Individuals Dodging Taxes

Does the owner of the wealth get a wealth tax deduction when the value of their wealth plummets dramatically?
If your going to treat it like a capital gain then they should get a capital loss, or no because the Gov then the Gov doesn’t get their cut…

 

The problem is they pretty much don’t ever pay that.

The Waltons famously avoided it entirely. I don’t recollect that they did anything illegal per se, but it was done with a series of charitable trusts which only had to give very little % to charity before paying heirs tax free. Seems like any person interested in addressing deficits and balancing the budget would want to address low hanging fruit like this regardless of what one thinks of “family dynasties” or a potential caste system in this country (which is another concern with massive wealth transfers). Even if properly taxing that currently tax free income at its statutory 40% “only” raised $50 billion or $100 billion a year, it’s better than nothing.

The sad thing is some “poor schmuck” with a working farm or small business in the $20 million range is far more likely to get hit with a tax bill than the billionaire. I just think it should be much clearer. If you are claiming to give away your massive wealth ala Buffet, then it ought to go to charity 100%. If you are using a system like the Walton’s, the parts not going to charity and instead distributed back to heirs should be taxed 40% as intended just as anyone else.

 

I can’t see all of the specifics of beginning and endpoints and contributions, but a basic US index fund has doubled in about 5 years.

VTSAX – Chart – Vanguard Total Stock Mkt Idx Adm | Morningstar

You are not Warren Buffett, no offense.

 

No offense taken.

You’re right, I don’t have the ability to move markets, push advantageous legislation, have billions to invest.
I also don’t have teams of analysts at my disposal.
Certainly he’s a smart guy but he isn’t doing it all himself.
It will be interesting to see how things go now that Charlie Munger isn’t around to balance him out.

Like I’ve said a few times for those that put their money in an index fund and let it sit great, that’s passive investing. But for those that buy and sell individual stocks it’s hardly passive.

Mind you I’ve never said I can beat those big guys, it was snark from some posters attempting to disparage my knowledge and success in the market.

 

This is the type of problems you get with such a tax. So they pay a tax, the market tanks, and they get a refund? That seems kind of ridiculous.

Wealth taxes don’t work very well in practical terms. France tried to put one in and I think it was a disaster.

 

Agree. It’s a disaster.

Most people’s biggest asset is their house. We all pay property taxes, do some want a Federal Property tax? I’m sure some might.

Assigning value to an investment portfolio for tax purpose would be a mess, what day do you assign the value?

 

The problem the individual investor convinced they can “beat the market”, is they don’t just have to beat the quants and the algorithmic traders. But for any one company you look ok at, there are literally hundreds if not thousands of analysts whose full time job is actually to look at that companies financials and help their firm make investment decisions about that particular company (or at least the sector it resides in) and they don’t just wait for public releases but to check other data sources which may give them insight. Basically their job has them knowing a helluva lot more than you just by the mere fact that it IS their job. Some of them might sort of suck at their job, but 99% of individual traders will still be hopelessly outgunned.

 

But it isn’t a zero sum game where the big boys prevent the individual from picking winners, and those big boys still get it wrong.

Years ago when I let Morgan Stanley manage my IRA they were far more wrong than right on individual stocks all their info said Apple was going nowhere and to dump it. This is when it was $75 pre split it wasn’t until it ran up to $150 did they say buy it now. They totally missed the recurring revenue of their App store.

It feels like sometimes they start pushing a company after it’s begun to run to drive the price higher.

 

And most of the professionals you describe don’t beat the market either.

 

Not one of 2000+ funds was able to beat the index fund every year for five years.


Mutual Funds That Consistently Beat the Market? Not One of 2,132. (Published 2022)


The longer you go, the less likely an active fund beats an index fund

https://www.forbes.com/advisor/investing/index-funds-vs-mutual-funds/


It found that over the course of one year, 51.08% of actively-managed mutual funds underperformed the S&P 500, and 48.92% of actively-managed funds outperformed the S&P 500.* However, those numbers change dramatically over longer periods of time.

• Over five years, just 13.49% of actively-managed funds outperformed the S&P 500*
• Over 10 years, only 8.59% of actively-managed funds outperformed the S&P 500*

*Data as of December 31, 2022

 

To be clear, it is Buffett that is saying that.

The problem becomes if you are Uber rich you avoid taxes by avoiding realization of capital gains. You just let the stocks / assets grow, and borrow against them with low interest lines of credits (which I assume the interest expense is tax deductible at close to 50% for them in some states).

 

Buffet himself actually raises that issue though. It’s not someone else or a politician who invented it as a talking point.

I do think long term gains should be treated favorably to encourage capex and long term investment. I assume Buffet must too. So it may be an “is what it is” scenario so long as we treat capital gains favorably. I’m not sure I’ve seen Buffet specifically address what he’d suggest to correct it.

 

Buffett Rule: What It Means, Criticism, FAQs.

 

That seems reasonable.

Corporations would still get tax breaks for capex im sure.

It would just ensure that individual investors would pay on gains over a million per year. The average rate isn’t punitive, it’s still less than regular income.

Sounds totally reasonable. So of course Republicans were 100% opposed to it (this was around the time of the stupid Grover Norquist pledge).

 

It’s a nice run for sure. But just FYI, even if we assume you didn’t put a dime into that account during those five years and that entire run was buying and selling to that number, had you invested it just in the S&P you would still have been well over 400k. You outperformed the S&P TR by about 3 percent a year if there weren’t deposits, less if there were. With much greater downside concentration risk. If you did outperform the market by that 3 percent or so over your lifetime though thr nenefits would be huge.
From my own perspective, I overperformed for over a decade even investing passively because I was overweight in mid cap and small caps - low interest rates feed those stocks. Those have come to bite me the last few years and things have evened out. But over time, a balanced portfolio usually wins.
Good luck with continued success.

 

The Grover norquist tax pledge still exists.

One of the reasons why we don’t have an IRS prefilled tax return is that Grover norquist decided that taxes should be painful and difficult and thus getting a prefilled tax return would be a tax pledge violation - which killed it with Republicans.

It is just amazing how some asshole can end up with power like that.

 

Taxes should be painful and difficult? So even the “postcard” thing is another performative lie to their own supporters*? I’m shocked that they would be dishonest! Shocked I tells you!

*obvious bs for anyone but the simplest wages only filing situation.

 

California tried to save the nation from the misery of tax filing — then Intuit stepped in

Intuit had a potent ally in Americans for Tax Reform, whose leader Grover Norquist was among conservatives warning that government would use any expanded role to entrap taxpayers and wring more money out of them. Return-free filing is a rare plank of Reaganomics the group rejects.


California Republicans were eager to align with the anti-tax activist Norquist, who was deeply popular with the GOP base.