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What I am understanding....
Income is a *measure of* value. In order for value to be measured, value must pre exist.
Income can refer to wealth and gain because the checks coming in contain pre existing value, but cannot be referred to someones labor. Someone uses their energy and labor to 'create' value, in turn, creates a paycheck.
Unlike checks coming in for a business (income), A laborer's paycheck does not pre exist.
Taxing wealth will result in taxing the same monies multiple times. If I were rich, I'd move.
There is no rule against taxing the same money multiple times. Doing so is the default setting, in fact. And the actually rich all but never move on account of changes in marginal taxation. They have roots and networks built up over most of a lifetime that they do not simply abandon for such trivial reasons. Business networks, social networks, family networks, religious, educational, cultural, and charitable networks. It would take quite a bit to convince an actually wealthy person simply to abandon all this in order to move, especially when most places actually worth living in have higher tax rates than we do. Obviously, there is no chance at all of moving to some low-tax dump that offers "none-of-the-above" as its chief attraction.
There is no rule against taxing the same money multiple times. Doing so is the default setting, in fact. And the actually rich all but never move on account of changes in marginal taxation. They have roots and networks built up over most of a lifetime that they do not simply abandon for such trivial reasons. Business networks, social networks, family networks, religious, educational, cultural, and charitable networks. It would take quite a bit to convince an actually wealthy person simply to abandon all this in order to move, especially when most places actually worth living in have higher tax rates than we do. Obviously, there is no chance at all of moving to some low-tax dump that offers "none-of-the-above" as its chief attraction.
Why would we need to move, when we can just move wealth/income around and shelter it? I know, you've stated in previous posts that "the rich" don't make business decisions in order to tax shelter and I, of course, disagreed with you.
Hint: If income is taxed higher, take less income. If wealth is taxed higher, take more income. There are multiple legal ways to shelter wealth/income - trusts, shell corps., paying out profit sharing, personal loans to business repaid at favorable interest, business/commercial property expenditure - even a small 1/4 owner of a small restaurant such as yourself can take advantage of some of these things (though having 3 partners and an LLC somewhat limits you).
Decisions to tax wealth vs. income is just political game. New workarounds will be found. But you have previously instructed me that people don't really need to know about all these fancy things...
There is no rule against taxing the same money multiple times.
Uh... there are rules about this... E.g. pass-through tax status means that business entities are not subject to double taxation. You should know about this since you have an LLC, right?
Just want to point out another major flaw in "wealth taxation" programs. In addition to the wealthy having many income/wealth sheltering options (as I've explained before), a majority of wealth is created from private business value.
So how does one go about valuating these private businesses in order to tax wealth? Do you not think maybe a business owner may be able to make his/her business look a little less profitable on the P&L in order to shield from taxation? Or, are people advocating raising taxes on the back-end business sale? How would this affect valuation? Or market incentive for U.S. business investment?
Quote:
Originally Posted by celcius
Since most of the serious wealth in this county takes the form of corporation stock, wealth is already taxed via the corporate income tax.
Company stock would be an easy place for them to value/increase taxing (though I, of course, am not advocating that). However, I believe (will look for source when I get a chance) that 60%+ of top 1% is in illiquid assets, mostly private business which is difficult to valuate and much easier to downplay in value.
Why would we need to move, when we can just move wealth/income around and shelter it?
Clue: The wealthy pay taxes. Usually quite a lot of them. But one of the advantages of being wealthy is that the taxes you do pay don't actually mean very much. You can pay truckloads of them, but after they've all driven off, you still have way more money left over than you know what to do with. Taxes don't actually affect your lifestyle at all.
You do seem to agree however that the wealthy do not go jumping from state to state or from country to country over a few percentage points in marginal tax rates. That's a meme that belongs in the dumpster, but we're all sure to be reunited with it again soon.
Quote:
Originally Posted by GoCUBS1
I know, you've stated in previous posts that "the rich" don't make business decisions in order to tax shelter and I, of course, disagreed with you.
Really? Why don't you pull up the actual post instead of stooping to putting words in other people's mouths? Taxes are one of many variables to consider in coming to a variety of decisions, but no reputable investment advisor would tell you to take the plunge on account of tax considerations alone. If there is not some viable underlying rationale for an investment, tax-advantaged status won't be enough to save you from taking a bath.
Quote:
Originally Posted by GoCUBS1
...even a small 1/4 owner of a small restaurant such as yourself can take advantage of some of these things (though having 3 partners and an LLC somewhat limits you).
Short-term memory issues? The LLC owns and operates the restaurants. I manage one of them. They've done well. We're all quite happy with the results.
Quote:
Originally Posted by GoCUBS1
Decisions to tax wealth vs. income is just political game. New workarounds will be found. But you have previously instructed me that people don't really need to know about all these fancy things...
Yet again no. I have had to inform you of what should have been the perfectly obvious fact that very few people will ever need to pay anyone for any sort of product or service related to escaping federal estate taxes when the exclusion for those is at $5.25 million and rising. Elephant stampedes would be a bigger concern for most folks.
Uh... there are rules about this... E.g. pass-through tax status means that business entities are not subject to double taxation. You should know about this since you have an LLC, right?
Certainly, but what sort of absurd logic are you trying to engage in here? Regardless of how LLC's may be treated, there is no proscription against taxing the same money twice. How can you have gotten this far without realizing that?
Clue: The wealthy pay taxes. Usually quite a lot of them. But one of the advantages of being wealthy is that the taxes you do pay don't actually mean very much. You can pay truckloads of them, but after they've all driven off, you still have way more money left over than you know what to do with. Taxes don't actually affect your lifestyle at all.
You do seem to agree however that the wealthy do not go jumping from state to state or from country to country over a few percentage points in marginal tax rates. That's a meme that belongs in the dumpster, but we're all sure to be reunited with it again soon.
Really? Why don't you pull up the actual post instead of stooping to putting words in other people's mouths? Taxes are one of many variables to consider in coming to a variety of decisions, but no reputable investment advisor would tell you to take the plunge on account of tax considerations alone. If there is not some viable underlying rationale for an investment, tax-advantaged status won't be enough to save you from taking a bath.
Short-term memory issues? The LLC owns and operates the restaurants. I manage one of them. They've done well. We're all quite happy with the results.
Yet again no. I have had to inform you of what should have been the perfectly obvious fact that very few people will ever need to pay anyone for any sort of product or service related to escaping federal estate taxes when the exclusion for those is at $5.25 million and rising. Elephant stampedes would be a bigger concern for most folks.
Clue: The wealthy pay lots of taxes and also shelter from taxes. They are rich, not idiots. You do not know of this because you are not one of them.
Tax sheltering allows them to reinvest in growing their businesses, their employee benefits, their estates. They are driven by saving money, including taxes. Are you really trying to tell me the wealthy don't really care about bottom line costs/taxes? You have got to be kidding. The rich often have become that way because they are wired to be obsessed with costs, like taxes. Warren Buffet has bought companies because he saw the owners scrimping over the cost of things like restroom toilet paper (go ahead, Google it). I know he advocates paying more taxes for social reasons, but he does not advocate being ignorant about costs/taxes. You see the difference?
Here are the things the wealthy usually care about:
You have 30 years on me - my memory is still sharp and I have already surpassed you in business ownership and profit (I don't have the handicap of low profit restaurant receipts divided by 4, or a mid-management hands-on job consuming my time).
Hint: Next time be a majority owner of a successful restaurant that you do not need to self-manage and have a succession plan so you don't have to work into your 70's. Isn't your high value Economics acumen worth more than that?
I never advocated for anyone to pay for tax/estate planning services, yet you keep grasping at that. The only thing I try to illuminate is the many tax advantages of owning business, property, certain investments - yet you scoff that people don't need this information because most will never use it. Perhaps, on an Economics forum, there is 1 person of 100 who could use this information, and I am speaking to that 1 person. What is it to you? I could have used some of this information when I was starting out.
I do not need a 1/4 restaurant manager "informing me yet again" (LOL) that it is fruitless to disclose tax strategies to the masses, as they are not needing of this information so I should just shut up. I am not addressing the masses. And I am not condescending or self-conceited enough to think all other readers here are complete idiots. Only one of us goes there.
Quote:
Originally Posted by oaktonite
Gee, I couldn't imagine. Haven't scads of real estate and personal property tax regimes just fallen apart completely over exactly such issues?
Another distraction.... We are talking about the context of valuating private companies (where majority wealth lies) for proposed wealth tax purposes. I'm sure that process would be transparent and all valuations would be completely honest and accurate...
Go ahead and tell me how you would valuate your 1/4 restaurant business for wealth tax purposes.
Last edited by GoCUBS1; 08-20-2013 at 01:00 PM..
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