
Billionaires’ Row and Welfare Lines - kareemm
http://www.nytimes.com/2013/10/26/opinion/blow-billionaires-row-and-welfare-lines.html?src=me&ref=general
======
ams6110
What does a billionaire do after buying a $90M apartment in Manhattan? Remodel
it of course. Lots for work for carpenters, electricians, plumbers, interior
decorators, and all the people that support and supply them. I don't see this
as a bad thing; it's a good thing.

~~~
kenster07
Yes, that is a good thing. The bad part is that they aren't using the other
99.99..% of their wealth, essentially taking everyone else's labor and ending
the cycle of trade that would otherwise help keep an economy going.

And that's not to mention broader macroeconomic issues which are more worthy
of essays than HN comments.

~~~
EGreg
Thanks to less than 100% reserve requirements on banks, the money the rich
keep in American banks is theoretically reinvested through loans back to
various enterprises.

The problem arises when the banks don't lend the money and just sit on it...
or when companies like Apple siton their huge cash reserves...

To fix this we must boost aggregate DEMAND. Investors and banks give money to
businesses when they see demand.

~~~
WalterBright
Apple has no cash reserves in cash. Even bank deposits are invested back into
the economy.

~~~
EGreg
Right, the real issue is with the lenders. I would argue that giving money
directly to the people so they can send price signals back into the economy --
via Basic Income or a Negative Tax -- is much more effective at increasing
aggregate demand.

------
Bsharp
Money from quantitative easing goes to the wealthy and connected first. The
rest of the country doesn't see it until its value has been inflated away,
which is why you'll see the wealthy benefit from the recovery and the poor
stay exactly where they are.

------
mynameishere
Just look at those comments. The readers of the NYTs place the blame for
poverty squarely on two groups: The rich, and Republicans. The first are
guilty of "not sharing"\--which implies they (the readers) believe in a zero-
sum economy. The latter are guilty for not wanting higher taxes, ie, for not
_forcing_ the rich to share. So, a single fallacy rules their world view.

~~~
ImprovedSilence
>> Just look at those comments

ugh, no thanks. I find the comments sections in news articles destroys my
faith in humanity even more than youtube comments these days....

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omonra
I'm curious if the author bothered to check what percent of most expensive NYC
apartments are bought by Americans (unlike Russian or Middle East
kleptocrats).

------
jgalt212
Many of these billionaires are undeserved and unearned billionaires because of
the carried interest tax dodge. That needs to go ASAP. Over five years into a
Democrat presidency and all these tax issues (low taxes on dividends, double
irish corp tax dodge, etc) that protect the uber wealthy persist.

It's not about taxing the wealthy, it's about fairness. $85K earned by a
teacher, $150K earned by a developer, $20M earned by Brad Pitt and $200M
earned by Steve Schwarzman should all be taxed the same way.

And the same goes for corp earnings. F Apple! Pay your taxes.

Top 10 Private Equity Tax Loopholes
[http://dealbook.nytimes.com/2013/04/15/the-top-10-private-
eq...](http://dealbook.nytimes.com/2013/04/15/the-top-10-private-equity-
loopholes/)

~~~
danielamitay
Without addressing the issue of tax loopholes in general, there is a logical
rationale for lower taxes on capital gains (for Schwarzman, Buffett & co):

\- It's a double tax, as money that was invested had already been previously
taxed.

\- It does not account for inflation. If an investment grows only with
inflation, capital gains taxes still need to be paid on that growth.

~~~
gamblor956
A capital gains tax is not double-taxation, as the tax applies only to "gains"
on a capital investment, and these gains have not yet been subject to tax.
Moreover, most capital investments are made using _untaxed_ amounts (i.e.,
"reinvested" income), as part of transactions designed to avoid paying taxes.

A capital gains tax is not intended to account for inflation--the persons that
pay the capital gains tax (companies and wealthy individuals) are least
subject to inflation. The lower rate was intended as an incentive to make
capital investments in businesses. Unfortunately, due to the way capital
assets are defined (or rather, is _not_ defined) in the tax code, the lower
rate has instead resulted in excessive investment in real properties, illusory
assets (i.e., derivatives), and other passive investments rather than in
businesses.

~~~
yummyfajitas
Say you have a business worth $100k. It earns another $100k and pays 35%
corporate tax on it. The rest goes into the bank. The company is now worth
$165k. If you sell the company for $165k, you pay cap gains taxes on the $65k
gain - at 20% qualified cap gains rate, you walk away with a gain of $52k.

That's what double taxation means. You paid taxes twice on the earnings of
$100k.

[edit: it might shock some of you to discover that this is a simplified
example to illustrate the point.]

~~~
gamblor956
I don't think you understand what double taxation means. Double taxation
refers to a specific _item_ of income.

You own a company, X. It earns income of 100 doing whatever. That income is
taxed. This is the first level of taxation. The company then distributes _that
income_ as a dividend to its shareholder, you. That dividend is income _to
you._ Thus, it is subject to tax again. This is the second level of taxation.
If you had performed the income-generating activity directly (i.e., not
through the company), it would not be subject to this second level of tax.
However, at the same time, the use of the corporate entity provides
significant legal and tax benefits. Thus, the double taxation is _mitigated_
but not eliminated.

Another example: Company X, based in the U.S., does some business in France.
France taxes that income. That is the first level of taxation. The U.S. also
taxes that income, due to its worldwide taxation system. That is the second
level of tax on the _same_ income. In this particular instance, we have a
treaty with tax to eliminate the double taxation of that same income. (This is
not true of all countries, for example, we don't have a tax treaty with
Taiwan.)

In your example, you ignore the basic system of US and EU capital gains
taxation. When you sell a business, you are generally taxed based on the
difference between [sale price] subtract [your "cost basis"] in the business.
(Cost basis generally means the amount you paid to acquire the shares, or
which you contributed to the business.) It is irrelevant that your business
was worth $100k before it made another $100k--the tax code doesn't look at
intermediary valuations, and it doesn't care about earnings when determining
the tax on the sale of a capital asset. What matters is whether you have a
"cost basis" in your shares of the business. If you acquired your shares for
$0 (for example, you contributed your labor to earn those shares), then upon
selling the business in your example you would recognize capital gains of
$165k, not $65k. Usually, capital gain from the sale of a business relates to
"goodwill" (i.e., brand value) rather than cash from earnings (and for
property or other capital assets, capital gains are usually due to simple
appreciation.) Double taxation is not usually a problem with capital assets,
so the capital gains rate does not reflect a discount to remedy double
taxation. Rather, capital gains rates are discounted to encourage investment
in capital assets.

~~~
yummyfajitas
_If you acquired your shares for $0 (for example, you contributed your labor
to earn those shares), then upon selling the business in your example you
would recognize capital gains of $165k, not $65k._

Yes, I was assuming you purchased at $100k to illustrate the cost basis. I
should have been more clear on that point.

If you want to argue that double taxation is justified as the price of limited
liability, go ahead. But it's silly to compare the capital gains rate to the
income tax and then ignore the corporate tax rate. Combined they amount to a
lot more than personal income taxes. This is why the wealthy contribute such a
disproportionate amount to the US treasury.

~~~
_delirium
> the wealthy contribute such a disproportionate amount to the US treasury.

Overall US taxes (from all sources) are approximately flat taxes, if
considered relative to wealth, as you seem to be doing. The wealthy contribute
roughly the same share of their wealth to the treasury as the less wealthy do.
The 90th-percentile-and-above of richest Americans own about 75% of the
country's assets in aggregate, and pay about 75% of the country's taxes in
aggregate.

------
EGreg
Automation and outsourcing

~~~
toomuchtodo
When was the last time someone from a financial firm on Wall Street went to
jail for unscrupulous/illegal actions? Why are financial service organizations
allowed to rent seek against the rest of productive society with impunity?

~~~
MaysonL
Bernie Madoff, who got away with massive fraud for decades.

And, oh yes, that former Goldman Sachs high-frequency-trading programmer (who
may have only taken open source code).

~~~
mattmanser
The programmer got acquitted a year and a half ago:

[http://nypost.com/2012/02/17/ny-appeals-court-orders-
acquitt...](http://nypost.com/2012/02/17/ny-appeals-court-orders-acquittal-
for-goldman-sachs-programmer/)

~~~
MaysonL
And was soon thereafter arrested on state charges (the first charges were
federal) which he is currently fighting. One bright spot: Goldman was just
ordered to pay legal fees for his first trial, as their by-laws say they are
required to pay legal costs for officers charged for acts taken as part of
their employment, and he was a vice-president.

