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Silicon Valley stirs over proposal to end popular QSBS tax break (axios.com)
115 points by sinak 13 days ago | hide | past | favorite | 327 comments





Honestly I find this article's framing is quite funny. Ok, so first off, let's imagine your an early employee of an enormously successful company and you have stock options. Tough life right you're really the one feeling the squeeze. Let's also assume you're earning over $400k in salary. So you don't just have valuable options, you're also earning a great salary. Now under this proposal you'd only get a 50% exemption for your capital gains - so you're going to pay 10% capital gains tax when you sell. If you choose to sell. If you don't sell until a year where you don't earn $400k (god forbid) you'll still pay nothing.

Oh but it's a disaster because in this hypothetical, you've already bought a mansion based on what you thought you were going to make selling your options and the 10% tax rate is going to ruin you. And you bought this mansion because you thought you were going to make a tonne of money from your options in a company that hasn't even IPO'd yet so you don't even have a clue what those options would be worth anyway, but somehow a 10% drop in the proceeds of your sale is going to be a disaster.

Here's my take on it - if you were banking on having a 0% tax rate despite being in the top 1% of earners in the US maybe you have unreasonable expectations of how the tax system should work.


You don't need to earn a 400k salary to have your QSBS qualification reduced, you just need to have 400k of income and proceeds from stock sales are income.

400k seems a bit hyperbolic for early stage startups

The proposal is that the exemption will only drop to 50% if you're earning over 400k.

Why are you assuming that means you need to make 400k / yr, you could make 50k in salary and sell stock worth more than 350k

Maybe I'm missing something about this - but the money you get from selling stock isn't income.

It is for the purpose of calculating your tax rate. Otherwise rich people who have 0 earned income and make all their money from stocks would pay literally 0%[1]

[1] https://www.irs.gov/taxtopics/tc409


As I said in the other reply, this is wrong. Only the gain is accounted for as income, not the capital. So you basically have two scenarios - you have huge capital and a small gain, in which case you should pay your damn tax. Or you have small capital and a massive gain, in which case you should pay your damn tax.

And remember- this is only paid if you chose to sell that amount in a financial year.

Oh, and afer you pay your tax, phone up all the people you've met that day and explain to them how you've still payed less tax than they pay on their income despite your income literally being unearned.


Miscommunication, I took the gp's "stock worth more than 350k" to mean gains worth more than 350k. You only pay tax on gains anyway so it seems moot to talk about the original value in terms of thresholds.

It may not be earned income but it’s income. Capital gains.

No, only the gain is income, the value of the stock is not. In your example you would need your stock to have gained 350k and to sell it all. You could sell 349k this year and pay nothing, and 1k next year and pay nothing.

Exemption? I would call it "ability to not be stolen".The vocabulary of states is very evil. By exemption it lookslike they are saying "we forgive you and do not make you pay what belongs to us" when in fact it is just the opposite, they take what does not belong to them.

I am quite pissed with the political mafia. Not only there. Everywhere.


By the same logic, if you every drive or walk or bike on a road or sidewalk, you are taking what does not belong to you. If you ever eat food that is healthy and nutritious because the government has tested and regulated food production, you are taking what doesn't belong to you.

If you live in your home safe and secure from crime . . . Taxes pay for basic infrastructure, defense, education, and regulation. These things that taxes pay for are good for us and you use them every day. You want them for free apparently. Do you seriously think you would be better off having to procure all those benefits yourself as an individual?


btw about sidewalks, etc. and public areas. They belong to all of us, we paid them through taxes. It is called common property. (Propiedad comunal en español, mi lengua nativa)

there are things we pay and maybe I would pay that are good for all of us. There are also things I would pay for even if my neighbour cannot and would let them use them or even consider it common property, as it is today. What I do not want is a fully coactive, unjust system with artificial regulations and countless state monopolies on top of me. I do not think spoiling half of the effort to someone is a promising proposition or that it is what it takes to sustain this. Needless to say, I am against welfare in a setup where it must be paid with debt. This is not what a responsible person does at home, why they can do it with taxes?

Who told you I need the government to not eat poison? This is so absurd. They have a chain of responsibility to do that today, maybe, but you could have certifications also, without any government intervention. Do you think people manufacturing the products you buy are interested in poisoning you? Would they do it? They would lose all their customers, their reputation would be damaged... no, I do not see it.

You think because the government is not there people do not care anymore whether they eat poison or not? Seriously? There is a clear demand for someone saying: this is safe food. It does not need to be the government. It just happens it is them who do it today. This is like saying people would not want schools if the government does not pay for them or hospitals. It is totally absurd. Things exist because people value them. And many do exist with no value because someone creates artificially from our taxes stuff. There is no more to it.

BTW, security, this is something many of you do not get either: you are safe because people around you have a mindset of respecting others, mainly and above everything else. That is why there are districts where you can go 2:00 a.m. safe and you know nothing will happen to you and some you would not go even at 20:00 p.m. a normal day! It has nothing to do with the police, or to a very little extent. You cannot have a police after each person. If someone takes out a gun and shoots you it will happen anyway.

If the police gave you unconditional security then that could not happen. On the other side, if you go to a prison, you have state workers every few meters. Is it any safer that good districts that are police-free? No way!! They are not. There are people passing drugs and violence, more so than anywhere else. Security comes first, and foremost, by what people are willing to respect or not, and later, there are outliers, yes, but this is not at all all the story.


If you do not see it, you are blind.

The food you ate this week--where did it come from? Which pesticides were used in it's production? Was the product adulterated (see: honey)? Do you know the list of food additives the FDA has banned, and do you look for their inclusion on labels? Because someone in the government does, for your protection. So you don't have to. But you would!

Where was the "and then they'll be ruined and they'll never make another red cent," attitude when we received toys with lead paint? Never mind obvious malintent, what about products that have been unintentionally but irresponsibly handled--a e. coli or listeria outbreak? Lots of people who have perfectly good intentions can still kill people.

My question is, why are you so against a government agency (i.e. the people) from taking care of this matter? You get a lot of services at cost. It's cheaper, and there is no weird incentive structure where "well, we could let this product that doesn't make standard, because the ratings company stands to make a lot of money if goes through." Remember fannie mae AAA rating junk mortgage bonds because if they didn't, their competitors would? At least their industry was financial instruments and not food.

We've strayed too far from the topic, though. Calling taxation theft while reaping the benefits is hypocritical at best. And saying "well, some taxation is ok, but partially removing the QSBS break is theft," comes across as disingenuous. Who's to say your QSBS break didn't fund a school or the FDA or a sidewalk?


> Do you think people manufacturing the products you buy are interested in poisoning you? Would they do it? They would lose all their customers, their reputation would be damaged... no, I do not see it.

There's a long history of businesses adulterating their products in order to increase profit. One of the most infamous being the Chinese infant formula scandal[0]. It seems incredibly naive to think that these regulations haven't been paid for in human lives.

The main reason for having the government take responsibility for certain things is that they should be available to everyone in society. Roads and schools are a great examples of this in practice.

Also, who wants to live a world where you constantly have to figure out if something is safe to fucking eat.

[0]https://en.wikipedia.org/wiki/2008_Chinese_milk_scandal


there is a long story also of why that does not depend on having a government, come on... and many other things.

I just advocate for the possibility that better paradigms are possible (and some have even existed in the past!).

But how come you have to figure out if food is safe just because it is not the government who certifies that food?!

Man, we are not going to agree at all, I see.

Yes, you go to a link for China, where the biggest government is and you have death penalty.

A good show of why governments work for food control, right? hahahahahaha! You are just making my point, man. It does not depend on it.


> But how come you have to figure out if food is safe just because it is not the government who certifies that food?!

Because rather than trusting a centralised entity responsible for food safety I now need to figure out which of the 5,000 profit driven "certification" authorities are actually trustworthy and aren't just an arm of the food manufacturer. In the best case scenario I end up finding 5 or so organisations that will certify the ingredients I use most often, and I'm a bit fucked if I ever want to eat something they don't cover. In the worst case those 5 organisations have previously been bought by the market leader and now are now operated as fronts.

> Yes, you go to a link for China, where the biggest government is and you have death penalty.

The infant formula scandal is simply the one with the most widespread media attention, probably because the profit motive lead to babies being poisoned. It was a counter example to your initial point that food manufacturers would never dream of adulterating their products.

If you'd rather have a western example, then in the UK a supplier of one of the largest supermarkets Tesco, was caught adulterating their "beef" burgers with horse meat.

> Yes, you go to a link for China, where the biggest government is and you have death penalty.

I don't see how the death penalty has any bearing on what we're discussing.

> A good show of why governments work for food control, right? hahahahahaha! You are just making my point, man. It does not depend on it.

It shows that they had the motivation, resources, and authority to find and punish those responsible. I don't agree with the form the punishment took but it illustrates the limitations of a private certification body once people start dropping dead. In fact they would be incentivised to help cover up any incidents lest they lose customers.


Man, you're digging a grave for your own point of view. If you compare China where the regulation is strict (but compliance is sloppy) with India, where both are lacking, China's incidence of death from poisoning is at least 2x lower.

That is just partial data. There are way more countries and I am sure the correlation is not like the comparison between India and China. Though I admit I did not search that data, just an intuition that there are countries where people stick more to rules and do not cheat you and places where you turn back and they do it. And no, it is not because of regulations. I lived in South East Asia for almost a decade. Anyone will cheat u there way more often than in most european countries. It is not regulations. It is people and culture. Yes.

The alternative isn't no government, it's getting the same treatment from a different authority with even less recourse. You're just blaming the messenger.

no. I am not blaming anyone. Seriously. I just say that this vocabulary is a shitshow to brainwash: taxing is putting a penalty on your efforts.

There is no more to it. You can give it 1million justifications, that will not change.

Sorryif I sound harsh. I would likea place where politicians do not abuse us like this.


If you want to talk about brainwashing, have you considered how the company you work for puts a penalty on your efforts? Their literal model is paying you less than the value you provide and recording that difference as profit. The rate they collect is often much greater than 10% of your efforts.

Ok, let us talk about it.

1. how do you calculate that profit?

1.a. given that you could do it by yourself, why do we work for a company instead of running a business ourselves? are you sure you are not missing some variables there?

2. does the employer have any additional risk? In my country, for example, firing a person is quite a bit of money. This is effectively an insurance to pay for the worker, besides the taxes they already pay (a penalty for the economic activity, basically, or, as I think of it: a theft)

3. do I do work for my employer forced by them or I chose to work there because it is my best alternative without coactively forcing someone to do something they do not want? Of course we always want higher salaries. But taxes do not work like this: in taxing systems you do not have a choice to pay or not to pay, you pay and that's all the story. You also have no word on where your money goes or any control over it. The people who manage it do not pay penalties for mismanaging it. In private companies I can assure you this is much more sensitive and you are much more careful with what you do than in public instances.

Please, let us keep the conversation rational. I would like you to discuss this topic rationally. Because I would really like to understand it.

P.S.: noone explained me yet why taxes are not theft. For me they are, I said, because they are coactively putting penalties on something you produce. Coactively, not even by mutual contract as in the case you mention from the employer. Of course we want more from the employer and the employer more of us, but, at the end, this is a mutual contract, not a do it or I put you in jail.


You're absolutely right about 1.a., but you're missing the fact that the same is true for the relationship between companies (and their owners) and the government. So just as the typical employee often could not generate the same value without the infrastructure and resources of the company, that company could not generate the same value without the infrastructure and resources provided by the state.

My entire original "profit is theft" argument rests on the same kind of assumptions as your "taxes are theft" argument. Namely that in both cases the affected party is not getting anything for their contributions and could have done it themselves. In my mind the only difference here is that taxes are explicit and transparent, while "capturing excess productivity" is hidden. The former seems much more honest in this regard.

Edit:

> You also have no word on where your money goes or any control over it. The people who manage it do not pay penalties for mismanaging it. In private companies I can assure you this is much more sensitive and you are much more careful with what you do than in public instances.

This is patently false. Not only do you have less control over how your employer spends your excess value than how your government spends your taxes (I don't recall being able to vote for my CEO), but corruption in companies is not uncommon. It's just less visible because companies are allowed much more secrecy than governments. This is not any better. It's also rare for a CEO to be seriously punished for running a company into the ground. "Failing upwards" is common.


Incorrect: profit from a company is hiring + working cooperatively. No matter you would want more money as an employee: you accepted it. You could go somewhere else to pick something else. You do not because you do not have something better.

Taxes is basically a gun in your head saying: 50% for me. Why? Because I say so. And you have no alternative. That is coaction no cooperation.

Seriously recheck it. We could talk what taxes are used for or ig u get enough from your wage. But the fact is thst the first case is cooperative and the second is coactive.


I should not have control on how my emplouyer spends my money if it is not part of thr contract. After all, we both accepted. But if you really dislike what they do, just go get work from another and NEVER work for such a piece of rubbish right? Can I do that with the State? No, I would be enjailed.

The state will not ask you. Simply like that. Factual and true.


By the same token, you could move to another country, no? The problem with this logic is that having a choice of jobs is often a privilege of having money in the first place (just like relocating to another nation). You probably can't turn down work, no matter how bad the "deal", if you need that money for food and shelter. So for many (most?) people the supposed free choice of employment is illusory.

This gets even worse when you consider how competition tends to drive companies to all be shitty to employees in similar ways. It's now really common for shifts to be scheduled algorithmically and on short-notice in fast food. If you're just entering the job market or have little experience, how do you "choose" to work for a company that won't schedule you for last-minute 2 hr shifts or have you "clopen" at the behest of some scheduling algorithm?


Do not work in fast food. But if you have to, in part it is because you cannot work elsewhere. Which takes me to... bsd choices? But even if u did it... My grandparents were raised without welfare. They were not rich.

They saved money and reinvested parts in a house for many years and other things. This is a mindset. It is not about being rich or not.

That is how you usually get out of poverty. As for working in fast food, probably is a consequence of not studying or having chosen studies with little demand. It is the crude truth. We cannot blame those on others.

I understand how hard it is. But the reality is that there are even socialist experiments about removing prices in cooperatives in Russia for making I believe it was screws and nails.

Two cooperatives provided with the same number of employees, same resources. One made better pieces than the others. Which ones do you think people wanted? And that without prices, some pieces were more valuable. What this shows is that no matter how much u try to equal things, they will naturally shift away by themselves. Jobs, faster vs slower, skilled vs unskilled. Fighting that permanently... I do not see it as a good thing.


There are ~15 countries that don't have income taxes. Some of them are even quite nice. I suggest you move if taxes offend you so much.

It's not like taxes go into a black whole. They pay for schools, roads, police, military protection, and a host of other services. We can certainly debate the relative allocation of funds, but going tax free isn't something most large nations can do. The nations that are tax free tend to be extremely wealthy on oil money (Bahrain) OR borderline anarchy (Somalia).


Yes I have been actively looking for reasonable countries. Not because I think I cannot pay but because I am convinced we should NOT unless we authorize someone to do it. Of course you would lose the services you do not pay for.

I do not need 0% taxes. But you know what? I do not need 54% income tax + 21% VAT plus many others that amount to 70% of my earnings and they laugh at us in our faces. I really do not need that. Here I talk about Spain. Let us leave USA apart bc I do not know enough. Just know that they are sailing in the same direction so if I were you guys, I would be a bit careful.

In the real world I do not need a 0% taxes country either. Of course.

Greetings and thanks for the suggestion.


Where are you that you pay 54% income tax and then 21% VAT? I assumed you were in the US, since US tax breaks were the topic.

I am spanish (54% over 60,000 euros in my "State"). But I see the US going in the same stupid direction of taxing and overregulation and it catches my eye.

Seriously, do not break it. I admire the founders of USA more than any other people worldwide.

The ideas of real freedom were born there, even if there are, like everywhere else, dark episodes.


100% exempt does feel high to me.

I think my main problem w/ the tax proposals is that they are big, bold changes.

If anyone wants to increases taxes even 1%, I want there to be a big fight about it. Serious demands in to budget efficiency and transparency. If it passes, I want to know there is scrutiny over the taking of my dollars.

Passing a 10% increase swiftly and suddenly is like a punch to the gut, and we all know the tax code and laws around equity are totally moronic. "We only tax if you make over $x!" doesn't account for the fact that many folks get all of their many years of equity... at once, in one tax year. Why is that counted as income for 1 year, and then boom, up to 65% tax?

Overall, taxes over 50% feel unethical too -- imagine if a mob boss goes to a retail store and demands half the profits. Why does anyone -- mob or Government -- deserve more than half of what you make? To hit 55% tax rate in California after this, you only need to make like $250k total. It's a good amount, sure, but if you compare cost of living... it's still hard to live on. You can still barely afford a crappy house. So you get this situation where "life is hard" AND the government is taking home more of your money than you do.


> To hit 55% tax rate in California after this, you only need to make like $250k total

If you make 250k as an individual you're in the 97th percentile in the state, 91th for a household. If that's impossible to live on how do the 90% below you survive? It's literally four times the median wage in the state.

Also another perspective from across the pond, I hit the maximum marginal income tax rate at 57k. Of my 85k paycheck I pay a little less than half effectively in taxes and social contributions so this discussion is like another world to me

https://dqydj.com/income-percentile-by-state-calculator/


Comparing salaries to all of California is an irrelevant data point.

Most Californians don’t live in the Bay Area, where basic housing costs $1.5M

Can a family of 4 live on $250k in the Bay Area? Of course. But you’ll never own a home.

And working for the wealthiest companies in the world doing the most in-demand job in the world, yet never being able to own a home, that’s a bizarre situation to be in.

We want to incentivize more people to work in tech. Not less.

Whatever you get paid in Europe is irrelevant since it’s a completely different system (from healthcare and education down to public transport and housing).

And if Europe wants to be at all competitive with the US or China in tech (right now, it’s not), maybe you should be getting paid more than a mid-level accountant?


The problem here is not taxation, it's the artificially constrained housing supply in the Bay Area. Too many people are chasing too few houses; they would remain unaffordable to most even if the tax rate were zero, because prices would rise to match income.

Fully agree, it's a housing supply issue.

But raising taxes while not addressing the supply problem will make it worse for those who have not already "cashed out" their capital gains into tax-advantaged real estate.


"We can't solve the issue because that would be unfair to the people who haven't gotten to make use of it yet" isn't a compelling argument.

>And if Europe wants to be at all competitive with the US or China in tech (right now, it’s not), maybe you should be getting paid more than a mid-level accountant?

I have 10 weeks vacation and a <20 hour workweek. I'd really rather _not_ be competitive with the US or China.


Congrats, but you can't opt out of competition indefinitely. If someone is willing to do the same job except better or for less, it'll eventually happen. Or do you think you're entitled to that job due to historical reasons?

A small change in tax policy isn't going to make the difference in owning a home in the bay area. The problem there is the price of housing.

Yes, somebody making 400k in Palo Alto isn't rolling in stacks of cash (though you are certainly doing a lot better than the grad students making 30k). But this sort of "hey but in this extreme edge case the policy is sort of frustrating" argument is consistently overused to prevent reasonable policies (see estate taxes and farms for a classic example).


Give me a break, there are tons of home owning families in the Bay who make less than that. The Bay Area is a lot more than Palo Alto, SF, Mountain View and Berkeley.

Can't give you a break, unfortunately. They already had homes before costs got to their current point. I made more than 250k and could not afford any home within an hour's commute to SF in the years my income was that high.

I might've been able to buy a condo at one point, but that's about it.


https://www.redfin.com/neighborhood/14233/CA/Oakland/West-Oa...

Most of these are well within reach, even moreso before the current bubble, if you make that kind of money. And an 8 minute BART ride from the city. Your not wanting to live there does not imply that somebody does not live there.


You're right, I forgot about the 0.8% of homes in the Bay Area smaller than most condos in an area where your chances of being involved in a crime are 1 in 6.

Your made up 0.8% statistic perfectly conveys the point I was trying to make above.

It's not made up. The US Census data is public to all. Number of households in West Oakland divided by the number of households in the entire Bay Area. If you look at just houses, the number is even worse.

Your example is beyond cherry-picked. The population of that region is only 21k. It is not remotely representative of the reality the vast majority of residents face.


Because you can go somewhere else and take home more.

Humans are constantly dissatisfied with their situations and seek continuous improvement. This causes a lot of friction but it's what breeds innovation.

The "why can't you just be happy with what you have?" argument applies at all levels of life. You could take this same argument from the bottom of the class hierarchy all the way to the top and it still won't stop humans from wanting more. This is in fact the same mental mechanism that enabled us to climb _from_ the bottom. You can't just turn it off no matter how high you climb.

I speak from personal experience climbing from working in fast food, warehouses, construction then to white collar IT leadership positions. I can't turn off the drive to be better no matter how good things get and I don't want to because it's the core of how I survive.

Just my $0.02


The question here should be what we are promoting by spoiling higher salaries and giving back to others.

Are you sure this will make for a good incentive for:

- people who excel at business to stay.

- lazy people to work instead of relying on welfare.

Besides that, needless to say that taxing is unfair in itself and taxing depending on how much you make is like treating you different because you belong to a group or another. Reminds me, in some ways, to Europe's middle age: you were judged different depending on different rules according to groups. I understand US is very different from my country, but my advice is that do not give a centimeter to any kind of positive discrimination (taxes, race, sex, religion or whatever). Once you have that one part will abuse the other. The only solution is to be as dilligent as possible applying same rules to everyone equally.

Yes, they sell all with nice words and good causes in-between, with you being spoiled with no word on what to do with that. But at the end, this is involution IMHO.


> good incentive for: > - people who excel at business to stay.

I use to believe what you're saying. In fact I often quoted very similar lines in arguments.

The more I've made, the higher up I've moved, the more senior executives I've worked closely with, the less I believe it though. Most "Sr. Execs" have just put in time, had some luck & networked well.

Higher salaries are rarely the incentive to become amazing at something. If you become amazing at something, usually you just love that type of work. Money as an incentive, for anyone who is living comfortably, has shown time & time again to not be a great incentive. Many people now are preferring remote work over higher salaries. Time > Money.

In middle & upper class incomes, the only thing I've seen higher salaries encourage are fast track MBAs and butt kissing.

Those in the upper income have done very well by encouraging favorable tax laws on themselves. They donate to politicians. They receive favorable tax breaks through real estate, capital gains, avoiding FICA tax of 15.3%, business deductions, low interest loans, etc. If you donate & network enough, you can also get some nice business contracts from the government.

> good incentive for: > - lazy people to work instead of relying on welfare.

Welfare is not for the lazy. It's for the burdened & hopeless. It's also to keep people well off enough to work but not go around stealing & attacking people out of hunger. It's like trying to dig out of a hole with a shovel while wealthy people are driving tractors & digging your hole deeper. Cheap labor is what makes wealthy people wealthy. A CEO can hire cheap labor, the govt will tax them "FICA" & income tax. The CEO will take their money in stock, so no "earned income" & no "FICA". If they do take an income, FICA is only on a small portion of their salary. The CEO can also get almost interest free loans on that stock, so no need to even sell stock & pay any tax.


> The more I've made, the higher up I've moved, the more senior executives I've worked closely with, the less I believe it though. Most "Sr. Execs" have just put in time, had some luck & networked well.

Yes, but it still belongs to them. They did it. Noone did it for them. And I am sure they know one or two things that a regular person do not know about their business, that is why they are there. We are not entitled to say who does it better or not. They are there for some reason, right? Of course, lobbying and using politicians to regulate would sound to me like a dirty sh*t. But if you built your things from your time and effort... why, why someone can touch that? No way... it is not about the amount. It is about something belonging to where you invested your time and/or effort, money, life, sacrifices you made to get there...

> Higher salaries are rarely the incentive to become amazing at something. If you become amazing at something, usually you just love that type of work. Money as an incentive, for anyone who is living comfortably, has shown time & time again to not be a great incentive. Many people now are preferring remote work over higher salaries. Time > Money.

Sure, my point here that if the money is made by providing a service, noone is entitled to come and tell you: hey, this is too much, give it to me, I will manage it. It is just absurd at all levels: a person who did not spend a minute in building all that comes and tells you what to do with it...

> Welfare is not for the lazy. It's for the burdened & hopeless

I am sorry to say this. I am going to sound really bad: of course there are hopeless and burdened people in it. I am pretty sure of it. Yet there are people that actively take advantage of it. I know this for a fact from the position I have through some relatives. But that is not even the point. The point is this one: with a huge welfare there is incentive for the lazy? Yes, there is. Sorry, it is like that: there are people who want to live from you.

What about the hopeless and burdened? I think this is also something to talk about, and a serious one. I really think civil organizations would do a better job at choosing who to help and who not to help, based on better knowledge on the terrain and close interaction. However, this welfare is: oh there are so many "poor" people (yes, burdened and lazy, both) so let us inject more taxes. And you feed the ball further and further. And when people stopped being poor as before (as in extreme poverty), then the discussion is shifted to equality, to have a justification to keep extracting resources from people who earn their own. So what you have all in all is that people who work or make money in the market are paying all the others and you expect this incentive to be sustainable forever. There is a reason why socialism failed so badly. And all the failure is about coaction and killing incentives. That is the way forward we are building.

Honestly speaking, I see this (and I did not like 15 years ago) like a huge scam. We cannot promote welfare-style societies. We have to promote individual autonomy and association. And that does not makes us any worse or more selfish: it makes us responsible. At the end, we do know when someone is burdened and I think most of us will have an eye to know when someone needs a lift.

Thanks for taking the time to reply.


> Why does anyone -- mob or Government -- deserve more than half of what you make?

The best argument is that policy like this has nothing to do with what individuals deserve. The idea is that people got rich in part due to all the nice infrastructure we have, and so we could tax some of the income they made off that infrastructure to pay for it all. This includes everything from bridges and buses to food stamps and free clinics - all the things that helped make getting rich possible.

Anyway I'm an anarchist and I would rather have workers in control of the means of production so no individuals get to take all the profits from collective endeavors for themselves, but if we're going to have a state that taxes folks, the argument above is the one I think is best.

Also others mentioned this but hitting the 55% tax rate at $250k means every dollar over $250k is taxed at 55%, but it does not mean that person pays 55% of their income as tax.


> The idea is that people got rich in part due to all the nice infrastructure we have, and so we could tax some of the income they made off that infrastructure to pay for it all.

This sounds solid until you realize that country B next door has lower taxes, better public services or in some cases - both. Does the GP question make sense then?


We are talking about a US tax proposal. I'll bite, what is country B you are talking about that is next door and has better services and infrastructure and lower taxes? Heck, remove the "next door" requirement you put in there and I still think your statement is indefensible.

And is less privatized for those public services, and doesn’t spend 5x what the rest of the word spends on a military industrial complex, and makes a lot of government income on natural resources.

I intentionally didn't want to name countries because this isn't about Canada or the US - it's a global issue and taxes (sadly) do not correlate to the level of public services.

I’ll take the lifestyle and economic security of Western Europe over anything in the US.

The US spends 3.4% of gdp on the military. This is nowhere near 5x the world average

I think you can find which stat I was pointing out, especially in real terms.

What would be an example of country B in your analogy, which fits those criteria, if we're talking in comparison/relation to the US?

I can't comment on the US in particular - I neither live there nor does my comment pertain to it specifically.

Rather, it was an observation of two things:

1. That high taxes do not necessarily correlate to extensive and quality public services.

2. That it is possible to find a better deal by hopping across borders.

Taken together, they put the whole "you need to pay back society" spiel into question.

If you want an example, look at the EU. Taxes are uniformly high in the EU but there is a drastic difference in the quality of public services (and as a consequence, your chances in life).


> If you want an example, look at the EU. Taxes are uniformly high in the EU but there is a drastic difference in the quality of public services (and as a consequence, your chances in life).

While taxes are uniformly high in the EU there is no such uniformity in size, population, gdp... making your point about taxes moot.


> Overall, taxes over 50% feel unethical too -- imagine if a mob boss goes to a retail store and demands half the profits. Why does anyone -- mob or Government -- deserve more than half of what you make?

50% is just a random number that feels good to you. I have a different question - what can you possibly do that justifies making $100 MM a year? Getting to keep even $45 MM seems mighty generous of society. (Obviously given the current value of the dollar.)

>To hit 55% tax rate in California after this

Thanks to a graduated income tax, hitting the 55% rate is no the same as getting taxed at 55%. And this only applies to one narrow source of income.


“ what can you possibly do that justifies making $100 MM a year?” That’s not up to you to decide in a free society. Market determines that.

Really now? How come we decided long ago that if you made $100 MM a year, you got taxed 80% on your marginal income. At other times, we decided you get taxed below 20%. Sounds like the market doesn't decide, it's the politicians.

Literally no one paid that rate in the US. During that period the government captured ~17-18% of GDP in taxes which is the post war average. There were a ton of tax breaks then, by today’s standards.

Wealth inequality is completely out of control now than compared to when we had those rates, so I don’t buy that argument.

there’s nothing about inequality that should mean that we’re collecting a lower percentage of GDP in taxes. There are lots of reasons outside of tax policy that wealth may accumulate.

Agree, but tactically if you want to reduce wealth inequality that’s the first one given passive investment beats working for income both in tax advantages, lack of estate taxes, and effectiveness.

There’s a giant sucking sound as all the money in the economy accumulates out of towns and cities and into the endless digital coffers of the investment class.


It's commonly claimed that no one paid the 70% rate. But do you have any evidence that that is true? It feels like one of those "facts" that has no sourcing.

Here you go [1]. Most high income earners in the 50s paid about 42%. It’s hard to squeeze income much more than that without the income going somewhere else. Historically speaking.

[1] https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/


That's not what that says. The graph that tops out at 42% is talking about the effective tax rate, not marginal. It's perfectly possible that some people had part of their income taxed at 70%, but their effective tax rate was 42%. That's just how marginal tax brackets work.

It entirely possible but no one was paying the 91% rate. The broader poor was that these rates weren’t effective. Reported income is highly elastic, according to work by Saez et. al.

As that link points out, the majority of the high earners (top 1%), which were averaged to get to 42%, did not even reach the highest tax bracket. The vast majority it turns out. The highest tax bracket applied to less than 2% of the top 1%.

Who likely didn’t pay that as they had plenty of tax avoidance strategies, not unlike the ultra-wealthy today. The apocryphal story I read some years ago was that these rates were cooked up to make it seem like the wealthy were shouldering the burden of WWII rather than profiting from it.

This is a common myth.

If .2% of earners REPORT INCOME greater than $x, they paid tax on that!

We get the percentiles straight from the IRS data.

There's this idea that people report they made $100 MM to the IRS, but are like, "Well, I only want to pay tax on $300k of that." And the IRS is like, "Sure."

You wouldn't be in the top .2% if you only reported incomes of $300k to the IRS. You'd barely be in the top 2%.


That’s not what I’m claiming. It’s pretty clear from public records that no one was really paying those rates. The people it may have hypothetically applied to probably didn’t take all of their earnings as taxable income and found ways to avoid paying the top rate. The real rate collected under the 90% regime in the 50s on the top 0.01% of income earners was 55%, not terribly higher than today.

Taxable income is highly elastic as taxes and income increase. See Emmanuel Saez’s paper here [1]. (Conclusion on page 60) it’s a good overview of the inefficiency of high marginal rates.

It’s nice to believe we could just scoop up the wealth of the wealthiest in society and make good use of the money, but it becomes very hard to collect in a hurry in the real world. Most OECD nations with generous social benefits fund them with VAT and taxes on middle income earners. They’ve all abandoned things like wealth taxes and soaring marginal rates for practical reasons.

[1] https://www.nber.org/system/files/working_papers/w15012/w150...


> The real rate collected under the 90% regime in the 50s on the top 0.01% of income earners was 55%, not terribly higher than today.

Its a time and a half the top marginal nominal rate, which is significantly above the real rate collected on the top 0.01%.

So, yeah, its much higher.


It’s higher but not nearly as high as people expect and didn’t raise a larger percentage of GDP in tax revenue.

> Who likely didn’t pay that as they had plenty of tax avoidance strategies,

Again, like I did 4(?) posts above this one, I'm going to ask for evidence, because I've heard this assertion a lot but never seen any specifics. Surely if they had plenty of tax avoidance strategies, you would be able to point to their version of the Double-Irish. Maybe even be able to estimate the magnitude of dollars avoided in taxes?


> Who likely didn’t pay that as they had plenty of tax avoidance strategies, not unlike the ultra-wealthy today.

You have zero evidence for this.


See the Saez paper from my other comments, it’s a well researched topic. The consensus is that people weren’t paying that rate.

And see my response. It's not as conclusive as you think. https://news.ycombinator.com/item?id=28541687

thanks for the source will need to read this up.

> Literally no one paid that rate in the US.

Literally they did.

In 1944, the top rate peaked at 94 percent on taxable income over $200,000 ($2.5 million in today’s dollars3). That’s a high tax rate.

Over the next three decades, the top federal income tax rate remained high, never dipping below 70 percent.

https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco...

Note the parent said "marginal" tax rate.

> During that period the government captured ~17-18% of GDP in taxes which is the post war average.

Even if the 17~18% of GDP is true (not saying it isn't, just dont have time to verify), it's very likely the highest tax bracket had way fewer people than it does today, so it would be equivalent of taxing earners of $100M/year in today's world. Weighing against GDP total negates increases in spending by the government to provide services that spur economies / provide benefits / etc. Point is - this figure is irrelevant and doesn't normalize the discussion.


No, no one really really did practically[1]. There are ways to capture more revenue, but it usually involves a VAT. Other methods historically cause economic contraction which lowers tax receipts. It’s important to be realistic about what policy can practically accomplish.

[1] https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/


Marginal tax != effective tax[0]

Yes they literally did. Your article says exactly what I said:

The 91 percent bracket of 1950 only applied to households with income over $200,000 (or about $2 million in today’s dollars). Only a small number of taxpayers would have had enough income to fall into the top bracket – fewer than 10,000 households, according to an article in The Wall Street Journal. Many households in the top 1 percent in the 1950s probably did not fall into the 91 percent bracket to begin with.

You need to understand the difference between marginal tax and effective tax. What you're referring to is effective tax. The parent very explicitly said marginal tax.

[0] - https://www.cbpp.org/research/federal-tax/marginal-and-avera...


The Saez paper points out that even among the 0.01% people were avoiding that top rate.

It points it out, but it's not conclusive. From the article you linked:

The data from Piketty, Saez, and Zucman is not divided among federal, state, and local taxes, so it is difficult to tell exactly how much the rich were paying in federal income taxes specifically during this period.

Some of the distributional assumptions in the Piketty, Saez, and Zucman paper are questionable. In particular, the authors assume that the full burden of the corporate income tax falls on owners of capital, which may not be correct. However, the authors note that they “have tested a number of alternative tax incidence assumptions, and found only second-order effects.”

> The Saez paper points out that even among the 0.01% people were avoiding that top rate.

Of course there were - tax avoidance is inevitable, but to say literally none of them were pay the stated rate with no evidence is disingenuous.

Bringing this back the overall point of the discussion - with a marginal tax rate that high (even with avoidance) it raised the effective tax rate nearly ~600 basis points higher. That's significant.


There are two parts to this. Who decides how much money what you made is worth, which is the market (and what I was referring to), and how much % of that the government takes.

OP said "paid $100M" but now you're talking about tax rates. Why?

The person you replied to is conflating the economic and social side. The justification is in social not economic terms. So it really doesn't matter what the market says, the point is whether it is socially sustainable not to re-distribute that.

As an aside, the US seems like a very weird place to me. There are homeless people everywhere. I have never seen so many homeless people anywhere in my life...even in developing countries. It is crazy. I don't understand how people tolerate that. Not only poor people but the US seems to be a country which breeds a total lack of empathy, I don't understand how wealthy people tolerate it...and then you read the hyperbolic comment elsewhere on this thread about a founder saying this is theft, this well end Silicon Valley, it is insanity, it is intolerable...try tolerating sleeping in a tent under a bridge.

Either way, the reason you tax the $100m is so you don't end up with a govt that will take more than your money. The notion that you can just take forever has never been a part of politics.

As an aside, I think most Americans perception of authoritarian govts is that they are anti-democratic in this way...but if you look at monarchies, there was always responsibility from the wealthy, there was always a safety valve...the US has no safety valve, there is no social responsibility from the wealthy, they have taken everything and are asking where the rest is (and sound utterly deranged when you suggest they should make $5m rather than $10m). There are things much worse than taxation, you have to live in the world with other people.

EDIT: I will add...I would kind of quibble with the notion that markets are free in the US. The amount of state support for capitalists since 2008 (not talking about TARP which was necessary) has been very significant. Free money for the wealthy, usurious interest and rent for the poor. In particular, the level of downward social mobility in the US is very low for a capitalist economy. Markets are free in the US...in one sense.


> is whether it is socially sustainable not to re-distribute that

“Bread and circuses” is derogatory, but the unsustainable parts of technological industrial society aren’t “rich people exist”. Conditions are so ridiculously prosperous and powerful for everyone that the new injustices are stuff like “my life expectancy is 70 instead of 80” and “I can’t afford to pay for debt I took”. What’s unsustainable?

There are plenty of homeless, but there’s also lots of jobs. They may absolutely fucking suck, but in terms of buying power you’re not gonna die and can live quite materially well vs rural.


Maybe if you manage to make $100 MM a year as a sole proprietor.

On the other hand, if you're making $100 MM a year through corporations, then it's the corporation that the market values, not you personally; and corporations (and equities in them) are state-intermediated fictions.

Corporations have no natural existence, or natural rights. They exist because governments say they do, they have cap tables because governments say they do, and they pay out dividends and have transferrable equity because governments say they do. They are government-drafted incentive structures to motivate productive labor, just like tax credits or mining rights or intellectual property are incentive structures to motivate productive labor.

Or, to put that another way: corporations are de-facto nationalized; by default, the government is the actual direct creator of every corporation that exists in the country. When the person who asked the government for a corporate registration, receives 100% equity in the resulting corporation, that's a transfer of that equity from its original holder at time of creation, the government. The government isn't obligated to do that. It just does it because that's what makes people excited to work hard building corporations.


This is giving governments a lot of credit. Corporations are really just a set of contracts between investors, founders, employees, etc.

Sure governments help enforce the terms of the contract and even set some ground-rules on what is/isn't allowed but the entire thing is built on mutual trust that everyone involved will follow the agreed-upon rules.

History has not been kind to nations whose governments break those rules and started nationalizing corporations. Not too long ago, North Korea was the side with the industry, railroads, hydro-elec dams, steel mills and manufacturing plants.


Curious. My local government nationalized water, gas, electricity, waste removal, roads, bridges, trains, etc. Some of these were even for-profit private companies at one time or another. Seems common in the US...

Clearly it's a spectrum. Property rights are certainly the purview of governments to set & adjudicate the rules within their jurisdiction, as granted by their unique powers (nominally) conferred by the people.


yeah and computers are “just” interactions between electromagnetism and matter. This slides a lot

> History has not been kind to nations whose governments break those rules and started nationalizing corporations

Yeah but history has been kind to companies who mold laws for and heavily intervene in them


My point is that the government is the one enabling contract law to exist, by making it enforceable. And so they get to say which contract terms are enforceable; and so they get to say which mutual agreements between private parties are iterated prisoners' dilemmas, and which are just ultimatum games.

Securities are valuable assets for the same reason that greenbacks have value: because the state is standing there ensuring everyone's playing a fair game. If the state didn't punish counterfeiting, greenbacks would be worthless. If the state didn't punish non-dilutive duplicate share sales (i.e. selling the same whole pie to two people), securities would be worthless.

As such, the state is creating the worth of those things, from nothing. Your effort into a corporation is additive, but the government's pre-invested effort into building the framework on which corporations rest is multiplicative, with the multiplier having started off, before that effort, at 0. Neither fiat money nor securities work in a lawless world. The government—that is, the People—get all the credit for making those things possible. Should they thus not get the reward? (Commodities do work in a lawless world, but not through tokens representing them. You'd have to bring those 10K bushels of wheat along with you if you want any credibility, which is pretty inefficient.)

Let me put it this way: if we were starting with a form of socialism where corporations exist, and have founders and executives and boards of directors, but no shareholders, with the government instead earning all corporate profits (which it then spends on things like UBI); and then someone proposed a capitalist class that would earn some of those profits instead, taking them directly out of the UBI budget... would that proposal be justifiable through any particular argument to natural rights/freedoms? There might be a practical argument, in terms of a profit motive incentivizing entrepreneurship and investment, leading to a "rising tide"; but would there be an ethical argument in favor?

> History has not been kind to nations whose governments break those rules and started nationalizing corporations. Not too long ago, North Korea was the side with the industry, railroads, hydro-elec dams, steel mills and manufacturing plants.

North Korea isn't a particularly good example; their economic stall is a result of trade embargoes more than anything. (They're actually doing as well as could be expected, given that they're an isolated, non-globalized economy whose only trading partners are much larger globalized economies [China, Russia] who don't need anything NK could provide.)

Meanwhile, China's own mostly-nationalized corporations do pretty well for themselves.

Hell, even Canada has tons of Crown Corporations, and everyone here is begging our federal government to nationalize the cellular infrastructure (and then lease it out fairly) because it'd be much better than the current oligopoly situation we're in.


I agree the contributions of many of the participants is multiplicative, but I don't agree that government is the most important.

Corporations can't exist without some entity enforcing contracts and agreements. That is sometimes the government but it is often also 3rd party arbitrators. In any case though government provides the ultimate backstop.

Most corporations also wouldn't exist without the strong will of a dedicated founder to drive the shared belief and vision of what the corporation could become even when the barriers seemed insurmountable.

Similarly, most corporations wouldn't exist without those early investors willing to stake a portion of their wealth or fund's credibility on those founders.

To a lesser extent, early employees also play a significant role. They take on risk and give up lucrative salaries at larger companies in exchange for more impact on a product and the potential of a big payout down the road.

If any of these entities/groups are not present, the corporation fails. All are needed, not just government.


Look at history, 150 years ago to be allowed to form a corporation you needed a legislature to pass an act after they believed that your enterprise was in the public good. Being able to form a limited liability company is a right granted by law and subject to limits.

Not that people pay attention today but if you read your states laws there are limits to what corporation can do, be named, etc.


the limit should be not causing damage to others. Regulations just put a higher barrier to enterpreneurs.

It is not a good idea to regulate all the time when in fact every regulation could effectively be a wall.


Why the Non-Aggression Principle is useless as a moral guideline http://dbzer0.com/blog/why-the-non-aggression-principle-is-u...

I just went quickly through the article.

The article treats this principle basically as ambiguous.

So this principle could be not perfectly defined for some, or disputable, according to the article.

However, you miss the point.

Saying that this principle is just not strictly defined (according to the article) does not make it a reason to put it to the trash directly. You have to compare to the status quo.

For me what the article supports (implicitly) behind this reasoning would be that the status quo (coaction and violence by governors) is better: hey, just proceed with coaction because NAP is not perfect? I think there is a lot of consensus on things that are wrong that we would all accept. Consider it a subset of NAP. The bigger the subset, the better for everyone.

In fact, there is a very clear principle, at least in my opinion that can define things way less ambiguously: it exists the negative or natural law and positive law.

For me, basically, negative rights should be inviolable and positive rights are not rights as themselves in my opinion: none of us will ever have infinite capacity or power for an arbitrary action, and in doing so you will violate the negative rights of others: I want to date this girl (but she does not), I want to go to Harvard (but I need to spoil others and disregard their academic CVs and skip the line), I want to have 10000 usd per month (but my employer built the business and won't pay that)... no, those are not rights. Those are things we earn by ourselves or figure out how to do.


How does this principle work when two sides have differing opinions on what constitutes the greater aggression (IE abortion where a woman's rights over her body are up against the question of when human life begins)

Vaccines.. at what level of disease severity should the government forcibly inject the entire populace with a vaccine to ensure that no one can aggress on another by infecting them (on purpose or accidentally).

If one jumbo jet passenger has a severe peanut allergy and other opens a bag of peanuts, is it an act of aggression?


If it is you who voted down without replying it must mean I am right. Long live NAP man. There are many of us who are civilicized people. We do not want to harm anyone or have excuses all the time to do it.

The closer to that ideal, the better.


1. I could be against abortion but I would try to convince someone to not do it. Never force them. 2. this is a trick question in the sense that it is true we can damage others. But it is also true you can damage yourself with a vaccine right? So I do not see a reason for anyone to force u. There is a reasonable risk here on both sides. What I will not do is to get aggressive if someone does not let me in somewhere. After all it is a fact I havr higher chances of transferring the disease and due to my conscious choice I try to not damage myself but also not actively damage others.

3. I do not think a person with a severe allergy would not inform the crew or just avoid the flight or set herself in special and guaranteed conditions. We are not kids. We DO know better than all these paternalist governments that treat us as idiots what to do.I have far more confidence in people than in people who has to dictate coactively to others what to do with no consequence all the time.

Freedom is responsibility my friend.

If you want paternalism you can pay yours I can figure out how to deal with my stuff and not damaging others on my way.

What you cannot do is to try others realize your view of the world. You convince them or leave them alone and let them do their own way. I think it is the more fair position by far.

With my view you can have all these things you wish and I do not need to participate in them. I do not want any of those benefits either. If I want one, I can pay for it or join.

With other views this is not even possible. So this way of doing it is just superior in my view.

But I see many people afraid of letting people choose. Instead what u have is a small amount choosing for the rest with evil incentives on top of it. A much worse alternative in fact. And one where people always blame others of their own problems.


government is our current paradigm. There could be way more distributed ways to keep all this stuff safe. Do not think it is the only paradigm. It is the only one we lived in.

If I run a business in say, Somalia, which has no functioning government, put together a cap table, name it, but some structure in place, is it not a corporation?

Market and also the structure of corporations which allows a small number of people to collect all the profits generated by the many workers beneath them. We could, for example, alternatively have a free society where most firms are collectively owned and managed by their workers. Then no individual would be likely to earn $100m per year, but in such a firm you could see everyone become a millionaire.

You're free to create a firm collectively owned and managed by workers right now, nothing is stopping you. I guess we do actually live in a "free society".

It's interesting that your idea of a free society is forcing businesses to organize in a certain way. Doesn't sound very free.


> It's interesting that your idea of a free society is forcing businesses to organize in a certain way. Doesn't sound very free.

You're reading that in to what I said. Look again.

"We could, for example, alternatively have a free society where most firms are collectively owned and managed by their workers."

I do not in any way advocate for the use of force to achieve this, and you have assumed I did. Tho I did not mention it, my philosophy is explicitly voluntary. I argue that it makes economic sense for workers to organize in this way, and that they should do it for their own benefit.

> You're free to create a firm collectively owned and managed by workers right now, nothing is stopping you.

Yes you are right I can. That's what makes this plan great! It is voluntary and doable today. However what I want to achieve is not just one more co-op. I want to live in a society where all of the goods I depend on are mined, manufactured, and delivered by cooperatively run firms. To achieve that level of change I have to go on the internet and talk to nerds about why it's so great for all of us to do this thing. So that's what I'm here to do. You may have misunderstood my comment as a complaint that I want the government to fix my problems for me, but again that is a misunderstanding of my position.

EDIT: I am doing things in the real world to achieve these goals too (see my profile), I only make the point about talking about it online because I tire of the “go do it then no one is stopping you” line. I am on HN to discuss theory with theory nerds.


Would your argument still stand if this hypothetical corporation had no employees but the owner?

That is, do you take issue with the fact that one person, employing many, profits much more than the people he employees or that he profits much more than his fellow man on the street?


Actually the idea of firms being cooperatives is only an approximation of my ideal. It is one step we can take which I believe would help. I do think that if the majority of firms in your society are top-down winner take all firms, you're going to end up with a top-down winner take all society and I think that's bad for society. In that sense I advocate that we move to more worker self-managed firms.

The question of the self employed person making huge profits is another one. I advocate for a somewhat selfless mindset (beyond meeting basic needs for your well being and happiness). So if a single individual can make huge profits, that means it's costing the customers a lot of money. In my mind, a person making a lot of profit could save a lot of people money if they shared how they are solving these problems, and recruited others to help with the effort. So that might look like: make their project open source and help others join in the effort to make their solution more accessible. I see this as best for society.

What then of the food and shelter this entrepreneur requires? As long as food and shelter are hard to come by, the entrepreneur will be incentivized to withhold their solution from society and keep charging high prices to ensure they meet their own needs.

The solution I see is for society to provide for the needs of all. This can happen by ensuring that food and shelter are abundant. If we do that, we can see more developers and entrepreneurs willing to share what they know for the benefit of all. I believe that if executed well, this strategy can lead to a better and more innovative society than one in which every person is incentivized to withhold their knowledge from others.

Going back to your original question - it's not that I take issue with a single business owner earning a high profit, it's that I think we can do better. Instead of a few earning high profits while others freeze to death on the street, we can provide food and shelter to all, eliminate material poverty, and do this all while innovating faster. But to do so, we must drop the self-centered individualist mindset and think about how to both look after ourselves while also looking after others. We must think as a community instead of atomized individuals.


Nobody is either a self-centered individualist or a selfless community member. These ideologies are terrible representations of reality. It's easy to entertain philosophies of individualism, self-reliance and empowerment along with caring for your community, the greater good, etc. I think most people would agree that all these ideas are beneficial to both individual and communal well-being.

I specifically advocate for community centered economics. This is in contrast to the rather myopically individualist economics we have in the USA today. Of course people are often selfless in the social realm (helping others etc) but I am intrigued by alternative arrangements of our economy which would see more of the profits generated by workers go directly to those workers rather than see those profits accrue to a minority at the top. I see our economic system as somewhat predatory and highly hierarchical, and I seek alternative arrangements which would eliminate technically unnecessary hierarchies.

The way businesses and the private economy in general are structured today seems to have arisen organically, though, it wasn't masterminded and imposed on anyone. It's natural for someone to have a business idea, take on a role of leadership and enlist other's to help. When Adam Smith wrote his treatise on capitalism he was just describing already typical commonplace behaviors, right? "Community centered economics" on the other hand, always seems to be a forced endeavor

> The way businesses and the private economy in general are structured today seems to have arisen organically, though, it wasn't masterminded and imposed on anyone.

Simplest counter example is labor unions. There was in fact a huge campaign to dismantle labor union power in the United States. Look at the way labor power was limited by state force in the 1947 Taft Hartley Act for one example:

https://en.wikipedia.org/wiki/Taft%E2%80%93Hartley_Act

Meanwhile in Germany every big company legally must have representatives from the union on the board of directors. A lot has happened since Adam Smith and some of it was "masterminded" on both sides. For example the "organic" work day was 14 hours long until labor activists fought and in some cases died for the 8 hour work day. We have made many decisions about the structure of businesses in USA and unfortunately much of it favors the accumulation of power at the top to the detriment of most people.

Finally, we must recognize that no matter what structure we have, we can always imagine better ones. And we can apply the same effort and pressure to make change as has happened in the past.


okay so if nobody can have personal control over $100M how do $5B infrastructure investments (tens of thousands of which you personally benefit from, like chip foundries or joint city infrastructure and pharmaceutical ventures) or billion dollar company investments (again you depend on many ... apartments, factories, agriculture)

It's kind of a funny question, because there probably has never been any $5B infrastructure investment which came from a rich person's pocketbook. They money comes from governments, which are institutions run by many people who don't personally control that money.

Anyway let's say you have a society where all the firms are worker self directed. It makes sense for firms to form broader organizations that represent different interests. So for example lets say you have an industrial zone on the edge of a geographic region. There's a shipping port, some bridges, electrical infrastructure, etc. All the firms in the area depend on this infrastructure to operate. And because they share this common interest, they have formed a regional cooperative made up of delegates from each firm in the region. When they need to make a decision about when to perform major infrastructure work, it is decided at one of their regular meetings. The delegates are not their to make their own decisions but to bring with them decisions made at their firm's meeting on the matter. If the delegate agrees to something their firm's people actually do not like, their people can recall them.

So the regional cooperative holds a regular meeting and there they decide they are going to build a bigger bridge and then decommission the old one. All the firms in this regional cooperative keep their money at a credit union which was set up specifically to represent these firms. They need to rustle up $500m to pay for this. They discuss how to raise the funds. There is a particularly big firm that will benefit substantially from the new bridge. They put up $50m on the condition that the bridge will have tolls and they will expect to be paid back $30m over 30 years. The rest of the firms together put in another $50m. The industrial zone regional cooperative takes their $100m to the broader regional cooperative which represents a large geographic region including several major cities which benefit from the industrial zone. The broader cooperative agrees to stake the other $400m for the bridge improvements with the agreement that the industrial zone regional cooperative will pay it back over 40 years.

So yeah. That's generally how you manage that. You can look up Murray Bookchin, David Harvey, and Richard Wolff if you want to know more. Also look up Zoe Baker on youtube.

If you don't like my made up scenario, maybe look up how ITER or LHC get their funding.

https://en.wikipedia.org/wiki/ITER#Funding

https://en.wikipedia.org/wiki/Large_Hadron_Collider#Cost

EDIT: Of course ITER and LHC are not workers cooperatives, just examples of how people delegating funds could make decisions.


okay my issue wasn’t that worker controlled firms would be legally incapable of joint ventures for profit. My issue was - who makes the decision? Do the workers understand finance and supply chain management and commodity prices and political risks? No, so why should they make the decisions

Ever heard of representative democracy?

yes representative democracy deals with this problem in a way that workers councils doesn’t. swarms of lobbyists (not evil) and aides are not industrial workers

It seems that you aren't familiar with the meaning of words that you are using. Workers councils are made up of delegates that are voted on by the workers i.e. they are a representative democracy.

And why would you expect that this new elected body would be any more effective at advancing it's electorates interest instead of just its own?

I would expect that they would be more effective at advancing it's electorates interest than the owners would be at advancing their workers interests for the simple reason that the new elected body can be simply removed and a new one voted in.

what’s magical about workers? why wouldn’t they just be corrupt themselves

> what’s magical about workers?

Did anybody say there was anything magical about workers? Since you are asking this question you must think that there is something magical about owners so why don't you tell us about that first?

> why wouldn’t they just be corrupt themselves

How would that corruption play out?


There is a large body of writing and historical practice on how to make decisions in this manner (communal organization and management of production). The anarchists Mikhail Bakunin, Peter Kropotkin, and Errico Malatesta wrote about this in the 1800's. Of course the Soviet Union was remarkably successful at growing from a very poor nation to a global superpower in 50 years. I absolutely oppose authoritarianism and that was their downfall, but they were an amazing economic success. Anarchists would say absolute centralization of planning was the failure, as perverse incentives developed until it fell apart. But decentralized planning seems extremely interesting. A more recent author who has written extensively on libertarian socialist decentralized planning and organization is Murray Bookchin. I think you would enjoy this 1994 piece on what Bookchin called "Communalism" [1]

But to provide you a basic answer to advance the conversation more immediately: People must be educated to follow any society. We've never expected the checker at Home Depot to understand logistics of her store. But this is due to the division of labor, not a limitation of the human mind. When people imagine a totally different society this tends to include schools which raise people for that society. And so every person would be taught more about how all the bits fit together and how to make decisions collectively. As I said, many different schemes have been proposed and tried for what system would work best. But someone like Murray Bookchin would suggest that different regional cooperatives can make their own decisions about how best to organize. I would be remiss not to mention the Mondragon Corporation in the Basque Region of Spain. They're a federation of cooperatives with a total revenue of 13B Euro ($16B) in 2013. They do big industrial stuff, finance, retail, and education. [2]

However I realize I am talking about how really big decisions get made. Maybe you're asking about individual firms. It's past my bed time but for that look at how cooperatives are managed. This history of a grocery coop in San Francisco is very interesting. [3] Here's a list of other Bay Area cooperatives. [4]

[1] https://social-ecology.org/wp/1994/09/what-is-communalism/

[2] https://en.wikipedia.org/wiki/Mondragon_Corporation

[3] https://web.archive.org/web/20170606172106/https://www.rainb...

[4] https://nobawc.org/


> Of course the Soviet Union was remarkably successful at growing from a very poor nation to a global superpower in 50 years.

In XIX century, Russia was already THE superpower in Europe (which was everything that counted back then). Everyone else was afraid of her. She was poor, but it's possible to be poor and a superpower at the same time - you just need huge population to milk, and spend the bulk on your budget on military. Having a massive territory that's basically impossible to conquest and occupy no doubt helped as well. It meant that even if they lost a serious war, like they did against the Japanese, it was ultimately without major consequences.

Communists just continued with that modus operandi. They built oversized military, nuclear arsenal, top-notch global spying and propaganda aparatus, while the population supporting it was forced to work for peanuts - not to mention tens of millions who worked in concentration camps for free, and who either died there or had their lifes broken because of it. Even with all this ruthless inhuman exploitation, the Soviet model was just inferior and ultimately couldn't keep up with Western market-based democracies.


the soviets had expert top down control, not worker control. we currently have decentralized (by a bunch of experts who own stuff and pay each other and publish papers and legislate) control

let’s say workers now control Amazon. all of Amazon workers. But it turns out Amazon AWS is a big part of Amazon revenue, the workers know jack about that, they either delegate authority to some aws experts and now as bans the same problem again if they ruin it. And you’re also assuming worker cooperatives wouldn’t follow profit motives - wouldn’t they? Workers want money. You want to abolish profitmotive but won’t do that. Workers could totally abuse monopoly or regulatory capture by vote


First: You do not snap your fingers and hand Amazon over to the workers. I am discussing a direction we could move society over time. My position is that it is in principle perfectly plausible to train people to manage something like Amazon. I am not suggesting we put warehouse workers in charge of AWS tomorrow.

Second: It is my bed time and I regret that I cannot continue to answer by way of conversation, but I would suggest reading link [1] in my above comment if you want to see an overall picture of how such a society might be organized.


and we could transition to a nuclear wasteland too, slow doesn’t mean the end can’t be bad. Amazon has people trained to manage Amazon and they currently do so. why would their interest be any more aligned with workers

just google the phrase “five billion dollar joint venture”. They don’t come from rich peoples’ pocketbooks, but they do from other areas and are important. And don’t come from governments. They come from the businesses lol.

Similarly, early and late stage venture funding and other forms of funding different companies would also take a haircut, probably (not much with a 10% tax above 100M, yes with a 100% above 100M). Which would suck for people who like medicine and electricity

> ITER and LCH

Yeah governments absolutely can fund things. The question is should they fund everything. And you should note that they weren’t funded by “workers councils”.

dude we have regional workers councils it’s called state legislatures and they absolutely do fund stuff. We even have decentralized hierarchical councils - city and county govt! And they do make infrastructure decisions! What they don’t do is fund chip development or factory scaling. And even the things they do fund they offload the decision work to experts (not workers).


Yes I added an edit after your comment to clarify that the point about ITER and LHC was just about how people could allocate funds for big projects, but of course there are innumerable examples for that.

My point is not that The State should fund everything. It is that groups of people can elect delegates and those delegates can make decisions for us. I don't want them to be made by a centralized state but instead by voluntary collectives. Basically I advocate for worker owned collectives to manage the production that those same workers depend upon. This would I think lead to more freedom with less exploitation. Those workers would have dominion over the profits they generate, rather than the current arrangement where that control is traded for a wage. I believe this could lead to a world where all people accumulate enough wealth that they no longer need to work to survive. But that can never happen if an elite class siphons off all the workers' profit to spend billions on pet projects for amusement.


I have no idea why the workers of, say, Uber would know how to decision make for tech infrastructure and strategy. unless you mean “give them board seats”, which is rather different.

Many schemes have been discussed to handle this problem. Giving a workers union board seats as is done in Germany is one possible way. Another, if we are imagining a different society, is to make sure our educational system teaches every student the principles of worker self-management. People would grow up learning how to make decisions collectively. A great example of another world not yet to be realized is the Oakland Community Learning Center run by the Black Panthers, shown in this 1977 television piece [1].

In that school, students learn to work together not just to solve problems, but also to determine justice (under guidance from adult teachers).

In a world with bosses and workers, we are teaching everyone to do as they are told and follow orders. But we could, I believe, see a much better world if we teach everyone to be community leaders and collaborators.

[1] https://www.youtube.com/watch?v=9dYsjDqUdr0


giving workers board seats doesn’t reduce their order following, it makes the orders better.

> Another, if we are imagining a different society, is to make sure our educational system teaches every student the principles of worker self-management

what are those principles? Yeah modern work absolutely crushes the soul, but ... how else do we make the heckin .1% tolerance raw materials in the heckin factories? Where’s the room for improvisation or self driven innovation if you’re a line worker in a butcher shop? Seems hard. Not sure black panther community leadership is gonna help.


It is not an issue of following orders, it is an issue of hierarchy. When all the workers are below the board in the hierarchy, the board can take all the profits, push the workers super hard, and squeeze out all their benefits. In that scenario a few people get rich off of the work of many, and you develop a society where a small minority of people hold all the power and rule over everyone else.

The board seats are not about "better orders" (tho that may be another benefit) they are about ensuring the needs of the workers are represented in board decisions. For example if the Amazon warehouse workers had representatives on the board, they'd get bathroom breaks and better pay. The only reason I mention workers making more decisions is if you want to eliminate the board entirely.

> what are those principles?

> Not sure black panther community leadership is gonna help

I know most people do not watch the videos I link (obviously), but it sounds like maybe you did not watch the video. If you want to know what principles I think would help, I really recommend the video! It will be better than me trying to tell you from memory (esp because I am sleepy). It's a great piece of history and it shows some ideas that would help make all students better community leaders and cooperative workers.


I will eventually read leftist theory, but I won’t be caught dead watching political YouTube

It's a television story from 1977. You can learn about this historical thing or not, but based on your comments it seems clear you just want to argue without learning anything.

What a myth! That the markets are free. There are a lot of levers we can pull as a society, and we're pulling this one (finally).

We create market conditions. It isn't some uncontrollable god we all have to live with.


It would seem that, as the writer and enforcer of regulation and other such things, it's the government that decides. In "free societies," perhaps that equates to democratic control, but again, that's clearly distinct from "the market."

In the real world, the government, as a representative of society, is a part of the market. You're thinking of the spherical cow of economics.

you don’t want pharmaceutical plant workers and accountants voting on whether the company should invest in mRNA tech in 2013?

I honestly don't understand your comment. Are you saying they should have voted? Should not have? I have no idea what you are alluding to.

ok and in an open democracy it’s not for you to decide that 55% taxes are too much. The public discourse determines that ;)

What if I do think that it is up to free society to decide that?

> free society

Free in what sense? Are you implying the US is a free market?


The modern market is propped up by laws that make things no one can naturally own, like words or code, into "property". Without these laws, programmers and their employers would not be collecting the same fat paycheques because all their output would be freely copyable without repercussions.

> what can you possibly do that justifies making $100 MM a year?

You could convince other people to give you $100 MM.


> what can you possibly do that justifies making $100 MM a year?

Decide on a course of action for a large company that, over the next few years, makes it $5 billion instead of $4 billion.


>> what can you possibly do that justifies making $100 MM a year?

> Decide on a course of action for a large company that, over the next few years, makes it $5 billion instead of $4 billion.

That's (assuming it was a unique insight) an improvement of $1 billion to the company, or to GDP. That is a high number, even bigger than 100MM (although you specified years vs. year, but whatever). It doesn't follow that it justifies making $100 MM a year.


Could someone else have done the same action / achieve the same thing?

If yes, then it's not justified. Large companies do not revolve around a single person (if it's not tesla/spacex, apple in early 2000, early microsoft)


Steve Ballmer quitting as CEO increased Microsoft's market cap by over a billion dollars. If someone can be worth a negative billion I see no reason a different person can't be worth a billion. What you are worth and what you get paid aren't the same, obviously. That depends on outside options, how much beter you are than the next best, replacability, productivity. But while large companies do not revolve around a single person one person leaving can be worth more or less arbitatry amounts. Notch made a billion dollars prety much single handed.

Suppose person A has a 50% chance of making the right decision, and person B has a 70% chance. Person B is then worth paying up to $200M more. Or, if you end up making ten decisions like this per year, then even 52% vs 50% would be worth the same amount. When you're managing enormously valuable properties, even small increases in performance can be worth a lot.

How would someone even measure those percentages?, what happens if someone hired is the reverse is true, being 30% right?, is that even observable?, would compensation be negative?

Otherwise, without being able to objectively measure this then it's all smoke and mirrors and the persons reach these positions through other means.

If that's the case, then taxing an appropriate amount is fair. There's also a precedent with Roosevelt introducing a tax that only really applied to Rockefeller


I mean you can just think about “would I rather have CEO musk / bezos or CEO drunk BPD girl”. It’s not actually based on percentages

I did have a musk/jobs/gates/exceptional people exception :). Also depends, if you're an oil company you really don't want Musk as CEO shutting down your operations...

Either way, I was making a comment on the: 'it's not fair to tax people making obscene amounts because they're actually worth the pay and doing work to match it'. It's basically hard to quantify, it's fair to tax as needed and there is precedent.


Someone needs to fund the judges and regulators and the NSF! I mostly just disagree with “employee run corporations”

What if that decision is anti-social or even illegal?

> 50% is just a random number that feels good to you. .... Getting to keep even $45 MM seems mighty generous of society

If their numbers are random, why aren't yours not random?


I certainly and sincerely agree with you about demands for budget efficiency and transparency.

> [...] you only need to make like $250k total. It's a good amount, sure, but if you compare cost of living... it's still hard to live on.

This reminds me of the famous "Let them eat cake" [0] by queen Marie-Antoinette.

A statistical point of comparison.

California median gross individual income is under $64k, or $78k [1] household income. "Easy to live on" scales superlinearly from there, so by significantly more than 3.2 or 3.9 times respectively.

Two anecdotal points of comparison.

I enjoy a comfortable life on 1/6 of that threshold amount pre-tax, albeit in a HCOL western European city. My marginal tax rate is... 53.5%, not including real estate ownership tax, and some other minor taxation.

And though it may surprise you, friends of mine living in the very LCOL eastern European countryside live on a 6k€ pretax income. 6k€ a year that is. With a family of four, soon five. They consider their living conditions comfortable and wouldn't want to change them for the world. Do mind this is 40 times less than the "hard to live on".

A recommendation

Please grow your awareness of the material situation of others. Being more anchored in reality will benefit you.

[0] https://en.wikipedia.org/wiki/Let_them_eat_cake

[1] https://fred.stlouisfed.org/series/MEHOINUSCAA646N


This is meaningless comparison I am originally from Ukraine 30K USD per year there buys you same lifestyle as 200+K in CA. So just comparing amounts is totally meaningless.

I wish you to one day have the perspective to understand other people may have different wants and needs than you and that it is fine. It doesn’t put them in any moral or social predicament.

> you only need to make like $250k total.

hackernews.txt

> AND the government is taking home more of your money than you do.

No it isn't. The government is taking more than half of the money that you _make at the marginal rate_. You'd want to be earning a lot more than that to have >50% total.


Yeah, I hit the highest marginal rate at about a third of my income, and yet I still only pay approximately one third of my gross as tax yearly.

As a founding member of a startup I can say that to early exercise using QSBS while the capitalization of the company is <50M is to take a huge risk. If the company folds, my stock is worth $0 and I lose. It's a gamble.

Why does the government get to take money from me, risk free, when I'm the one taking the risks and starting a company which, if successful and grows, will employ many people? Is it fair to pay on an unrealized gain, such as with certain option exercises where you have to pay AMT without first selling? All risk to me, none to the government. They're like mobsters who shake you down, rich or poor.

Eliminating QSBS will be the death of Silicon Valley. Raising capital gains will likewise kill incentive to build businesses and invest. It's insanity, pure insanity. There is no avenue the Democrats are leaving un-pursued in their quest to raise taxes. Insanity in this economy. Insanity.


I think you've forgotten that with a company you've been given some amazing legal rights by the goverment. If the company goes bankrupt you as founder don't personally have to pay off the debits you get to walk away.

As far as I understand, government has very little to do with it. It's a signed mutual agreement between the investor and the founder.

> Eliminating QSBS will be the death of Silicon Valley.

Silicon valley existed before QSBS it can survive it's removal.


Maybe I'm missing something. But equity for work is income. Which should be taxed like everyone else. Or if you view it solely as an asset just like all other stock, you should pay cap gains just like everyone else.

Is there something hidden in the draft to tax unrealized gains? I know that was an idea thrown out by some super progressives but it is not in the draft bill and won't get passed.

Looking at inheritance only even that got stripped too because of 'family farms'


> Why does the government get to take money from me, risk free, when I'm the one taking the risks and starting a company which, if successful and grows, will employ many people?

Why do you get to use the internet my tax dollars paid for? That same internet that your startup so heavily requires to function, heck, even exist?


okay but the adage of “VC profit is mostly the huge winners”, so your marginal benefit goes down only at the highest valuation companies, and does that really harm much?

There’s a great argument that yes, I’d rather have Elon be able to pump billions into spaceX or bezos billions into his ventures than have poor people spend them, but incentives? No clue, genuinely


>They're like mobsters who shake you down, rich or poor.

Well, that is how it began. There were mobsters that shake you down. Then people decided that they don't want to be shaken down. They formed a government to fend off mobsters and then it turned out that the ruler is also a mobster so they implemented limited terms and elections to decide on the next mobster knowing that a society will inevitably succumb to external mobsters if it does not manage its own mobsters.

Therefore the moral argument that governments are bad because they are mobsters is extremely weak.


I love this logic, if you're going to take some of my money away I will do nothing instead. Really? Bullshit.

Why should anyone get to take hundreds of thousands or millions of dollars without paying anything back to society in taxes? Simply because they took a risk? They owe nothing to the society that let them do that? All those jobs they created, hired people, who relied on government services at some point from education, roads, healthcare, food, security, etc. Of course they did too, but no. Now that they are making more than almost everyone in the society, they shouldn't have to pay anything back to it?

It's a greedy load of crap justified with weak, self interested nonsense.


> I love this logic, if you're going to take some of my money away I will do nothing instead. Really? Bullshit.

Is it? Why is it so hard to imagine that higher taxes on risky ventures might cause somebody to go "Eh, not worth it, I can make better use of my time - like spending it with friends and family"?


If that is you, why should we trust you with a tech unicorn? Is there no other value or purpose to your venture?

You will be replaced by someone who pays their taxes.

I'm fairly sure I'll still be paying taxes when I go out to eat with my family or go camping with friends. It's just not going to be as much as if I had spent that time working.

If your entrepreneurial drive is only as strong as the capital gains rate, I don't really have any faith in you as an entrepreneur. We're talking about people exiting for substantial amounts that this really impacts.

I don't think that I'm the only person that struggles with pretty much anything that doesn't bring instant gratification, be it hobbies, chores or starting a business.

Most businesses fail anyway and knowing that even if you beat the odds and succeed, the reward might not be worth it because the government takes an ever large cut should give every reasonable person pause to reevaluate their life priorities.

As cliche as it sounds, money isn't everything.


So why the big fuss over giving up some at the extreme end of wealth? It's been shown to have diminishing returns after a certain level anyways. And yet, here we are arguing about why paying zero percent on amounts above 400,000 is a dealbreaker.

I can't wait to read about all the entrepreneurs who come out and tell their story about how the tax rate at the highest level impacted their decision to create a startup. I'll be waiting forever.


> To hit 55% tax rate in California after this, you only need to make like $250k total. It's a good amount, sure, but if you compare cost of living... it's still hard to live on.

Excuse my ignorance but would you be able to lay out basically how this amount of money is hard to live on?


Perhaps not hard to live on, but it's easy to see how the state taxes away any chance you have to build any semblance of wealth due to the insane cost of living in the Bay.

Basic 1 bedroom apartment rent, at least 45min commute or less to Menlo Park/Palo Alto - $4000/mo

CalTrain/BART/car insurance/bus/Uber - $1000/mo (this is conservative, since car insurance costs more in the Bay since the DA won't enforce anti-theft laws)

Groceries - $400/mo

Utilities and phone bill - $400/mo

Health insurance - $300/mo

Miscellaneous other expenses (e.g. soap, toilet paper, etc.) - $500/mo

CA tax bracket for the 57k-295k income range is 9.3%, so your average rate for that 250k is going to be pretty close to 9%. Your effective federal rate under the new tax plan being discussed in Congress right now is going to come in the mid 30's - let's say 32% to be conservative. Social Security adds 6.2%, Medicare another 1.45% under current rates. CA SDI is another 1%. Total effective rate: 49.65%. Post-tax earnings: $125,875 out of $250,000.

What about your expenses? Well, if you do the math, the above comes out to $79,200/year. You now have $46,000/year to save towards a house... which oh by the way, costs $1.5M at present day for a shack in Fremont. Oh, and forget about having kids too.

Yes, you aren't starving, but considering you're making $250k it's kind of egregious that you aren't able to purchase a run-down house in 30 years from your income. The problem is twofold: the state taxes away half your income so you can't build wealth, and NIMBYs opposing the development of new housing suck away the rest of your income.

And before you say we should be focusing on actual poor people first: perhaps consider that the state clearly has the resources for both?


Everything in this list is overinflated, or you're really poor at budgeting. A $4k a month 1br is going to be a luxury high rise; not a basic 1br. $1k a month on travel expenses is insane. I never spent more than $400 a month and I used Lyft at least twice a day every day. Health insurance is covered by your employer, unless you're working for a really shitty employer.

Also, you don't understand marginal taxes. Please, go read up on them, because anytime you talk to someone who understands them, they're going to think you're an idiot when you start whipping out your calculations.


I quoted the effective tax rate. The marginal rates are higher. Federal marginal rate at 250k under the new proposed tax plan is 35%, excluding Medicare and Social Security. CA's marginal rate at 250k is 9.3%. All of the numbers I quoted are lower than that.

Maybe try to understand that your taxes are composed of more than just federal+state and that Medicare+Social Security+CA SDI actually adds a substantial amount?

> luxury high rise

Have you seen real estate prices recently? Luxury high rise has you paying much more than 4k if you're anywhere close to a good neighborhood. And if you're trying to argue you can spend 2k to live in a 1930s apartment in the Tenderloin while making $250k, I think you're too far in the echo chamber to have your mind changed.

> Health insurance is covered by your employer

This is in the context of startups, so no, it's not. The employer will subsidize it but it isn't free.


You're comically overestimating the effective tax rates.

SSI maxes at 140K, so you're paying an effective 3.5% rate at 250K. The effective federal and state tax rates for 250K of AGI are going to be below 32 and 9% and they won't be affected by any current Biden plan. The calculator I'm looking at[0] suggests an effective federal rate of 23.5%, CA rate of 8%, and FICA (SSI + Medicare) of 5%, for a total effective rate of just over 36% overall, 13% (or 32,000 a year) off of what you suggested. This more or less matches my experience with an AGI of around that much, although in practice my effective rates were lower than those.

To put that in perspective, that ~32,000 you're misestimating by is enough to afford a second apartment, or, you know, the annual SF minimum wage.

To hit an effective federal tax rate of 32%, you need to be making 800K/year. To hit an effective overall tax rate of 49%, you need to make more than 2 million/year (less after this year, but not a whole lot less, like 1.8 million a year or something).

> And if you're trying to argue you can spend 2k to live in a 1930s apartment in the Tenderloin while making $250k, I think you're too far in the echo chamber to have your mind changed.

I can find a handful of 1 and 2 bedroom apartments with W/D and dishwasher for <=3K. I can find plenty under 3.5K. Like, tons. And that's on zillow. You can usually find better rates on craigslist. "I want to live in a luxury high-rise downtown" is a very particular interpretation of the requirements you laid out.

[0]: https://smartasset.com/taxes/california-tax-calculator#oDlsn...


I would argue it's not inflated at all.

$400 a month for groceries? In SF?

A single meal at an "affordable" restaurant is often $30 after tip.


> A single meal at an "affordable" restaurant is often $30 after tip.

I've never considered nor seen anybody counting eating out as groceries. Is that normal?


It is a great way to inflate budgets if you want to demonstrate that it is impossible to live in the bay without making seven figures.

We see this pretty consistently in media where crocodile tears are shed over a family making 500k and barely able to keep it together but you look at the budget and they are saving 80k in retirement and spending 20k on travel or whatever.


No.

> What about your expenses? Well, if you do the math, the above comes out to $79,200/year. You now have $46,000/year to save towards a house... which oh by the way, costs $1.5M at present day for a shack in Fremont. Oh, and forget about having kids too.

$46,000/year is a decent pre-tax annual household income in most of the country, and saving 20% of your income is doing very well for yourself. If you're putting that much away even after those inflated expenses (are you seriously paying $50/working day for your commute?) you're in no position to complain about your tax rates. The bay-area housing situation sucks, but that doesn't mean you're entitled to take out of the tax fund.


> If you're putting that much away even after those inflated expenses (are you seriously paying $50/working day for your commute?) you're in no position to complain about your tax rates.

Ahh the classic “well you aren’t poor so you don’t get to complain”.

Can we not aspire to have a middle class in this country?


I would consider $46,000/year in savings to be very, very far from poor. And that's with a budget many consider to be inflated.

I would consider being unable to purchase a rundown house in a mediocre location after 30 years of saving from a high income to be pretty bad. You obviously aren't poor but it's not exactly a good situation to be in.

After 30 years at a conservative 3% you'd end up with $2,188,278. Are you saying you wouldn't be able to find a home in that price range?

$46,000/year is $3833/month, which if you go by this calculator for mortgage payments [1] is less than an $800k house. If you live in the Bay Area, you know that you can't buy a shack for $800k unless it's in the Tenderloin.

The mistake you made was using the future value of the saved money to pay for the present value of a home. Home prices in the Bay have also historically appreciated about as quickly as the stock market, but even if we assume they appreciate at 5% and you could get an 8% return investing money, you get taxed on the extra returns of your investment in the range of 30% after LTCG and state taxes, so your post-tax return discounted by the house price appreciation is basically 0.

A lot of words to say that your calculations are wrong and even if you take on a relatively high amount of risk+reward by investing in the S&P 500 you probably still won't save enough for a house in a region with good schools in 30 years. Which I think if you're making two hundred fifty thousand dollars a year, is pretty unreasonable.


> $46,000/year is $3833/month, which if you go by this calculator for mortgage payments [1] is less than an $800k house. If you live in the Bay Area, you know that you can't buy a shack for $800k unless it's in the Tenderloin.

They were including $4,000/month rent in the original calculations. If you're talking about buying on a mortgage then you should be using $7833/month.


Apparently we can't, because part of the social contract of a middle class is that they're happy to pay 50%-ish tax rates.

*marginal tax rates on every dollar earned above 250k

> Basic 1 bedroom apartment rent, at least 45min commute or less to Menlo Park/Palo Alto - $4000/mo

I lived in a "luxury" 2br apartment that was 20m from Palo Alto just a few years ago for $4000. My 1br prior to that was $2250.

> CalTrain/BART/car insurance/bus/Uber - $1000/mo

But you live a shortish commute away. Why do you need CalTrain and Uber? Where is car insurance costing $12,000 a year?

> Utilities and phone bill - $400/mo

Huh? Power, water, trash, cell phone, and internet came to roughly $200/mo for two people when I was in the bay.


46k / year in savings is "hard to live on". What a joke.

It's easy to inflate bills by pretending what you are getting is the bare minimum while paying premium prices.

Your argument about tough to live is that you have more DISPOSABLE income than >40% of the country has total income.

Renting a nice 1bdrm apartment in a decent neighborhood in SF or LA is going to cost you over $48k per year. Probably closer to $60k. That's close $100k+ pre-tax.

Even with a modest spending budget, if you want to max your 401k - which you will need to do to keep this life style in retirement - you're going to need to make $180k.

Definitely not "hard to live on". But also, you are decidedly far from rich.

$250k - if you are single - you should be able to save a lot and make some investments and have more financial freedom - or more spending, whichever you prefer. Still, you are far from "rich". Even at ~$450k (top 1%), you're going to need several years of savings at that level before you start to feel "rich".

Should people feel sorry for you? No. But are you just riding around on yachts and drinking umbrella drinks all day? No.


My 2BR in SF is $2.6k a month. The other apartments in my neighborhood that are similar are ~$3k a month. People in SF need to get away from the idea that you need to live in a downtown highrise to live in SF.

You don't need to be riding around on yachts to be rich. If you never need to be concerned about money, you're rich. When I was making $150k a year in SF I didn't need to be concerned about money. At $250k a year, I could invest half my income and still never think about money.


You just argued in the same comment that a person who is supposedly rich should downgrade on their life style so that they can afford a certain housing situation. That is not being "rich".

You're not rich if you can forgo thinking about money for only one month.

Being rich is when your job is just for influence and power and not the salary. Being rich is when you can fly from your vacation home in one exotic destination to another exotic destination. Rich is when you have a million dollar painting hanging on your wall that your grandfather acquired in the 1920s for $500. Rich is when you don't even have to think about whether you can afford the private school for all three children with 50k tuition per year each and when you don't even have to think about budgeting for any of it. Rich is when you have a maid at home and a private chef living on your estate. Rich is when your wife can buy the $5000 dress for a one time party and it's not even a wedding or anything special. Rich is when you can afford to hire a doctor to come to your house in this economy. If you live in a 2 BR apartment I don't care how luxurious it is. You're not rich.

If you make less than $500k a year and you don't invest 90% of it you don't even have a chance at being rich in your life time.

We're 10 years away from everyone being a millionaire because inflation is really that high but the difference between barely eking out a 1.1 million dollar net worth based on all your assets and living in a 50 million dollar house may as well be the difference between flying at 30,000 feet and being in actual orbit.


I'm tired of the nobody is rich argument.

I'm tired of people calling me rich when I live in a fucking apartment and can't even afford to buy property.

If you live in an apartment in a high cost of living area and your concern is buying property at the same area you’re rich. I understand that this isn’t what your assumptions of being rich looks like, but your quality of life is significantly higher and opportunities for you are significantly greater than most of the country. It’s important to recognize reality and understand ones feelings may be presumptive.

The average person making $180k in SF is not much better off than someone making $100k in Dallas.

In Dallas, you'd be called upper middle class. In SF, people lecture you that you're "rich".

Post-tax, the difference is only ~$45k. Your rent is going to be an extra ~$20k. Your cost of living is going to be an extra ~$10k.

Okay, so you've got an extra ~$15k, maybe 20% more purchasing power. But this only works if you're single.

If you have kids or a dependent, you're going to lose all of that to rent and expenses (and probably more).

And, until this year, it's not like you could just take your $180k job to somewhere cheaper. If you got a job somewhere cheaper, you'd get paid less to where it wouldn't make much of a difference financially.

Really - the only benefit is how regressive the 401k system is. You can dodge taxes on your high marginal tax rate in SF. So you're much more likely to contribute to your 401k - which will almost certainly work out for you in the long run.

In the short run, you're likely to pay for it significantly with a reduction to your quality of life.


To be honest I recently made a ton on crypto and I'm using it as a down payment. It made me painfully aware that if I had to save up for the same down payment it would take me 10 years to save that much money and chances are along the way some financial emergency would ruin it all. And with the rate housing prices are increasing right now you can be priced out fairly easily.

Rich is when you don't need to think about any of this shit at all. People keep trying to put a dollar amount on what being rich is. We're all middle class arguing about how much we make PER YEAR. The truth is you're only rich if you control enough wealth that you can not work for a decade or more.

For example my step father start a trucking business that required him to work from 5 am to 5 pm every day for more than 10 years. Slowly he added more and more drivers. Recently he sold his business for 1.1 million.

Now is he rich? I personally don't think so. They live in a modest townhome in a low cost area. He just has a low burn rate relative to the amount of assets he has. There are way larger houses all around them.

And the truth is most normal people will agree with me because that's what their lives are. What you make per year can't be used as a metric for wealth. It's just earning potential not actual wealth.


$48k is $4k monthly; $60k is $5k. While you certainly can pay that much, you don't have to. Take this $2k listing: https://sfbay.craigslist.org/sfc/apa/d/san-francisco-apartme... Or this $3k one: https://sfbay.craigslist.org/sfc/apa/d/san-francisco-861-pos...

Those are borderline, but they’re pretty close to being fully in the Tenderloin. That’s the roughest and one of the cheapest parts of San Francisco proper.


It is possible.

These are not terrible apartments, and they're in decent neighborhoods.

These probably would've been closer to $3300 or $3600 pre-covid. And they're not particularly great.


Not terrible? The first link is a modern 80m2 flat (sounds huge for 1 bedroom to me) with great facilities right on the sea front. Do you have example of what you would consider good, because it already sounds pretty luxurious to me?

I can't imagine that everyone in California is making >$250k.

There must be lots of people making low 6 figures or even gasp 5 figures and still somehow managing to survive.


Because of graduated taxation and government benefits, many of those people making 5 figures receive free or subsidized healthcare and other benefits from the CA government while paying a much lower effective tax rate. Essentially CA is just taxing the middle class but instead of the middle class it's the upper middle class.

An actually effective tax would be a wealth tax with no exemptions for all the homeowners sitting on 1000% gains and angrily voting against all new development. Highly taxing high incomes in my opinion _reduces_ socioeconomic mobility, since the wealthy don't pay rents and therefore spend much less than high income earners who are not yet wealthy.


Yachts are expensive. And it’s literally impossible to live in Cali without one. What would the neighbors think?

You’d be hard pressed to buy a 2 bedroom condo in most of California with that income. The places that pay that much have the most expensive housing in the US.

Rents for a small apartment can be around 3000/month. Food in the area is quite expensive. So are things like car maintenance, movie theatres, gasoline, etc. If you live in SF, you'll need to budget 2-3 car break-ins per month and 1-2 catalytic converter thefts per year to deal with. On top of that, CA has a quite high income tax. It adds up fast...

> If anyone wants to increases taxes even 1%, I want there to be a big fight about it. Serious demands in to budget efficiency and transparency. If it passes, I want to know there is scrutiny over the taking of my dollars.

One can imagine it should apply for both increases and decreases. "What programs will no longer be funded and why?", etc


> To hit 55% tax rate in California after this, you only need to make like $250k total.

Marginal rate, effective rate not even close.


People so often performatively misunderstand this, that I'm getting to where I think we should literally skip having marginal rates and just abruptly switch the actual rate over at that threshold.

I mean, if that is how they are going to act, let's just do it. Nothing is apparently gained through having marginal rates be the reality. We are just leaving money on the table when the collective insistence of people for decades is that marginal taxes don't exist and the rate's just abruptly hiked to a different one.

So fine. Marginal rates don't exist, then. Happy?


> If anyone wants to increases taxes even 1%, I want there to be a big fight about it. Serious demands in to budget efficiency and transparency. If it passes, I want to know there is scrutiny over the taking of my dollars.

> Passing a 10% increase swiftly and suddenly is like a punch to the gut

The problem is that there have been decades of unserious scrutiny. Every percent is fought over regardless of what the underlying details might be. So what you get is a situation where only "big bang" changes happen, because once the politics manages to break the deadlock, why waste that narrow change window on 1%?


> imagine if a mob boss goes to a retail store and demands half the profits. Why does anyone -- mob or Government -- deserve more than half of what you make?

I work and create wealth, and some heirs swoop in and grab that created wealth for themselves in the form of quarterly dividends. Sounds like exactly what you are describing. The parasitic expropriation of my surplus labor time by an aristocracy of heirs.


This isn’t about estate tax. Your heirs don’t take anything away from you, neither does the government with estate tax. At the time they take whatever they’re taking, you are dead. Dead people have no use for property.

Besides that, if you don’t want your heirs to have your estate, you can create a will while you’re alive and leave all your property to charity, your cat, whatever. In any event, whatever happens to your wealth it won’t really matter to you, since you’ll be dead.

Edit: seems I misread this. Anyway, nobody “expropriated“ your labor, you sold it at an agreed upon price. If you aren’t happy with the price you got, demand more or make your labor more valuable.


They’re talking about corporate profits being funneled to already wealthy shareholders instead of the people responsible for generating the profits.

It doesn't seem that the OP is referring to their own heirs.

Ok, but then tax cuts need similar detailed scrutiny. What will have to be cut, and who will suffer by how much as a result?

The US government doesn’t need your money to fund its programs, it can always fund by printing money. Tax policy is more about shaping behavior and preventing inflation, and as such these taxes ought not be judged on what they’re “paying for.”

I find it interesting how people stopped caring about everything except housing. It's like humans have succeeded at almost everything except one thing and then people tell you that their basic needs aren't met as if the rest of their life is just as bad when it's the opposite. People want housing to be exclusive and they want you to get the hell out of their hometown.

https://en.m.wikipedia.org/wiki/Door-in-the-face_technique

This is classic DITF. Spring 10% on everyone and then claim to have “listened to the people” by later rolling it back to 1%.


Do income spreading if having an unusual year. This spreads your income across the past several years, and allows a lower marginal tax-rate.

Do you mean exercise of options and sales of shares? Because otherwise this strategy is only available to the business owner(s). Thx, tax strategy newbie.

I don't know where you get that idea. I mean income spreading, and it's available to individuals. Leave your personal attacks on another forum please.

https://www.investopedia.com/terms/i/incomespreading.asp


> Leave your personal attacks on another forum please.

what?


>Overall, taxes over 50% feel unethical too

Wait until you hear about Apple's turnover tax! F.you(pay them) even when you're losing money!


How do you hit 55% tax rate in California after this?

You're damned if you do and damned if you don't. If you raise taxes 10% you won't be able to touch them again for 10+ years because everyone will say "but you JUST raised taxes" — I've seen this happen locally.

Bold suggestions tend to happen because they either get negotiated down and/or it's the only chance you get for quite some time.


The cruel part here is retroactiveness of the change. Pioneered by California's Proposition 30 in 2012 ([1]).

Retroactive changes of the (tax) law reduce the planning horizon and ultimately the efficiency of the economy.

1. https://gscpa.com/prop-30-retroactive-tax-increases-approved...


I realize the US Constitution only means whatever the heck the Supreme Court says it means, but Article 1 is explicit in preventing both the federal govt and the states (which is relatively rare, most of the restrictions on states are a result of the "incorporation doctrine") from passing ex post facto laws. And I think this prohibition was made specifically for purposes like this, where you shouldn't be penalized if you plan things above board according to the law at the time your decisions were made.

I sign a contract to import widgets, but they have not been delivered yet. Congress imposes a new widget tariff. Should I be able to import my widgets without paying the tariff?

The linked article states the bill (which has not been passed yet) says this (emphasis mine):

> effective for all sales taking place at or after Sept. 13, 2021.

Using your example the equivalent is imposing a widget tariff, passed at date X, for widgets that have already been delivered at some previous date X - N.


It is equivalent to announcing a planned widget tariff on date Y, for widgets delivered on date Y and later. Because if you announce it on date Y, but it doesn't go into effect until formally passed on date X, people will import a whole lot of extra widgets quickly to get around the new tax.

> Because if you announce it on date Y, but it doesn't go into effect until formally passed on date X, people will import a whole lot of extra widgets quickly to get around the new tax.

So? I mean, my answer to that is, "tough shit". Doesn't matter when it is "announced", there are a million things that are announced that never make it into actual law. And there have been many tax laws in the past that have not been ex post facto laws, and yes, people take advantage of the current situation before the law changes. That's literally exactly how a fair legal system should work.

At some point people will want new widgets again, and they will have to import them after date X, and that's when the government should fairly be able to get their extra pound of flesh.


If it wasn't retroactive to the date of announcement, though, then it could trigger a mass sell-off of stock before whatever date it actually takes effect, which could have economy-destabilizing consequences.

What does seem wrong to me is not that it's retroactive to 9/13, but rather that it applies to all gains realized after 9/13 even if the majority of the actual gain occurred before 9/13. So if you've been holding a stock for 10 years, you now get to pay the new tax on the entire 10-year history of gains, not just the gains from this year.

It seems weird and unfair that the new tax disproportionately affects people who have been holding their assets for a long time, compared to those who buy and sell frequently.

Couldn't they have made a rule where you could independently calculate how much of your gain was pre-9/13 vs. post-9/13 and pay the two different rates on the different portions?


Unrealised gains have always been a tax avoidance measure, if you swim with the sharks don't complain about getting bitten.

Honestly it's time to eliminate the whole concept of "realization". Even secondary-market shares are liquid enough to value reasonably reliably, or we could bring back in-kind taxation.


> Unrealised gains have always been a tax avoidance measure, if you swim with the sharks don't complain about getting bitten.

Are you asserting that everyone who has held assets long-term is "swimming with the sharks" and thus deserves to have sudden unexpected taxes applied to their historical investments?

> Honestly it's time to eliminate the whole concept of "realization". Even secondary-market shares are liquid enough to value reasonably reliably, or we could bring back in-kind taxation.

You'd have to figure out how to deal with illiquid assets. If property values in my neighborhood go up will I be forced to sell or refinance my house to pay the tax bill? If I manage to pay the taxes while holding on to the house, and later the value goes back down, and I don't have other gains to offset, do I get a refund?


> If property values in my neighborhood go up will I be forced to sell or refinance my house to pay the tax bill?

Pardon my ignorance, but isn’t that how it works (outside of California)? My understanding is that in almost all US tax districts, property values are assessed periodically and the tax liability of the owner changes year on year with the value of the property.


Sure, but property taxes are usually in the 1%-2% range, whereas capital gains taxes are currently in the 15%-23.8% range, with proposals to increase them to 28.8% or even 43.4%.

> Are you asserting that everyone who has held assets long-term is "swimming with the sharks" and thus deserves to have sudden unexpected taxes applied to their historical investments?

If they're legitimately long term investments then "sudden unexpected" taxes shouldn't be a problem. And it's not like these people accidentally stumbled into a 100% tax break. They knew what they were doing.

> You'd have to figure out how to deal with illiquid assets. If property values in my neighborhood go up will I be forced to sell or refinance my house to pay the tax bill?

No-one cares whether my generation can afford to own our homes, why should I care whether boomers can afford to own theirs? Maybe if we stopped deferring taxes at the drop of a hat it would bring some sanity to house prices.


> And it's not like these people accidentally stumbled into a 100% tax break.

The 100% tax break is for QSBS specifically, but it seems like you're saying all capital gains should be taxed annually rather than at realization, including regular retail investors, people who own houses, etc.

> If they're legitimately long term investments then "sudden unexpected" taxes shouldn't be a problem.

Sometimes people make financial plans based on what they believe their assets to be worth, e.g. deciding when to retire. Certainly people shouldn't be making big life decisions based on short-term gains but doing so based on long-term gains created over decades seem entirely reasonable. Finding out that those long-term gains are now worth 5% less (because the tax rate went up 5%) could be frustrating.


> The 100% tax break is for QSBS specifically, but it seems like you're saying all capital gains should be taxed annually rather than at realization, including regular retail investors, people who own houses, etc.

You're right, what I said was pretty sloppy.

IMO taxing annually is fairest. But also, if you're an ordinary decent investor, then there shouldn't be much difference between either treatment. If the difference between "realising" your gains annually vs all at once makes a difference for you, it's because you're doing some swimming-with-the-sharks shenanigans (such as claiming a 100% tax break somehow).

IMO it's right for the government to be as aggressive as legally possible when closing tax loopholes, because the people exploiting them will be as aggressive as legally possible (as is their right). I think anyone who retired or bought a house based on the expected profits from their tax-avoidance scheme deserves what they get - sure, it sucks to find out your savings are suddenly worth 5% less than you thought, but if that 5% was because you weren't paying your fair share of taxes, well, tough cookies.


> If the difference between "realising" your gains annually vs all at once makes a difference for you, it's because you're doing some swimming-with-the-sharks shenanigans (such as claiming a 100% tax break somehow).

Again, how would you handle illiquid assets? It's hard to pay taxes when you can't actually sell a portion of the thing that's being taxed. What, exactly, do you want someone with a house that has appreciated to do? What about someone who worked for an early-stage startup, received some stock that they aren't able to sell yet, but whose 409(a) price has gone up?

> I think anyone who retired or bought a house based on the expected profits from their tax-avoidance scheme deserves what they get - sure, it sucks to find out your savings are suddenly worth 5% less than you thought, but if that 5% was because you weren't paying your fair share of taxes, well, tough cookies.

Bizarre take. You think everyone who invests and has capital gains did it specifically for the purpose of avoiding taxes?


> What, exactly, do you want someone with a house that has appreciated to do?

Pay taxes based on the housing appraisals that we already require for property tax purposes?

> What about someone who worked for an early-stage startup, received some stock that they aren't able to sell yet, but whose 409(a) price has gone up?

Use the secondary market price (at least as a floor), or pay taxes in-kind with the stock.

> Bizarre take. You think everyone who invests and has capital gains did it specifically for the purpose of avoiding taxes?

I think it's an either-or situation. Either you saved a bunch of taxes - which means you probably did it deliberately - or you didn't, in which case you're not going to mind much if your tax treatment changes.


I would argue that laws are imprecise, and taking advantage of the law, as opposed to intent, is questionable. So they probably reduce planning horizon for some and expand that for others, so I'm not sure the efficiency ultimately suffers.

How about as a matter of fairness? When I made my small angel investments, I thought the QSBS would apply to me. Revoking that for investments already made seems a bit unfair as the tax advantage was locked in by competitors who saw payoffs sooner.

Maybe you thought that QSBS would keep being the way it was set. But there was a chance people would find QSBS written bad enough to change; I don't think analysis of that would show that no, QSBS is pretty close to being ideal from a point of view which well reflects opinions of people.

In a sense it's like an investment into an autocratic country - profits are high, but so also is uncertainty. In more developed countries uncertainty is lower - but it doesn't mean that laws are perfect.


From a general perspective, retroactive changes to the law aren’t a great idea. It’s one of many foundational philosophical realizations of the American criminal system that modernized it. So why do we accept it in the civil realm? There are variations here that are better.

I would say this change is more likely to actually entrench existing wealth. It would be better if adjustments to it were made:

* Disallow tax games with the QSBS. Currently if you carefully structure your allocation, you can get 30 mil or more tax free even though the limit is 10 (give shares to your spouse and a family trust - each gets an independent 10 mil). Tax games are an economic inefficiency that serve to entrench existing wealth holders and are parasitic on the overall economy (my tax attorney is not an important part of my investments or helping innovation in tech yet I have to pay him fees to figure out things that should be simple)

* Make the tax progressive like with income tax. 100% up to 10 million in net worth or 500k in salary all the way down to 0 at 20 million net worth or 1 million in income. At some point the government helping you become an elite investor isn’t necessary.

* Start the clock on when changes will be made impacting investments made today while changes are being debated. Then when/if it changes, make it retroactive. That way it’s done transparently with general knowledge in the market.


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