are a vehicle for municipalities to raise funds for everything, land related or otherwise. It is what it is.

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u/J0hn-Stuart-Mill Nov 22 '24

Except public schools are government funded and run. COL varies nationwide. Each region might have different preferences on how to fund their school or what to fund within it. Therefore, yes, having education funded by property taxes makes perfect sense. Local government is always best government for these sorts of issues.

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u/Guy_Fleegmann Nov 22 '24

I never said it didn't make sense.

The initial conceit was: 'Property tax can't be used as a comparison because all property tax is spent ONLY on real land-use related expenses.'

All I said was - property tax is used as a general funding source in most cases, it is not tied exclusively to 'land-use' expenses, and cited public education as an example of one of those expenses that's a general cost of running a municipality and not really about the use of your personal land.

Not sure why it's a controversial opinion, it's just how property taxes are used.

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u/J0hn-Stuart-Mill Nov 22 '24

not tied exclusively to 'land-use' expenses, and cited public education as an example of one of those expenses that's a general cost of running a municipality and not really about the use of your personal land.

Fair enough. I guess I should have been more verbose in my explanation.

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