Those are examples of predicting demand changes on a macro scale.
Amazon wants to do this on a more micro, person-by-person level. For example, you visit a product page for some specialty shampoo. Amazon might decide to ship that product before you even add it to your cart.
My response to Amazon, if they do this, is something I call predictive returns. As in, I predict I will return everything they ship to me in this manner.
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.
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.
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.]
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.
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.
> 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.
> That's what double taxation means. You paid taxes twice on the earnings of $100k.
You paid 48% on the $100K, and that is all that matters in the end - the fact that it was a two step process, and that different steps have different credit/exemptions consideration is not really important.
And you generally can pay just your marginal rate - don't set up a corporation, and list everything on your own return - singular taxation goodness!.
However, no one likes to do that, because it makes them personally liable. So actually the higher rate (which people like to call "double taxation" even though that's not informative) turns out to be the fee you have to pay to separate your finances and legal status from the business - and by the fact that the vast majority of businesses choose it indicates that, in general, it's not expensive and might even be too cheap for what it provides.
No. Cash earned by a corporation does not affect the basis of its shareholders. If such cash earnings were distributed as a dividend, it would not affect the basis of its shareholders but would be taxable as income to the shareholders.
(Cash distributed by a corporation but which is not earned, i.e.,if the corporation has negative earnings at the time of the distribution, would reduce the shareholder's basis.)
If you were dealing with a partnership/LLC, the $65k would generally increase its partners' basis in the partnership/LLC. However, in such case you wouldn't be dealing with double taxation in the first place.
The carried interest tax loophole is not about taxing investment gains at a lower rate, it's about letting PE/HF/VC types turned earnings realized from money management services into fake long term capital gains.
Furthermore, HF managers pay less taxes on their earnings than their investors do b/c HF investment gains are short term capital gains but the fees collected for managing such short term gains get taxed at the lower long term rate.
> It's a double tax, as money that was invested had already been previously taxed.
Everything has, in some form of another, been previously taxed. "Double taxation" is a good sound bite, but it doesn't actually say anything. yummyfajitas gives a computation below that shows the overall tax rate is higher (48%). That is an actual argument (which I will respond to there). But other than that, "double taxation" means nothing other than "different rates", which is generally always the case.
That's the thing: I wish more people would notify you when they use your open source stuff. Attribution means less to me than simply knowing that it's being used.
I understand the financial mistakes (underperforming investments). I understand the building mistakes (extravagance, over-spending). What I don't understand is this policy that will (in my opinion) destroy The Cooper Union's core asset: the student body. Having attended, I whole-heartedly believe that nearly all of Cooper Union's value-add is in being surrounded by incredibly intelligent peers. Peers who are now less likely to apply or attend.
Me: Spent two years at Cooper, currently graduating from NYU.
Basically, I derive a significant amount of esteem and happiness from making things that people use. It was this that lead myself and those around me to believe I should pursue Engineering. Unfortunately, I derived very little to no esteem from what I felt was merely "book learning" at Cooper. The school system I grew up in was extremely liberal and forward-thinking, so Cooper Union felt extremely rigid to me (although I acknowledge the possibility that all Engineering programs are like this). I simply couldn't survive four years like that.
Ultimately, I studied Economics at NYU, so I moved away from Engineering to allow myself to pursue development on my own. There are other reasons why I moved to Economics, but thats the gist of it.
I see. I almost thought about applying to transfer to CU, but didn't since I didn't know how their financial situation would work out. Non traditional students don't really get a lot of help with these things, and it's uncertain enough as a transfer already. Hopefully you were treated ok as a transfer at NYU!
It's really sad to see CU's free tuition gone. It was one of the few places that smart but poor people with no access to easy credit still had a fighting chance of attending. :(
I'm a Cooper grad -- the first two years are book learning, the second two were hands on. I built lots of fun stuff; interactive art projects with the art school, lots of robots, and even a race car for my senior thesis.
Instead of ranking by net points, or points over time, the comments could be ranked by points per view. This essentially gives a close approximation to "What percentage of people who viewed this comment found it worthwhile?"
Aside from the "Some important lessons" section (which seemed very patronizing, although OXO seems to be in the right here considering the expired patent aspect), it seems that OXO handled themselves pretty well. It pointed out Quirky's side of things, and then presented their own side. With quite a bit of citation where appropriate.
Quirky[1] went straight for the "justice" aspect in their post without presenting much info or even a cursory discussion of related patents.
I'd TL;DR them down to "Whatever your bright idea is probably isn't as original as you think. If you think nobody else has thought of it you probably haven't looked very hard, or if you're very lucky the numerous other people who thought of it at the same time as you or before you never pursued it".
We all live in the same world (now more than ever), we're all influenced by the same things and IMO ideas are more tied to a time and the zeitgeist than they are to any person, every personal and historical "bright idea" I've ever encountered backs this up in my experience.
This is why ideas are a "dime a dozen" and execution is everything.
Comparing this to the patent fights between Apple and Android et al, it is interesting to see how calmly OXO is responding. No "thermonuclear war" here over the various copies Quirky is making of their products. (Of course, I don't think the cost of design and manufacturing a plastic kitchen object can compare to the iphone). However, it is good to see an established firm like OXO acknowledge that they are being copied, to not freak out over it, and to acknowledge that the best way to respond is with continued innovation and the best product you can make. I think smartphone and tablet makers would be wise to follow that lesson.
With OXO and quirky, we're in a realm where hiring a team of $700/hour lawyers would wreck both companies. For Samsung and apple, the cost of legal advice is a rounding error.
While you make great points, the cost/risk of designing a cutting board or a dustpan is orders of magnitude lower and the response should be commensurate.
I don't think it's wise for Apple to not defend the things it believes it has patented but that's an argument for a horse of a different color.
The fact that Apple's products are more profitable on a unit basis, and can fund more expensive lawyers for longer periods of time, does not mean it is a good strategy.
I can't see any real benefits that have accrued to apple from their patent wars. The shortest evidence of this is that Android has now >50% market share. if the patent wars were a good strategy, this would not have happened.
Having more money does mean you can afford to waste more money, but it still doesn't make wasting money wise.
Not really relevant to the patent issue, but your second point is a bit of a fallacy. It's possible that android would have even more market share without a patent war, or that the patent war was a risky strategy which had positive expected value at the time it was begun, but which didn't pay off.
My frame of reference for this statement was prescription drug patents. Manufacturers can get 18 years of exclusive sales of their product. Whatever one may think of the ethics and behavior of the drug companies, it is a very effective use of patents. Other drug makers can copy what the drug is intended to achieve, but not the drug's exact composition. That seems like a reasonable parallel for how things should work in the smartphone market.
I am not sure that positive expected value was really ever the intent here. From most accounts, Steve Jobs felt personally affronted by the competition, and that is not necessarily a rational place to initiate a major action. I think the best case to make is that it delayed the growth of Android, but even that seems questionable. Android has copied them in virtually every respect, rolled out devices with little encumbrance, and shows no sign of stopping.
There's also the aspect of the patent wars where conflict become self-destructive. For example, a flame war in comments where people get increasingly nasty and lose sight of what they were even talking about. Google bought Motorola for defense, a patent portfolio. Counter suits are now possible.
Dissipating the focus of an organization's executives on rent seeking instead of innovation carries its own costs.
Both companies end up winning here, for different reasons. OXO is the voice of reason that calmly explains what's what while Quirky looks like the protector who goes to bat for their inventors and community.
To me, Quirky looks like the crazy person who escalates in a big way without even bothering to talk to the supposed wrongdoers. Not someone I want to do business with.
It's a matter of reputation and business for both participants in the squabble, so it's not a waste of time for them. You might have wasted your time reading it and commenting on it (if you didn't find it interesting), but that's your fault. I found it fun to read, so it didn't waste my time.
And you said '...the "design" crowd'. What are your quote marks for? Are you implying they're not actually designers, or are you mocking the idea of product design as a profession, or something else?
It's far more a waste of their time and effort than it is of mine.
Pointless drama like this does not result in new products, it does not result in improvements to existing products, it does not reduce their cost of doing business, and otherwise has no beneficial properties.
Like I said before, even from a marketing perspective, it probably does far more harm than good for both of them.
And I put "design" in quotes because I don't know how else to refer to them. They apparently don't like being called "hipsters", which is the only other word I could think of that would describe them, collectively.
Sadly this has backfired badly - the first I heard of Quirky story was from this post, and I am now unlikely to ever buy one of their products. Oxo on the other hand is an amazing story in the design thinking community, and it is nice to see their rhetoric match their product quality.
Interestingly enough, my participation on Twitter was spurred and continually maintained via OSS and GitHub. So this is really welcome on my end (although I wouldn't mind extra info such as watchers and forks).
It is a bit weird though: the displayed image is the project owner's profile image, which doesn't seem directly relevant, and seems a bit out of place.
Amazon wants to do this on a more micro, person-by-person level. For example, you visit a product page for some specialty shampoo. Amazon might decide to ship that product before you even add it to your cart.