Capital Gains Tax

[AlabamaPaul]

Your comment about stock purchase implied dividends. Qualified dividends already get special treatment. As far as I am concerned they should all be taxed at a single flat rate and not be taxed based on income level of the recipient and S-corp owners should be heavily penalized if they take the majority of their money as non-payroll money. I say this as someone who owns S-corps, LLC's and am in partnerships--K-1 and 1099 income should all be taxed at a single flat rate across the board for everyone.

I just get sick of people whining about paying taxes on income that gets preferential treatment already. If you want to complain about all that depreciation non-sense I am all ears though. I do support eliminating the forced depreciation and recapture even though it does theoretically constitute another tax benefit in the long run.

All of my posts on this thread have related to capital gains and have specifically excluded qualified dividends as they are paid from after tax corporate income. Now, all income derived from our S-Corp is taxed at personal rates. Why would you want to penalize its owners even more so?

 

[YoungConserv]

Explain. Is your success measured by passive gains or what you have produced?

It's on me doing research and recognizing a investment opertunity that allows me to by risking my wages increase my income.

 

[AlabamaPaul]

It's on me doing research and recognizing a investment opertunity that allows me to by risking my wages increase my income.

You're not risking earned income; you're gambling excess savings in a market, and any returns received do not deserve preferential treatment...

 

[imagep]

It's on me doing research and recognizing a investment opertunity that allows me to by risking my wages increase my income.

But you doing that does little or nothing to produce anything that would otherwise not be produced.

Me purchasing shares of facebook in no way contribute to facebook offering more or better services. Doesn't really matter who owns those shares, the profitability and production of facebook is just the same.

 

[Fisher]

All of my posts on this thread have related to capital gains and have specifically excluded qualified dividends as they are paid from after tax corporate income. Now, all income derived from our S-Corp is taxed at personal rates. Why would you want to penalize its owners even more so?

Because stuff costs money and society needs stuff. I would do it as a tradeoff--eliminate Earned Income Tax Credits and any other refundable credit and I will gladly pay more as my share. Eliminate or cap the home interest mortgage deduction. If everything is put on the table at once and everybody gives some back or pays more, then we can go from a debtor nation to a creditor nation in pretty short order, which is the smartest thing to do with globalization, and is exactly what China is doing right now.

 

[imagep]

You're not risking earned income; you're gambling excess savings in a market, and any returns received do not deserve preferential treatment...

Are you mocking me? that just sounds way to much like something that I would say.

You're no fun when you are being rational.

 

[AlabamaPaul]

Are you mocking me? that just sounds way to much like something that I would say.

You're no fun when you are being rational.

We disagree on policy, not economic reality...

 

[imagep]

...then we can go from a debtor nation to a creditor nation in pretty short order, which is the smartest thing to do with globalization, and is exactly what China is doing right now.

Depends on your point of view.

China is a creditor nation at the expense of the standard of living of the vast majority of the Chinese people. From the point of view of the typical Chinese peasant, the money that they are lending other countries could be better spend on things like central HVAC and cars and nicer housing, and maybe some baseball caps.

 

[Fisher]

Depends on your point of view.

China is a creditor nation at the expense of the standard of living of the vast majority of the Chinese people. From the point of view of the typical Chinese peasant, the money that they are lending other countries could be better spend on things like central HVAC and cars and nicer housing, and maybe some baseball caps.

Well from my point of view I have seen numerous reports of China building crap they have no present need for like random resorts in the middle of nowhere for which there is no demand just to create jobs. I have also seen that China is starting to reorient its economic strategy to improve markets internally. I have also seen that China is investing around the US government in US markets. I have also seen that China is making heavy investments in helping develop third world markets. In short, they are guaranteeing multiple streams of non-tax revenue over a wide-range of currencies to stabilize their currency and budgets going forward. In short, they started at the bottom and are moving by leaps and bounds, but the everyday citizen will see their standard of living grow from what it was before economic modernization as well so they will get there.

 

[ForcedAppeal]

But you doing that does little or nothing to produce anything that would otherwise not be produced.

Me purchasing shares of facebook in no way contribute to facebook offering more or better services. Doesn't really matter who owns those shares, the profitability and production of facebook is just the same.

I would agree with one caveat - The INITIAL money that is raised with IPO's and the like can lead to rapid expansion, hiring, etc. - only problem being that there is currently no mechanism for identifying shares purchased during the initial fundraising/expansion efforts and aftermarket activity. I'd like to see investment in new ventures rewarded (yes, there is a favorable rate for investment gains in small business stocks) but I couldn't really care if this favorable treatment was extended to after market/secondary trades (whatever you'd call them at that point).

 

[YoungConserv]

You're not risking earned income; you're gambling excess savings in a market, and any returns received do not deserve preferential treatment...

Gambling implies random chance the stock market does not operate that way it takes skill.

 

[YoungConserv]

But you doing that does little or nothing to produce anything that would otherwise not be produced.

Me purchasing shares of facebook in no way contribute to facebook offering more or better services. Doesn't really matter who owns those shares, the profitability and production of facebook is just the same.

By that same logic banks should have a special tax put on to the interest the recieve.

 

[ForcedAppeal]

By that same logic banks should have a special tax put on to the interest the recieve.

What does bank interest have to do with shares sold on the secondary market?

 

[head of joaquin]

I would agree with one caveat - The INITIAL money that is raised with IPO's and the like can lead to rapid expansion, hiring, etc. - only problem being that there is currently no mechanism for identifying shares purchased during the initial fundraising/expansion efforts and aftermarket activity. I'd like to see investment in new ventures rewarded (yes, there is a favorable rate for investment gains in small business stocks) but I couldn't really care if this favorable treatment was extended to after market/secondary trades (whatever you'd call them at that point).

Most of the IPO cash usually goes to the intial owners. It's sort of the point. A company that can go public doesn't need to go public to get cash. If it's that successful that people want to buy shares, it can borrow all the money it needs. So IPOs are the way the founders cash out and walk away as millionaires or billionaires. Nothing wrong with that. But it isn't about capitalizing the company, even if the company does in fact get an injection of cash.

In any case IPOs are less than 1% of market activity during any given period.

 

[head of joaquin]

But you doing that does little or nothing to produce anything that would otherwise not be produced.

Me purchasing shares of facebook in no way contribute to facebook offering more or better services. Doesn't really matter who owns those shares, the profitability and production of facebook is just the same.

This fact is constantly lost on market evangelists. They think buying IBM stock somehow magically capitalizes IBM, when of course it just goes to another stockholder, who on average is probably in the top 10% of wealthiest Americans in any case. Buying stock isn't "investing" in business in the meaningful sense of capitalizing it. Nonetheless, conservatives keep up the silly rhetoric about rich people benefit business by buying stock. YC will repeat the nonsense next week, just watch.

 

[ForcedAppeal]

Most of the IPO cash usually goes to the intial owners. It's sort of the point. A company that can go public doesn't need to go public to get cash. If it's that successful that people want to buy shares, it can borrow all the money it needs. So IPOs are the way the founders cash out and walk away as millionaires or billionaires. Nothing wrong with that. But it isn't about capitalizing the company, even if the company does in fact get an injection of cash.

They don't take the money that the IPO raised to cash out. They 'cash out' with stock and stock options. The money raised during an IPO is used for expansion and the IPO documents actually have a proposed budget of where the funds will be used/allocated. Of course they could borrow money - why should they when that money has a carrying cost that they don't have to pay - if they really think the corp will grow and the stock price will increase accordingly, issuing shares will ultimately work out cheaper than borrowing money - each corp obviously will make it's own decisions in its own unique circumstances.

I see many successful corps that I remember issuing stock that have their original owners deeply involved way past the IPO - so to say they're using IPO's to strictly cash out is just factually incorrect. They stay on as majority shareholders - ever hear of guys like Bill Gates, Michael Dell, Steve Jobs, etc,etc etc

 

[greyhat]

Most of the IPO cash goes to the intial owners. It's sort of the point. A company that can go public doesn't need to go public to get cash. If it's that successful that people want to buy shares, it can borrow all the money it needs. So IPOs are the way the founders cash out and walk away as millionaires or billionaires. Nothing wrong with that. But it isn't about capitalizing the company.

That's not correct at all; an IPO does serve to capitalize the company, it's the whole point. Original investors do sell some of their shares at the IPO, but in most cases only a fraction.

Just because a company is successful it doesn't mean that debt, which must be paid back, is a better route to growth than equity listing, which needs not be paid back.

 

[head of joaquin]

They don't take the money that the IPO raised to cash out. They 'cash out' with stock and stock options. The money raised during an IPO is used for expansion and the IPO documents actually have a proposed budget of where the funds will be used/allocated. Of course they could borrow money - why should they when that money has a carrying cost that they don't have to pay - if they really think the corp will grow and the stock price will increase accordingly, issuing shares will ultimately work out cheaper than borrowing money - each corp obviously will make it's own decisions in its own unique circumstances.

An IPO can be structured that way, but mostly they aren't. Again the whole point is for the founders to get rich (and I don't blame them for that). If it weren't, they wouldn't do an IPO. They don't need the cash if they're so successful that they can make a public offering. Instead IPOs are usually structured as an offer for sale (or a hybrid) whereby they sell out their equity shares or a portion thereof.

Zuckerman walked away with $20B from the Facebook IPO. Where do you think it came from? He sold 30M shares during the offering. It was structured for just that end.

 

[greyhat]

This fact is constantly lost on market evangelists. They think buying IBM stock somehow magically capitalizes IBM, when of course it just goes to another stockholder, who on average is probably in the top 10% of wealthiest Americans in any case. Buying stock isn't "investing" in business in the meaningful sense of capitalizing it. Nonetheless, conservatives keep up the silly rhetoric about rich people benefit business by buying stock. YC will repeat the nonsense next week, just watch.

You're confused with an IPO, which occurs only once, and with people buying and selling shares in the secondary market.

When someone buys a stock, they own an interest in the company's equity. You become a part owner of the company as the company is owned by its shareholders.

 

[head of joaquin]

That's not correct at all; an IPO does serve to capitalize the company, it's the whole point. Original investors do sell some of their shares at the IPO, but in most cases only a fraction.

Just because a company is successful it doesn't mean that debt, which must be paid back, is a better route to growth than equity listing, which needs not be paid back.

No, if that were the case Zuckerman wouldn't have walked about with $30B. It was structured that way. Usually an offer for sale is part and parcel of the IPO, making the founders rich. That's the whole damn point. If they wanted more capital, all they'd have to do is go to the bank. Banks and private equity firms would have fallen all over themselves to loan to Facebook.

 

[ForcedAppeal]

Zuckerman walked away with $20B from the Facebook IPO. Where do you think it came from? He sold 30M shares during the offering. It was structured for just that end.

So you've just shown, that they don't take the money raised from the IPO, they are just issued millions of shares (a proper percentage ) in exchange for their original ownership shares. They then proceed to sell these shares on the open market. The cash from the IPO was untouched and can serve the company in future endeavors.

 

[greyhat]

An IPO can be structured that way, but mostly they aren't. Again the whole point is for the founders to get rich (and I don't blame them for that). If it weren't, they wouldn't do an IPO. They don't need the cash if they're so successful that they can make a public offering. Instead IPOs are usually structured as an offer for sale (or a hybrid) whereby they sell out their equity shares or a portion thereof.

Zuckerman walked away with $20B from the Facebook IPO. Where do you think it came from?

Wrong; founders, like Mark, exercised stock options to "cash out" during the IPO. I suggest you read about corporate finance; seems like you're not well informed on this matter.

 

[head of joaquin]

You're confused with an IPO, which occurs only once, and with people buying and selling shares in the secondary market.

When someone buys a stock, they own an interest in the company's equity. You become a part owner of the company as the company is owned by its shareholders.

No, I'm not confused. The offer to sale is part of the IPO. If it weren't Zuckerman would have lost money on the sale, since the stock fell after the IPO.

What's true of Facebook is true of Google, World Wresting Federation, Yahoo and any modern IPO. The offer to sale is part of the IPO structure, so that a large part of the capital infusion goes to the owners.

 

[head of joaquin]

Wrong; founders, like Mark, exercised stock options to "cash out" during the IPO. I suggest you read about corporate finance; seems like you're not well informed on this matter.

Yep. You don't seem to understand that that means the capital infusion doesn't go to the company. It goes to the founders as part of the IPO structure.

Zuckerman got $20B. It came from the company. The company did not use it as capital. That was the point and Zuckerman wouldn't have done an IPO is he didn't get the $20B.

What aren't you understanding about this?

 

[greyhat]

No, if that were the case Zuckerman wouldn't have walked about with $30B. It was structured that way. Usually an offer for sale is part and parcel of the IPO, making the founders rich. That's the whole damn point. If they wanted more capital, all they'd have to do is go to the bank. Banks and private equity firms would have fallen all over themselves to loan to Facebook.

Mark exercised stock options which is different than someone selling shares they already owned.