zlacker

>>southe+(OP)
I wonder if this is coming up just before the election because of the Harris campaign’s suggested policy of capital gains tax on unrealised gains for people who have over $100m in assets? I think this is a great idea personally given what these people are doing to avoid paying tax including taking out loans against their own share portfolios. Worth thinking about what people are willing to do to not pay billions of dollars worth of taxes.

>>andy_p+ex
Do "these people" include entrepreneurs with equity in startups with rapidly increasing value but no way to take money off the table? It doesn't take much to cross "$100m in assets" as a startup, say, $2.5M in revenue at 40x valuation (or $5M at 20x, etc.), even while loss-making.

How should the founders and equity investors in a bootstrapped high growth unicorn that is neither public nor profit-making handle this proposed capital gains tax? Does this mean VC funds would need to set aside arbitrary amounts of cash to cover impossible-to-predict taxes on cap gains during, say, a 7 year window?

It could also make it harder to attract and keep talent, since the earliest stage employees often rely on equity grants as part of their compensation. Does this mean every early stage employee has to have deep enough pockets to cover cap gains tax pre-revenue? And what happens when the company implodes past the look-back for recouping tax overpayment?

It might make sense to focus on closing existing loopholes without creating new burdens and cash flow barriers that could disrupt the innovation and growth ecosystem with unintended second and third order consequences.

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Edit to add:

It's true that a peeved Wall St donated a fraction to Biden this season relative to the past, and — surely entirely unrelatedly — partnerships and private equity were taken out of the latest incarnation, leaving in publicly traded and the $100M holdings.

If passed, this will be tinkered with, encircling ever more to offset the loopholes inevitably used.

>>Terret+TB
> Do "these people" include entrepreneurs with equity in startups

No it doesn’t, you’re arguing using a straw man here. They need to be publicly traded securities to be taxed as I understand it. Also paying taxes is a public good, even if you’re exceptionally wealthy.

>>andy_p+1C
> They need to be publicly traded securities to be taxed as I understand it.

On the contrary, many variations of proposals (they keep popping up) cover partnerships or other forms of company holders as well.

Even in the Harris plan, though not usually talked about, even for the illiquid not-tradable group there would be a new deferred tax of up to 10% on unrealized capital gains upon exit. To be fair, "exit" implies an ability to pay that.