Writing off investment losses does not eliminate or even reduce the risk! It avoids you paying taxes on money you didn't actually earn.
Our income/gains taxes avoid confiscating your (hopefully productive!) property by only taxing you on the profits you realize, which both enables and encourages you to keep up what you're doing, producing more prosperity for yourself, your community, and tax income for the government. It doesn't reward you for taking risks, but it doesn't punish you for taking them either. If you take a risk, lose money, and still get taxed on that money you're getting punished for taking a risk.
Yes, but when you're filthy rich and sit on a mountain of unrealized gains you get to be selective about how much you pull out. You can invest 100 million in startups knowing that most of it will go to 0, allowing you to later offset anything that you cash out with losses.
Would you pay $20 bucks now to offset paying tax on a future $20 bucks? There's no way to come out ahead just by failing, that scheme only minimizes risk.
And your winning investments had a chance of being a failure, yet you still pay full taxes on their gains.
Imagine you believe that a stock will stay at the same price, so you make an investment that loses money if it goes up and gains if it goes down, and another that moves in the opposite direction. So the two largely cancel out and you make a bit of profit if it stays the same as you expect.
What should you pay taxes on? The amount you actually made or the 'virtual money' that flowed through only to be canceled out on the other side?
Our income and gains taxes are intended to tax you on just what you actually gained, after taking out costs (including the costs of the other investments you made that didn't pan out).
Bezos and other rich people are sitting billions of unrealized gains.
1. Bezos gets lucky and turns $100 of founder shares into $100 billion of unrealized gains.
2. Bezos goes to the bank and gets a loan for $500 million to invest in a diverse portfolio of early stage startups knowing that only a tiny fraction of them will account for majority of his returns.
3. Every year a portion of his portfolio fails, allowing him to sell a portion of his original shares to offset the losses and show a net gain of 0, allowing him to pay no taxes.
4. He hits a Google or Uber and 10xes the original $500mil but gets to continue this scheme of not realizing the gains unless he has losses to match while his control of the universe continues to expand.
"Jeff Bezos Investment Portfolio is very large and diverse. he owns a stake in several Very Very large companies that you’ll be surprised to hear. Bezos was one of the first shareholders in Google, when he invested $250,000 in 1998. That $250,000 investment resulted in 3.3 million shares of Google stock worth about $3.1 billion today."
AFAICT, the main objection is he has an obscene amount of money (which fair enough, he does). I'm not sure what your objection to this scheme is in general.
Would you still object if a small business owner did the same thing (which I'm pretty sure is common, just not with startups)?
presumably because he's disproportionately funding "the universe"? All that money on failing start-ups probably lose him more than whatever the stock-disposal tax rate is. What isn't going to the government is directly seeding the economy.
The 10x payoff is taxed. You seem to assume that would still have happened anyway - who would have funded it? Bezos investing in a portfolio created that wealth.
Assume he breaks even: He had to burn through 10$X in order to have $X shares in that 10x company. The tax he would* have paid if not offset against losses, is the same he pays on the unicorn. i.e He gets credited tax on the 10$X, but pays tax on $(10X).
Except, if you get a big win, you can't offset that win against gains, and in fact have to pay tax on that win. Also, a big discount is only a big discount if it differs from the norm: infact anyone is allowed to offset their losses.
Yes, maybe only billionaires have the capital to make this bet less volatile, but such is as with all things: It's generally easier to turn larger amounts of money into more money as high-capital-requirement opportunities become available to you (not just relating to this), they have still have to have large amounts of capital, and put it at risk i.e more to lose.
Our income/gains taxes avoid confiscating your (hopefully productive!) property by only taxing you on the profits you realize, which both enables and encourages you to keep up what you're doing, producing more prosperity for yourself, your community, and tax income for the government. It doesn't reward you for taking risks, but it doesn't punish you for taking them either. If you take a risk, lose money, and still get taxed on that money you're getting punished for taking a risk.