Step up basis is insane as a policy choice. It basically means that we just don’t tax the primary means of income used by wealthy people AT ALL.
If a company pays you you have to pay taxes on it. Unless the company pays you by inflating the value of stock in that company, in which case you just… don’t.
Yeah. I think a lot of the non-founder, high-pay FAANG crowd is in the funny spot where we are all paid super well, pay a lot of taxes, but if we were richer.. we'd actually pay a lot less taxes.
Being paid salary by employers, we can't structure our compensation to the most tax efficient forms.
The guys (almost always guys) at the top structure their pay to forms like stock or pass-thru or carried-interest, or whatever tax arb of the decade. Then they carry it forward, use trusts, borrow against stocks, and then hand it off to their kids when they die w/o tax.
They probably own enough houses, and have control of their schedule that they can stay out of CA/NY for 183 nights/year and avoid high state income tax too (while mandating RTO to high tax city/states for the rest of us).
Kind of a millionaires vs billionaires (or even decamillionaires) thing.
yeah I make similar as FAANG employees but in a mixture of businesses and capital gains, deducted by retirement contributions (doing your own employer match is a super power! 3x higher contribution limit), QBI, illiquid asset based donations to donor advised funds and deducting the expenses to generate income
my tax is basically 0 every year, down from closer to 52% marginal in California (effective 40%)
if I was doing the same with W-2 income there would be almost nothing I could do
No it’s insane. Like any tax it could be made progressive, make the tax lower or nonexistent for smaller amounts of money.
But stepping up the basis is insane and indefensible. It’s a heads I win tails you lose approach.
Basically you’re saying oh we know there are capital gains here but they are not realized so it’s not time to tax them yet and then the person dies they say just kidding those capital gains never happened.
It’s nonsense. Tax them at whatever rate makes sense if you want but don’t make a complete mockery of the concept of basis.
My simple tax take is that we should just treat all income streams as regular income, and have whatever progressive rate on that income and be done with it.
By creating different classifications of income and constantly tweaking the rules, we setup entire tax evasion industries catering to those who have control of their income streams & money to pay advisors.
There's lots of BS that estate tax exemptions are there to protect small farmers, but they constitute something like 0.002% of estate tax payers.
I agree. But if we had a simple system people would be able to tell whether or not they get adequate value for their money. Obtuse and opaque are a defense against fair or just, take your pick.
I think people at the top miss that they get, in some sense, some of the most value for money from a modern functional society.
In the absence of a government monopoly on violence and functional government services, a highly paid business exec will need to live their life more like a mafioso or warlord. There's places in latin America where even what Americans would call "upper middle class" people need to hire security and worry about kidnapping and extortion plots.
Add to that things like rule of law, so that the government strongman can't suddenly declare your business anti-patriotic / illegal (China) & take your cash / put you in jail.
Then you have things like - copyright, trademark, etc systems that allow you & I to develop ideas as IP and the government allows us to protect it in court so that we can reap the benefits.
So no, I don't think "tax is theft" and that we should live in some Mad Max world.
People who denigrate high trust society & rule of law do not understand how messed up living in low trust societies is.
Nor am I thoroughly impressed with the idea that we need a permanent overclass who is able to pass wealth down untaxed across generations, especially given all the trust fund underachievers I've met in my life in NYC.
Yes if you think we shouldn’t tax people and not have an healthy modern society with government services and let wealth pile up for tens of generations completely unmolested then you’re right.
Step up basis is insane as a policy choice. It basically means that we just don’t tax the primary means of income used by wealthy people AT ALL.
If a company pays you you have to pay taxes on it. Unless the company pays you by inflating the value of stock in that company, in which case you just… don’t.