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.
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.
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
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?
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
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.
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.
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?
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.
You could convince other people to give you $100 MM.
Decide on a course of action for a large company that, over the next few years, makes it $5 billion instead of $4 billion.
If their numbers are random, why aren't yours not random?
> [...] 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.
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.
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.
Silicon valley existed before QSBS it can survive it's removal.
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 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?
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.
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.
Excuse my ignorance but would you be able to lay out basically how this amount of money is hard to live on?
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?
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.
There must be lots of people making low 6 figures or even gasp 5 figures and still somehow managing to survive.
One can imagine it should apply for both increases and decreases. "What programs will no longer be funded and why?", etc
Marginal rate, effective rate not even close.
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?
> 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%?
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.
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.
This is classic DITF. Spring 10% on everyone and then claim to have “listened to the people” by later rolling it back to 1%.
Wait until you hear about Apple's turnover tax! F.you(pay them) even when you're losing money!
Bold suggestions tend to happen because they either get negotiated down and/or it's the only chance you get for quite some time.
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...
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?
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.
Any way to stir to conversation and political thinking on efficient spending?
As for why it doesn't get that much political attention, I believe it's mostly because it's normally not that controversial in a partisan sense. Most political parties don't run on a 'corruption is good' ticket, and both left and right parties would normally like more efficient public services: the left so they can deliver more public goods for a given amount of money, and the right to allow them to reduce taxes. Which is not to say it doesn't ever become salient: the efficiency of public services was a big thing in US politics in the 90s, for example.
But at the root of all of this there is something many do not notice: spending efficiently is done way better by way more pure market dynamics. This means politicians do not have a place there.
Yet they want to control a bigger and bigger piece of the cake to justify their positions. Even a well-intentioned politician would not be able to manage more efficiently than a free market.
But when they know this and still insist is when their masks drop: they are not there to help anyone, just to justify their positions.
They really act increasingly more like a mafia in my opinion. I stay in Spain but I see the same trend in all the westerner world, including USA.
Privately funded healthcare has no incentive to cure people because cures reduce future income streams. Publicly funded healthcare has no incentive to keep people ill if there is an easy cure.
I also do not want to pay tolls on pedestrian walkways.
If I had to describe your comments in one word I'd choose "cringe".
A government can spend billions of dollars efficiently.
As an example look at current COVID rapid testing kits. The US government is purchasing them at 4x the cost in other developed economies. California gave away $31 billion dollars in unemployment benefits to criminals.
This is what frustrates me. I am happy paying 40% tax as long as I see it making a difference in society.
It’s sad for that person, but the most meaningful impact is to VCs and angels that receive this exception multiple times. Less than the diff of leaving California for a single exit.
This is mostly going to affect not employees, but individual angels.
Not sure why you would think this, early stage employee's (ignoring co-founders) are going to have a much larger stake in the business than most angels.
People compete, it's deep in their nature, so rules of the game get adjusted. Within boundaries, which overall beneficial for everybody, but still - the details of such thing as taxes, usually being imprecise, allow for gaming, so they don't survive long. So - it looks like uncertainty here is by design.
Eliminating the carried interest loophole would cure the problem you observe without the distorting effects of capital appreciation taxes.
And they have ~1 yr to mid-term elections where passing a bill might get a lot harder.
I find it pretty eye-opening that Biden would rip the military out of Afghanistan and deal with those consequences including loss of human life, and yet be too afraid to get rid of the carried interest loophole.
When you vote for a party, you compromise based on the whole package, regardless of how much you disagree with individual policies.
If we got to vote for what we wanted, government would look very very different!
They got it because it's a means for governments to bootstrap things. Like EV car adaption or tech startups. Once that goal is reached the tax benefit will go away.
And in this case I can't see how on earth a 100% tax exemption on capital gain can ever be considered fair towards other people like "normal" working people.
If you advocate things like tax the rich and justice then rejoice because this is a step in the right direction.
Like with so many things people want change but don't want to change themselves. They want other people to change. So no this isn't trolling.
I support and like the QSBS, but it is exactly the sort of thing the average voter would say is a “tax loophole for the rich”.
Likely they should pay _something_. But they should also be grandfathered in.
But at the same time, over the past year, it’s ridiculous how easily this government decides to change the rules of the game overnight and expect us to catch up without a problem. It was the money printing first, then talk about raising capital gains, now this.
What the hell. People had made plans (to buy a house, or to retire for example) based on numbers that we thought were sacrosanct.
I just cant see any point in talking about it anymore, as opposed to letting ICIJ or ProPublica figure it out three decades from now in an irrelevant leak, at least irrelevant in 2060.
Leave people alone. Let people live. Do not control what people should earn or not. Just grant the right to not be damaged to others, that is your job politicians. Not trying to coactively spoil people their effort.
Good afternoon. Written from Spain, where things and mindsets are way worse than there in this regard. You are starting to mess up what took you to being developed.
And "Do not control what people should earn or not" is incredibly naive and dangerous, if ever taken seriously.
Written from Portugal, with hope that the balance of power starts to shift away from high income earners, and back to somewhere closer to the median. Because it's kinda ridiculous right now in the US.
Every single consumption good you have was born in capitalism. Your phone, your computer, your cars, your much cheaper than before clothes. Everything my friend. Open your eyes.
Because the day people that provide things to the rest get pissed off some would have a very bad time. The worst part of the story is that those who want everything for nothing are the most loudy.
I do not see a problem in anyone earning what others give them voluntarily. Another topic is evil regulations that are artificial. Those will deviate the money to the wrong hands.
Naive is to think that regulators can do better thsn the market, which is pure will of people and think that those people do not have incentives to regulate on their own interests things of others.
Yes, very naive indeed.
