a thoughtful web.
Good ideas and conversation. No ads, no tracking.   Login or Take a Tour!
comment by mk
mk  ·  19 days ago  ·  link  ·    ·  parent  ·  post: The billionaires are angry

This is a dumb idea. The problem is billionaires taking loans on those assets. Tax those loans. That's the income that they are trying to target. The same money printers and defenders of zero rates which created this massive equity distortion are blaming those who benefit most so that they can create a tax law that forces people to sell their property. Like the AMT, it will grow to affect more people with time.

It will be only a few years before all of this is avoided by the creation of options.

I am all for increasing taxes on the wealthy. But this is a dumb way to do it, that can only be sold because people think it will never affect them (see title of article). This will be extended, and it will affect more people in time.

Tax the income ultra-wealthy are creating via loans, and stop pumping the stock market at all costs.





b_b  ·  18 days ago  ·  link  ·  

    ...it will grow to affect more people with time.

You sound just like Elon!

Here are the top two headlines from the New York Times, as of right now, 11/10/2021, 10:51 am:

    Inflation Surges, Dashing Washington’s Hopes That Price Gains Would Slow

    Rivian’s I.P.O. price valued the electric-vehicle maker at $70 billion, a market worth that approaches that of Ford.

(For the uninitiated, Rivian has built and sold exactly 0 cars to date, though they have contracts with Amazon for delivery vehicles.) Do we maybe think those two things are connected? Stopping the market pumping has never been more important. Tesla is now worth as much as literally every other car maker combined, and that's a symptom of a disease, not a sign that Tesla will one day out earn all of its competitors.

I have no idea if taxing unrealized gains is the optimal way to go, but it would at least stop, to a certain extent, every CEO's mad drive to pump his share price as high as it can go. Somehow we need a return of stock prices being tied to business fundamentals, and while I agree that the government is hugely to blame in the problem, we should also disincentivize the mad drive one the owners' side to always grow the price. I don't think taxing loans solves that problem. And I also think that taxing loans is highly problematic, because most loans are liabilities, and therefore are actually tax write-offs. This is a good thing for investment purposes, so you'd have a hard time disambiguating between personal income and business investment--at least it would probably create as many troubles as trying to tax the unrealized gains.

mk  ·  16 days ago  ·  link  ·  

We don't need to create a property tax for equities to pop the bubble. Old fashion raising rates will do it.

Taxing stocks is also problematic. Do you tax at the high water mark, or the average price over the whole year? How does an owner know when to sell? One could easily have an obligation that wiped out a very large part of their portfolio if they sold too late if there was a large draw down. Could a CEO lose shareholder control of the company because of a crash after a Game Stock like spike? i.e. "You had $1B of stock in June so you owe $230M, sorry that the stock in now worth $200M in August. You should have sold."

kleinbl00  ·  16 days ago  ·  link  ·  

It's definitely a "please god do something" play, and it would not have the effect anybody wants. I don't think it matters, though, as it's a gambit to provide cover for something else (like raising rates).

The Biden administration wants to raise rates but they need cover to do it, because it's gonna fuck up a lot of shit. Volcker's name was mud for what, 20 years? In the meantime, inflation allows them to do a lot of stuff they want - housing reform, wage reform, etc.

When the House Democrats wanted a COVID package it was a hurredly-assembled liberal wet dream that the Republicans had to sign because they were over the barrel. They had that shit ready from years and years and years of policy papers and were able to copy-paste together a stone fuckton of socialist largesse. This thing? It's clumsy, it's ugly, it's basebait. I support what they're trying to do but I also agree with your objections.

It's a gambit. What will be interesting is what they come up with when this fails as designed.

kleinbl00  ·  18 days ago  ·  link  ·  

    Tesla is now worth as much as literally every other car maker combined, and that's a symptom of a disease, not a sign that Tesla will one day out earn all of its competitors.

Important side-note: Tesla was worth more than literally every other car maker combined until two days ago, when the mere idea of Elon Musk having to divest 10% of his holdings caused Tesla's market cap to drop two hundred billion dollars. This chart is from October. As of this writing, TSLA's market cap is $1.06T, down from a peak of $1.23T last Thursday.

b_b  ·  18 days ago  ·  link  ·  

And if we click our heels together three times, and repeat "There's no place like Mars" maybe Elon will take us with him off planet when Tesla is worth 60 kajillion dollars after they reach a million unit sales per year. What a fucking fantasy world "the market" has created.

spencerflem  ·  16 days ago  ·  link  ·  

imo, the problem is not billionaires taking loans, the problem is billionaires. a wealth tax makes a lot of sense if the goal is to knock them down to size

mk  ·  16 days ago  ·  link  ·  

IMO the system that creates them is worse, and that the wealth tax is a treatment of a symptom, designed specifically to pass the buck and oversimplify for political reasons.

b_b  ·  16 days ago  ·  link  ·  

I actually see nothing wrong with billionaires as a thing. I visit the Henry Ford museum with my kids very regularly, and that type of weird shit just isn't possible without the superrich. And I think when we look at a lot of our cultural institution that we value so heavily, we have to also admit that many of them were made possible by the largesse of the Gilded Age barons. I see nothing inherently morally wrong with wealth, even a lot of it. I see a lot wrong with stock speculation, and I see even more wrong with it when it's being perpetuated by the company execs themselves, which is basically every company these days in the era of hyper-financialization. I'm not arguing that the little guy get cut out of the market, nor that there shouldn't be rich people in the world. I'm arguing that there need to be stiff costs for making stock instead of making a product. Maybe the bubble collapses on its own. But I've thought that since about 2013 and there's no end in sight. While this mechanism may not be optimal, I haven't seen a tax proposal from anyone that looks better. Maybe make it illegal to use company stock as collateral for a personal loan?

spencerflem  ·  14 days ago  ·  link  ·  

On principle, it's undemocratic for so fantastically much power to be held by unelected individual people. And with basically all productivity improvements going toward lining their pockets, with wages trending downward even before inflation, with their short-sighted destruction of the environment, the American economy, privacy, etc...

It seems like basically every bad thing that's been happening in this country is a direct result of billionaires. When companies gut themselves, lay off all workers, outsource, and make a good brand garbage, some billionaire is getting rich. The billionaires lobby and oppose pro-worker legislation, are almost uniformly conservative, and after decade after decade of hoarding essentially all of the rise in GDP, flaunt their wealth with pointless and extravagant vanity projects.

Not to mention that it's billionaires who own the oil companies that have been ruining the environment for the last 50 years. And the same billionaires that conveniently bought all the good real estate in chilly Canada.

I hate them so much. And they only exist because we, as a society, allow them to. You can't get that much wealth by working. You get it by capturing the value that would be going somewhere else. Jeff Bezos didn't make all of Amazon have two day shipping. His army of underpaid and overworked wharehouse employees do that, for none of the money or benefits. The "heros" are actually doing the labor while bezos earns another hundred billion in the middle of a pandemic that (surprise) only benefits the billionaires.

If they stopped existing (taxes or otherwise), maybe the 6 Trillion the government printed would have gone to real people instead.

Their wealth in corporate stock only exists because we say it does. Hell, private property only exists because we say it does. So why the hell do we as a society say that one Jeff is allowed to hoard the entire GDP of some goddamn countries while people starve in the streets.

veen  ·  16 days ago  ·  link  ·  

You really don’t think there is exploitation at play after amassing a certain amount of wealth? Or an immoral shirking of responsibility?

What I’d do is to tax the ever loving shit out of anyone holding onto more than 10 million, and make it incredibly easy to avoid those taxes by investing it into strictly regulated funds aimed at innovation/science/the arts/nature.

b_b  ·  16 days ago  ·  link  ·  

I don't know where you draw the line. I have no problem raising taxes on rich people, even aggressively so. But I also have no problem with being rich, per se. The company I work for is funded by a billionaire, and I see very little other way that my type of business could operate in its early phase, since there's no way to make money making medicine for at least 10 years from founding, and that's with sunk costs that range into the hundreds of millions. No government grants are going to solve that problem. Some investment funds may be able to, but really what's the difference between owning a piece of an investment fund and having any other type of asset. You're still equally as rich.

Obviously big companies could be a lot more aggressive in their pursuit of R&D. I mean, how many Nobel prizes did Bell Labs win back in the day? But that was before we let the shareholder revolution destroy any public company's ability to think further than 2 quarters into the future.

I think what we need is a rolling back of the shareholder revolution, to create space for companies to plan and to disincentivize gigantic pay packages that are so often stock- or options-based. I'm not educated enough to know how to do that.

mk  ·  16 days ago  ·  link  ·  

    Maybe make it illegal to use company stock as collateral for a personal loan?

A perfectly reasonable solution.

spencerflem  ·  16 days ago  ·  link  ·  

The government can make weird and fun things too, like all the national parks. Having societal decisions made by people living in a different plane of reality just isnt healthy, even if we occasionally get a Carnegie Hall or Gates Foundation.

Imo, if more people can afford to be artists, that would be the biggest improvement to culture

Also, totally agreed that there is a distinction between making value and financial engineering

mk  ·  16 days ago  ·  link  ·  

    Imo, if more people can afford to be artists, that would improve culture the most.

I hope you are tracking NFTs, because it is going to make the arts a real profession for the masses. In fact, I expect that in 10 years, many billionaires will be artists. In 25 years, most will be.

spencerflem  ·  16 days ago  ·  link  ·  

I hope so, they'd be more fun at least. I really don't see how though, who has the money to drop millions into art except people who are currently billionaires?

NFTs don't seem to solve a problem other than a more efficient and creator-friendly way to let rich people speculate without the overhead of auction houses

(I really am earnestly trying to understand NFTs, I've read kleinbloo's very thoughtful comment earlier, and the take on how it avoids taxes makes sense but not why I as a normal person would want one)

mk  ·  16 days ago  ·  link  ·  

I am not talking about fine art, but the art that we all consume, literature, furniture, film, music, decorations, etc.

Currently the market for creators is abysmal, and rent-seekers typically capture >95% of profits. The disintermediation of the markets for creative goods is going to realize the value creatives bring to society. In addition, by increasing the sheer numbers of creators, there are going to be knock on effects.

spencerflem  ·  14 days ago  ·  link  ·  

Totally agreed that the artist market is terribly skewed against creators, and anything that improves that is great

I'm still not sure why I, as an fan, would want an NFT, though. What I'm excited about is the actual movie or book or furniture. And for artists, how is an NFT more helpful than supporting them directly on Patreon?

kleinbl00  ·  16 days ago  ·  link  ·  

You go to war with the army you have.

spencerflem  ·  16 days ago  ·  link  ·  

I completely agree, but treatments can be helpful too

kleinbl00  ·  18 days ago  ·  link  ·  

What's to stop the ultra-wealthy from taking out 40% more loans? The whole problem is the assets are used to secure credit - the credit secured is only nominally tied to the underlying assets, as any cursory examination of Deutsche Bank or Goldman Sachs' balance sheets will show.

Taxing the loan is effectively taxing the bank, who will respond by passing along the costs to their least capitalized members. Sunrise, sunset.