So small business can't take out loans unless they can realize and be taxed on the full valuation of their company immediately? As much as I can appreciate the goal, this is absurd.
This is not about businesses taking out businesses loans. It’s about the owners of businesses using their shares as collateral for loans.
Most small business owners probably can’t even do this, because banks won’t accept their shares as collateral. So in a sense you could say this would even the playing field between big and small business.
Because income tax started as only targeting people making $3,000 a year, which was the top ~40% of earners in 1913. Once the door to a new government power is unlocked, it never closes it only gets more open.
> Once the door to a new government power is unlocked, it never closes it only gets more open.
I don't think "slippery slope" is a reasonable defense here, especially with the situation you're using as an example. The top 40% of earners is a lot of people, and pretty close to the number of people that pay positive income taxes today (50% of earners pay 97% of taxes). The slope you're using as an example doesn't look very slippery, especially given that 100+ years of the US changing completely has happened in the meantime.
Slippery slope arguments are absolutely legitimate when (a) dealing with policy proposals in relation to difference from a perceived "normal" situation, (b) discussing issues in which factions that wish to push the status quo toward an extreme endpoint manifestly exist and exert influence, and/or (c) there's a demonstrable history of incremental expansion of similar policies' scope and effects in evidence.
The unsaid half of the example, which I assumed was understood for people on HN, was that income tax was initially presented as a small tax on the very well off which now impacts almost every earning American.
That’s playing all sorts of games with the numbers, from 1917 the $2K threshold (50k in 2024) was at 2% tax rate with the top rate being 15% at $2m pa of 1917 dollars so ~$50m pa today.
1) Effective taxes aren't much different today. A married couple with no kids will pay < 5% on 50k. FICA is what makes it higher, so not exactly apples to apples.
2) You're choosing 1917, pre changes, to paint an inaccurate picture. Top rate went from 15% to 67% that year, and 77% the year after. Almost double today's top rate.
What happened was, we introduced a revenue system, and have changed it over time, often dramatically, as the country's needs have changed, both raising and lowering rates. We haven't gone down some crazy spiral of ever increasing tax rates. If anything, the tax situation for the rich has gotten better over time, not worse.
I choose 1917 because it's both old - the point of this exercise - and right after a lowering of the band $3K to $2K and increased taxes in response to WWI. WWI was quite a dramatic event.
I'm not sure what you're arguing - that it changed dramatically or that it has not changed dramatically. If you're arguing it has changed dramatically then I guess we are in agreement.
You should also note that 1917 was prior to the introduction of sales taxes (1921) and social security taxes (1937). Looking at only federal income tax paints an rather incomplete picture when looking at total tax burdens.
"A married couple with no kids will pay < 5% on 50k" I assume they're dual filing for the 50K so 25K on average? The lower %16 percent of the population. A weird number to pick.
I don't think "everyone" is talking about small businesses. Only people with an axe to grind against the legislation, who trot out "Small Business" to play the sympathetic victim.
Yes. It's very common to collateralize a loan with the total assets of the company, and often with personal guarantee on top of this for small LLCs without significant assets or credit history.
I do not see in the article where it says the loan has to be used for personal expenses. In fact from what I can tell it just says unrealized gains will be taxed regardless of whether a loan is taken out or not. The loan example is just used as a justification.
In response to "If one uses an asset as collateral for a loan" you wrote "So small business can't take out loans unless they can realize and be taxed on the full valuation of their company".
Most small business owners probably can’t even do this, because banks won’t accept their shares as collateral. So in a sense you could say this would even the playing field between big and small business.