First line of the article:
> Jensen Huang, the chief executive of Nvidia, is the 10th-richest person in the United States, worth $127 billion
I haven't been paying attention to the bullshit that is nth-richest person but how the fuck is someone worth that much and is only in 10th place? Wasn't it not too long ago that $127B would have been 1st?
Rich get richer, poor get poorer. Something like that.
But mostly, because technology has ASTOUNDING margins and markets that are, essentially, winner takes all, the richest people are now tech instead of oil or resources like they used to be.
We will see the world's first trillionaire. It will happen in our lifetime.
Unless the trend of murdering the ultra wealthy actually kicks off. Then maybe not.
It thought the CEO of a company is not ultra wealthy by a longshot. He's just an employee, well connected, ex-banker or ex-consulting who happens to be a multi-millionaire. Great gig if you can get it, especially if you avoid divorce -or death from stress.. or murder.
The founder of a company -who may or may not be be CEO- is where the the money is at. That's where the value-creation is, and where the ultra wealthy reside. They also usually have somewhat functional families.
But I wanted to answer this question objectively, so here's what I did:
I suppose you can start with a definition of ultrawealthy[1] which is $30m assets minus primary residence. That seemed low to me, but its on wiki, so OK.
Median CEO pay for publicly listed companies was 16.3M, gross. [2] . Take 50% off the top for taxes (US-avg so aggressive), then you are around ~$8M , before expenses. Factor expenses of $1M (probably low, considering consumption goes up relative to income), that means $7M for assets, meaning the avg CEO is working about 5 years to become hit ultra wealth. However, the average tenure for a CEO is 4.8 years [3]
So i suppose a few of the CEOs are eventually making it into the ultra rich, if they can outlast the average tenure on the job.
It depends on company share ownership. If they created the company (and held on to shares), or if they are mostly paid in shares (and held on to shares), if they kept buying as many shares as they could and got paid in as many shares as they could - and held on to them - and the company got amazingly successful (outliers) - then yes.
If they were content to be salaried CEOs, then no.
Yes but not entirely. Yes in that if the CEO tries to sell 125B dollars of shares, the stock price will take a significant hit.
No in that this is paper wealth that you can borrow liquid cash against. Which makes a decent fraction of that wealth actually accessible (if you don't use this borrowing to just buy more shares.)
All wealth is paper wealth. The value of anything and everything changes with the wind and, as such, can only be measured at a moment in time. The ridiculous mantra that wealth isn't truly wealth until it is turned into cash is absurd since the value of cash itself fluctuates with rates of inflation and one currency against another.
>I haven't been paying attention to the bullshit that is nth-richest person but how the fuck is someone worth that much and is only in 10th place? Wasn't it not too long ago that $127B would have been 1st?
This can entirely be explained by the performance of the broader stock market. In 2005 the the 10th person richest person had $18.3B. If you multiplied that by the total returns of S&P 500[2], you'd get $129.5B, which is actually more than how much Mr. Huang was worth.
Don't hate the player, hate the game. Can't blame someone for trying to protect their wealth. A loophole is... a loophole. Close them, redesign the tax code. Lame to single out individuals in posts like this as though they are doing anything wrong.
The law does not define what is ethical. Of course you can blame somebody for trying to hoard an unreasonable amount of wealth. As George said, we live in a society.
(deleted my previous reply as I wasn't happy with it.)
1. I'm not sure what the implication is here.
2. It sounds like he is attempting to create dynastic wealth by avoiding taxes owed after he dies. So, to me it does not seem like some protest against the US government. But if he was actively trying to do good with his wealth in the amount of billions of dollars, then maybe that could be defensible.
1. The implication is that this is a question of who can put the money to the greatest possible use.
If I take the money I have and invest it then I'll get paid something for that. It follows that the person taking the money thinks they can use my money and end up with more even after they've paid me back.
Here's the question. Is every act of commerce an act of theft? If so then none of this means anything. If not, if a company borrowing money is making good and services (and jobs) that everyone benefits from then in theory my putting my money to work is making everyone better off.
The alternative is that government will use the money more positively. On the upside they just spend it on the downside all they do is spend it - the feedback from "good" and "bad" spending is delayed.
If you're referring to the desire to avoid unreasonable taxation without representation, it does not seem like the same thing to me. I don't know - maybe he is avoiding taxes so he can give it all to charity. But greed seems pretty commonly accepted to be unethical.
You may not "owe" the government, if you can find a loophole where you can technically avoid paying legally. But in my opinion ethics definitely comes into it, why wouldn't it?
The government is the only entity that is responsible for the loopholes and that can close the loopholes.
If we want fewer loopholes then we should prioritize that when selecting our government.
The law does not define ethics. Ethics does not define the law. It is folly to pretend there is more than a tenuous bidirectional link.
For example, any father ethically owes his children more than child support. And any child ethically owes his father more than refraining from stealing from or killing him.
The existence of these loopholes creates two options:
1) Follow the spirit of the law, which is that on your death, your assets are taxed as they are passed on, thus you contribute to funding the laws and society we are supposedly working together to create.
2) Do work to avoid having to give up anything, even though you can easily afford it, and you'll be dead anyway.
I don't see how #2 is ethically the same as #1. He doesn't have to do the most selfish thing just because he isn't technically being forced otherwise. Caveat that I haven't researched if this guy is giving tons of money away otherwise or something, I'm just trying to explain why I think it's fair for people to criticize this behavior even though it might be legal.
I agree. But I also think the only way to have a sliver of chance is to push the topic, again and again. And for that, articles like this is important.
People need to get real examples of how the tax avoidance is happening. How insane the amounts are. And realize that when the rich don't pay, it's left to the middle class to foot the bill. Abstract explanations won't work.
There can be no real change a witouth massive amount of political pressure. Pressure that can only be fueled, at least partly, by emotions. And the proper emotions are fear, anger, and the feeling of being tricked.
How about we eliminate billionaires while we're at it? To auto-adjust this for inflation, it can be defined as the current cost of 10,000 kg of gold. That's 10 metric tons which is a very generous amount for any individual.
Billionaires exist only because of exploitation of the environment and of other people. I would never be in that position because I would never be exploitative.
No. I don't leave any money in the bank account beyond what I need to pay the bills. This is because money is often stolen from users of bank accounts, and the bank generally refuses to make them whole.
If you invest money in other people's labor expecting a return (stock market, pension, but not crypto or a house), then you are exploitative. You just don't do it yourself, you delegated it.
You're trying to equate capitalism with exploitation, but they're not the same. There is such a thing as fair market compensation. Exploitation exists when people are made to work over 40 hours a week, or they get stifled with bad health insurance, or lack a safe work environment, or otherwise taken advantage of such as with a visa issue. Not every stock investment is exploitative.
Closing the loopholes is like writing a bug-free program. I.e. practically impossible. You can criminalize any exploits though (just like with software and security exploits).
>The Huangs were taking advantage of a precedent set nearly two decades earlier, in 1995, when the I.R.S. blessed a transaction [...]
Regardless of your position on the current tax code, I think most would agree it's a dick move for the government to prosecute someone for something that they previously said was legal.
Maybe, but the American tax system seems unreasonable complicated and trickable with its 'charitable foundations' and 'Donor-advised funds'. I think it's rather defeatist to think it's impossible to make a better and less exploitable system.
Of course, we are now entering the time of open oligarchy, so it probably won't happen soon.
I suspect the US tax system has far more smart people working on generally finding and exploiting its features and other holes and optimizations than your favorite OS or bloated web browser.
Private Foundations in combination with Donor Advised Funds
interestingly this article has no evidence of an “I Dig It” being used by Huang, which is an overly complex and unnecessary strategy to limit taxes, when it does have evidence of the Private Foundations and Donor Advised Fund being used, at far greater values and is a far simpler way of having tax exempted gains and tax deductions.
There is also a GRAT being used, which is also more complex than necessary.
PF + DAF is all you need
It would have been interesting to see a very aggressive use of QSBS in action, as this would be even more tax free instead of tax exempt, but seems like a missed opportunity
The downvotes are probably because of the "Please don't comment about the voting on comments. It never does any good, and it makes boring reading." guideline in the HN guidelines linked at the bottom of the page, which HN readers seem to interpret as including comments discussing flagging on submissions as well.
Nobody seems to be permitted to explain the flagging either because of the "Please don't complain that a submission is inappropriate. If a story is spam or off-topic, flag it. Don't feed egregious comments by replying; flag them instead. If you flag, please don't also comment that you did." guideline. Anybody who does post to explain their reasons for flagging seems to often have their comment downvoted and flagged.
I'm not arguing for or against the guidelines, just pointing them out.
Anyone with a billion dollars only owes taxes as a result of changing how an asset is invested... which only happens because the new investment will generate more wealth after taxes than before.
I haven't been paying attention to the bullshit that is nth-richest person but how the fuck is someone worth that much and is only in 10th place? Wasn't it not too long ago that $127B would have been 1st?