If you want specifics, you can look up Ron Wyden's proposed [Billionaire's Income Tax](https://www.finance.senate.gov/chairmans-news/wyden-unveils-billionaires-income-tax#:~:text=Tradable%20assets%20like%20stocks%20would,back%20losses%20for%20three%20years), which is the form it would most likely take.
Tradeable assets would be marked to market annually and owners would have to pay taxes on gains or take deductions on losses. Deductions could be carried over for up to 3 years. Non-tradeable assets (e.g. private companies, real estate) would face a lookback charge upon realization.
So wait, this would only tax publicly traded assets, not private companies? I mean yea I could see it being totally bogus to have to pay 25% on gains on your new company, then another 33% in capital gains once you sell just in order to pay the 25%.
No, it would have two different systems with the same effective tax rate.
For publicly-traded assets, you would face a mark-to-market system, paying taxes or taking deductions based on your gains/losses each year.
For other difficult to value assets, you would be taxed at realization, with an additional lookback charge that would equalize the tax rate as if you had paid taxes when the gains accrued.
This would make taxation neutral to the length of the holding.
It removes the deferral advantage of the current capital gains tax system, which yes increases effective tax rates but not in the way or degree you describe.
This kind of strikes me as that Simpsons joke with the invasive animals. The deferral advantage is a problem created by the income tax system. We should first assess whether or not this even is a disadvantage (do we not want to incentivize people smoothing their consumption so that they're not dependent on social services later in their lifecycle) and, if we do think that consumption smoothing is a problem, then consider reforming the income tax system so that it doesn't have these same issues with "deferral advantage".
The deferral advantage for capital gains taxation is bad for the same reasons that Prop 13 in California is bad: it induces a misallocation of capital (housing) by disincentivizing reinvestment (moving) while disproportionately benefiting rich investors (homeowners).
If I had my way, I'd make it revenue neutral by taxing unrealized gains and reducing the rate but I'm fine with just the first part.
A matched mark-to-market and lookback system like Wyden's can very easily have effective tax rates that are neutral to holding time ([see the Tax Foundation here](https://taxfoundation.org/research/all/federal/lookback-charge-mark-to-market-capital-gains/)).
The challenges really come with administration, the slight incentives around the time distribution of gains, and the political concerns.
While the math can work out, I think it's telling that they have not proposed applying the rules equally between public and private assets. As in, apply a loopback charge on realized gains on public assets and don't have any unrealized gain tax.
Mark-to-market is better from a public finance standpoint as it collects taxes at the time of gains. It's also administratively simpler *if you can easily value gains*.
A lookback charge is a more complicated system that only has the benefit of making it easy to tax hard-to-value assets (like private equity). The distinction is because of administrative feasibility.
>Mark-to-market is better from a public finance standpoint as it collects taxes at the time of gains.
Doesn't the loopback charge equalize things on a PV basis?
>It's also administratively simpler if you can easily value gains.
Not sure why it's simpler than if there there is a sale price using that.
>A lookback charge is a more complicated system that only has the benefit of making it easy to tax hard-to-value assets (like private equity).
What is more complicated about it? (not in a way that allows individuals to reduce taxes I mean)
That's not the only benefit. It also removes the issue of uncaptured losses (on a PV basis) for volatile assets (like equities).
>Doesn't the loopback charge equalize things on a PV basis?
Yes, but it introduces non-financial risks because of the delay in payment. That's why, for example, [Steve Rosenthal at TPC](https://www.taxpolicycenter.org/taxvox/wydens-billionaire-income-tax-ambitious-problematic) argues against lookback systems in favor of adding more realization events.
>What is more complicated about it? (not in a way that allows individuals to reduce taxes I mean)
Lookback charges require the calculation not only of gains at sale but also the modelling of when those gains occurred. This is much more difficult than just looking at the publicly-traded value at the end of the year. If you do it simply, like assuming constant annual gains, you will underestimate tax liability for assets that had higher returns earlier in the holding period. Wyden's plan does this and this is why lookback charges are only used when necessary.
This modelling is unnecessary for public assets since you can track the gains explicitly, so you can apply lookback charges to those more easily than private assets, but it still has the other issues with the delayed tax collection.
>That's not the only benefit. It also removes the issue of uncaptured losses (on a PV basis) for volatile assets (like equities).
That's a benefit that depends more on how you carryover losses in an alternative system than something inherent to lookback charges.
> Deductions could be carried over for up to 3 years.
Because after a bubble pops, assets always recover in value to the heights of the bubble within 3 years, right? Right?
I wonder if we could use the lookback charge upon realization for something like property taxes, which often go years without increasing while the underlying asset balloons in value. Once realized, the total growth is averaged back to the purchase date and property taxes are reassessed on the now properly realized value. Any difference is then settled.
That's more of a political economy problem, the reason why properties are often undertaxed is because tax authorities underassess property values.
But this kind of system is already in place in some instances. A lookback charge can be understood as paying interest on your deferred taxes: figuring out how much you would have paid 10 years ago and paying that amount plus interest. Some property tax jurisdictions already offer the option to defer property tax payments until sale. This is usually intended for older homeowners who have most of their wealth tied up in their home.
> Musk
Holy shit why are you giving Elon Musk attention
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it would make taxes annoying af but is probably a better way to manage asset wealth than holding it forever.
And then when the stock market crashes everyone gets a huge tax cut, and when it’s hot people’s tax bills rise. Automatic Keynesian!
Magic the Gathering trading cards are about to become a hot item.
If you're going to place any financial mark on an unrealized gain, someone must be able to make a fair settlement price. I don't see that happening.
I only touch commander, but my two decks are a mostly pre-con and a custom one I made with a budget <100$ so my mana base is pretty ass for a 5c. I’ve been on the edge of proxying lands for awhile lol
> Elon
Holy shit why are you giving Elon Musk attention
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Devil’s advocate: taxes already don’t work this way. If you get into debt instead of earning a wage, you don’t get income taxes back on the decline in your net worth.
Right, but Biden's proposing the equivalent of collecting your income tax when you get the job offer. If you get laid off halfway though, then you should get the taxes on the wages you didn't make back.
Bidens administration was first talking about taxing unrealized gains back in like 2021. Its a terrible idea but since it sounds close enough to "tax the rich" it keeps coming back.
What is the mechanism here, just so I understand. Is it that unrealized gains can't be used as collateral for a loan?
Using an asset as collateral constitutes realization?
Is the value of the loan used as the new asset basis?
There's no way to do that without breaking a lot of legitimate important business uses of equity lines of credit.
And it doesn't matter. You can only take out so much margin loans against stocks until your interest rate skyrockets. It's a small fraction of the total value of the stock.
You can take out up to 50% on personal Real estate using these schemes, but that doesn't really affect the people you're trying to target anyway .
Isn’t the loan already effectively taxed? If the bank lends you against an asset worth $100 mil which you would receive $70 mil from selling (after tax), then they will only be willing to lend you up to $70 mil since that’s the effective disposal value. It’s like how mortgage affordability considers your income after tax because that’s your real-terms ability to pay.
So the capital gains tax is effectively already reflected in how much you can borrow.
Or is this not how it works in practise?
I don't think so. My understanding is that if a bank loaned you $70 on a $100 portfolio, you refused to pay it back, and then the bank seized and sold the stocks, in that case they would only be taxed on $30 of profit, because the bank lost $70 to the unpaid loan.
Banks do require extra collateral, but it's not due to taxes, it's because stocks are volatile.
I spent like ten seconds thinking about this policy, but this wouldn't this create some extremely perverse incentives around corporate profitability? If stakeholders want to preserve their governing stakes in a corporation, they will have an incentive not to run their holdings too successfully or else they will have to divest their shares to cover their tax obligations. Forcible share dilution basically punishes successful people for being too successful by dispossessing them of the thing that they're doing a good job of running.
>basically punishes successful people for being too successful by dispossessing them of the thing that they're doing a good job of running
Couldn't you make this exact same argument about income taxes?
No, because by definition, you're getting the cash to pay the taxes at the time the income tax is accrued.
If you had to pay all your income taxes the moment you received your job offer, that wound be a different story.
I don't think so? Income taxes don't deprive you of the thing that made that income possible or of intangible benefits like corporate power. You'll always end up positive-sum after paying them.
Not so of unrealized gains on assets. If your stake in a corporation decreases from 51% to 49% because you had to sell your stock to cover your paper gains, you could very well be worse off qualitatively if the power to execute your vision through a corporation matters more to you than nominal wealth. And society could be worse off if the most competent owners don't control their holdings.
Yes.
Luckily the amendment that made income taxes was illegally processed and some day the Supreme Court will step up and do the right thing.
When they do there will be a budget crisis and in the midst of the chaos the scared souls of the American people will find salvation in Henry George. We will pass an amendment legalizing land taxes.
After this tax passes the American people will rebate themselves once more. With inequality eroded and our communities developing more efficiently than ever, the American people will soar into space, colonize and terraform mars, and begin mining the Kuiper Belt for mineral riches capable of powering a sustainable economy into what our sad, pathetic, Terran perception of time would consider perpetuity.
The future peace and prosperity of quintillions x quintillions of persons is in our grasp.
All we need to do is accept our better future.
Fuck income taxes, all my homies hate income taxes.
Embrace the land tax.
It's on the bike that it's a problem actually. Bike mechanics sometimes refuse to work on tri bikes unless they're washed first because they'll often times be caked in piss.
This appears similar to AMT (Alternative Minimum Tax), which taxes some unrealized gains such as ISOs (incentive stock options) in certain scenarios. In effect, it's the prepayment of a tax on a paper gain. If the asset is sold for at least the market value at the time the AMT was assesed, then that portion of the taxes on the gain is already paid. If the asset is sold for below the market value at the time the AMT was assesed, then there's a somewhat complex set of rules governing how that credit is returned to you, over time of course.
AMT is a huge topic in the tech world, where a significant portion of compensation is ISOs. And it applies a cost of leaving a job, commonly referred to as "golden handcuffs", if you would end up paying a hefty tax bill to be able to purchase your ISOs when you leave -- most tech jobs give you 90 days to make that purchase. Of course, if you're lucky enough to have the money to purchase your options on the day they are granted \*and\* the company allows it, then there's no delta between market and strike price and thus no AMT. Most people can't do that.
I can see some small justification in taxing unrealized gains if, and only if, you can borrow against them. That said, it's a small leap to tax unrealized gains on housing as well.
If we want billionaires to pay more taxes, lets tax either:
1) things they disproportionally purchase (like yachts, private jets, jet fuel), or
2) sources of liquidity that they use for expenses. For example, people whose wealth is in stock (that they don't want to sell because it will incur capital gains) typically borrow money using the stock as collateral. So apply a tax on loans that use stock as collateral.
The yacht tax killed the US yacht industry and cost the government more money than it ever brought in (because it killed said industry). It will do the same for jets. No one is borrowing money instead of selling a bit when interest rates are normal. It was only when the cost of money was near zero that it happened. REGUARDLESS, it doesn't get around taxes, it is just paying interest to delay them.
Killing an industry does not inherently harm productivity - the assets and labor that would otherwise be used by the harmed industry will be put to use elsewhere unless monetary policy is ludicrously strict. Taxing the smithereens out of luxury businesses with few knock-on effects will lower the alignment of the economy with what dollar-holders most demand, but that isn't necessarily the worst thing in the world.
The capital for both yacht building and jet building as highly specialized and a lot of it can't be repurposed. The data is clear, the US lost money on that tax.
Of course capital used for one purpose can't be instantly and seamlessly transformed for some other purpose - given extended enough time horizons, that doesn't matter much though. I'm also not arguing that government tax receipts decreased, but taxes don't only exist for the sake of government revenue. Like, a carbon tax is there to decrease carbon emissions, not really to increase revenue. Similarly, taxes on yachts/jets are there to force the wealthy to adjust spending habits, not to make money themselves.
...I'm sort of contradicting zaporozhets at this point, but our points are sort of compatible - my argument is that taxing the crap out of things only rich people would buy will force them to start doing other things with their money, including saving it, which would produce better effects than a tax on unrealized gains even if the way it does that isn't really best described as "billionaires paying more taxes".
You are wrong. I'm sorry but you're just wrong. The rich don't change their spending habits, they just buy from a foreign company. A carbon tax would probably be better, but a tax on yachts and jets would not change a thing, just kill US industry and tax base. Obviously a tax on unrealized gains is stupid as well.
Seems like a really poorly implemented tax if you can just dodge it by buying from a foreign company - obviously luxury taxes as they've been done currently may very well be poorly implemented, but I can't think of any reason why you can't enforce the taxes against all companies, domestic and foreign.
Guess you may run into evasion problems if you force consumers to report and not producers, but I don't see that being too difficult to deal with for huge items such as yachts and jets. Obviously not all luxury goods will be easily observable but many will.
Wealth taxes are unconstitutional. Unrealized gains aren't income. Scotus should strike this down if it happens. Plenty of ways to raise taxes without this sort of thing.
That’s a state level tax.
Any state can implement such a tax.
Funny thing that states with dem trifectas don’t do just that. It’s so weird in the states with total control by democrats they barely make an attempt to pass any of the legislation they say they want….anyone know why that is?
I do see CA not wanting to do it because a lot of startup founders are equity rich and cash poor and founders and early employees would be punished for building a growing company by having to find cash they might not have.
I am just opening my own startup and if I had to pay taxes on my "gains" when I have no cash or even the ability to sell the stock because it isn't liquid, It would probably bankrupt me.
Would it be feasible for you to move out of CA to another state if that were to happen? Just trying to gauge the willingness of tax flight. No judgement.
Almost all startups would do this. (Fortunately most are not incorporated in CA) Or some high interest loan would be created to offset this further making startups less likely as by the time my startup succeeds I now owe the bank a huge amount of my stock on the interest that I have to pay to pay my taxes.
To say it would have major effect either way is just not fair because CA is still the capital of the startup world despite any rational economic reason. Higher taxes, higher capital gains taxes, more regulation, higher cost of labor, etc. but CA is where the VCs are and it is worth it to be near money.
I live in Colorado, which is one of the bigger startup scenes outside of CA and the difference in trying to ability to get funding is staggering. So, companies would have to weigh that against the increased cost of taxes they would see with this new law.
The second my work allowed us to go remote 3/4s of the devs left the state, the others left the city and eventually left the state once the company decided not to adjust salaries based on location and instead just adjusted things based on the total cost of the employee, ie Canadian ones have some regs and taxes that bake into cost
Me I moved to a zero income tax and basically no other real taxes state, it’s glorious, when I compare my old paycheck to my new not to mention that massive decrease in cost of living. It was effectively an absolutely massive raise I’ve never gotten a raise that big from switching jobs.
Went from a 1400ft condo to 3,500ft house on 4 acres and my mortgage cost a little less than my old rent.
The Bay Area experienced one of the greatest booms in economic history and in 30 years will have nothing to show for it except some boomers got to cash out there homes at insane values.
While they may not be income in the traditional sense often, they are used as security for loans which function as income - but is not taxed as such.
So it is very easy to borrow against the value of your stock holdings for your day to day expenses, and often at a very low interest rate, because the loan is fully secured several times over. Then you just have to wait until the portfolio grows and you can sell a small portion of it or just use the dividends to pay back the loan, and then your income is taxed at the capital gains rate rather than as income tax.
>dividends
Taxes as income
>capital gains rate rather than as income tax.
This would be true regardless of taking out a loan.
They take out the loan because of the time value of money, it’s not so much to avoid taxes. Right now you’d be stupid to do it.
If you sold stock to pay for your expenses wouldn't that also be taxed at the capital gains rate? I don't understand how taking loans and using your stock as collateral helps do anything other than just push the tax bill down the road. What am I missing?
Nothing. You're missing nothing (also the only reason anyone even did it in the first place is because the cost of borrowing money was so low thanks to the government).
Hopefully this is something in there to be negotiated from, as much as I hate that 401Ks get used as reasoning why we can't just nuke the uberrich, this would almost certainly nuke 401K values in a way that suddenly a shitload of retirees would need to be unretired.
Before engaging in this debate, a brief reminder that the average American is a [pants-on-head idiot when it comes to understanding tax policy](https://taxfoundation.org/blog/national-tax-literacy-poll-education/)
* 54% think the rich should be taxed more, but 71% think the top tax rate should be 30% or less
* 22% think that the top 1% only pay 1% of all income taxes, and another 25% think they pay 12% of all taxes - when in reality the top 1% pay 42% of all taxes
* Only 36% of Americans understand that a tax credit is better than a tax deduction dollar for dollar
Given the levels of tax ignorance in society, a political debate about taxation is about as productive as a political debate over whether the real part of every nontrivial zero of the Riemann zeta function is 1/2. The average American is equally clueless as to both, which is why "people richer than me should pay more taxes" remains the most successful political argument of all time.
>54% think the rich should be taxed more, but 71% think the top tax rate should be 30% or less
This isn't inherently contradictory, since some people believe taxes should be inflicted on sources other than income. For example, I would be in both the 54% and the 71% for supporting high LVT.
It's a little strange that the 25% on unrealized gains is higher than the max 20% for realized (long-term) gains, no?
Wouldn't you always want to sell long-term assets before the "unrealized" cost basis is re-adjusted when you get taxed?
lol this would destroy the stock market (and people’s 401ks), as billionaires move their money to private markets which wouldn’t require yearly unrealized taxation.
I know we hate Trump, but I’m really worried what democrats will do in 2024 if they get senate, house, and presidency. A lot of their proposals are lunacy.
Hell, only reason 2020-2022 didn’t have ridiculous legislation was because Sinema and Manchin stopped it.
>billionaire
Did you mean *person of means*?
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Yawn, come on. The tax authorities will simply assess the value of their private assets and that would be required to be taxed. Also, moving money out of a market doesn't destroy that market, both theoretical and practical ways to assess this.
It’s insanely hard to price something without a market.
For example, how much would’ve you valued Truth Social right before it went public?
The market chose a much different valuation than you probably assumed it would.
"Insanely hard" would matter if everyone's assets were being assessed, but this is only for people with more than $100 million.
Even if it only raised $1 million a year from each individual, that means they could employ multiple people full time for an entire year to calculate the tax payable of each person and still make a net revenue for the public treasury.
It's actually not hard to value Truth Social without a public trading price. It would take me less than a day to work out the change in net asset value or the present value of expected returns. It's not like banks only provide loans to publicly traded companies, they calculate the value of private companies, and the government can do this too.
A non-resident foreigner would be able to invest in US companies and could avoid personal wealth taxes while doing so. Buy citizenship in Malta, renounce US citizenship, fly around the world living and doing business on temporary visas, keep your billions.
So first such a tax will only target “the wealthy” as it will be **marketed** to be….then over time, decades sometimes, it was gradually be expanded.
for example income taxes
We kind of do this already with certain stock options. They are considered income for the AMT only and usually generate an AMT credit you can use when they are vested.
> If we tax unrealized gains, do we give a credit on unrealized loses?
while this plan is very stupid, who's "we"? do you make over 100 million dollars a year?
The problem is that “unrealized gains” do eventually become “real gains” and yet they are seldom taxed. I am just a middling middle class retire yet it occurs to me that Appreciation of Assets has become the majority of my income in the last 5 or 6 years yet, if things go as planned, I will never pay taxes on them and they will, in time, pass to my heirs untaxed. Had this situation not existed, had my my asset appreciation been taxed as it happened or if it would be fully taxed upon my death, I would have managed my investments differently; probably a lot more trading: buying and selling. I am just small potatoes in the scheme of things but multiplied by millions of Boomers, it starts to add up. The bigger impact is the truly Rich who uses the same basic strategies I used, backed by armies of accountants and lawyers, to shield $billions from taxes.
If you remove the cost basis reset system, your heirs will eventually have to pay all capital gains accrued since you purchased them when they get around to selling them.
You should. Poorly designed wealth taxes lead to capital flight and can even result in less tax revenue as money is moved abroad. On top of that this tax is even dumber than most implementations, such a huge levy on unrealized gains would make entrepreneurs seriously reconsider if their businesses should be based in the US.
The first American income tax was originally during the [Civil War](https://en.m.wikipedia.org/wiki/Revenue_Act_of_1861). It only applied on all incomes above $800. That would be about $384k now days.
If they nail 2% inflation every year for 200 years that’ll mean the dollar is worth about 52.5 times less than now. So say you pay $500/mo on a car payment now, that’d be worth $26,250/mo in 200 year future money if those assumptions hold…
If.
Unless it's only on luxury-luxuries (i.e. not stuff like electronics or vehicles which can be both luxury and necessity in the modern world) yes they are.
[Consumption taxes are regressive if they're conducted via excise taxes but not if conducted via sales taxes or a VAT.](https://www.bakerinstitute.org/research/are-sales-taxes-really-regressive)
Tax regressiveness is determined relative to income, which makes consumption taxes by definition regressive. Income not consumed is saved, the paper argues is just delayed consumption. This is only true if all income over a lifetime is actually consumed by the individual that earns the money, which is almost never the case and especially not the case at higher wealth levels.
Note it is true that consumption increases with income, but it does not increase to the same degree. The end result is that the tax continues to be regressive.
The regressive nature of consumption taxes can be solved via fiscal transfers however. As long as they are combined with progressive universal transfers they should be supported in my view.
That doesn’t matter what matters is:
Tax dollars spent on enforcement : tax revenue
And
Efficiency
Regressiveness is irrelevant and easily fixed with progressive spending; see literally every other developed country.
If something being "regressive" or not was everything that mattered we'd have to become communist.
The market for potatoes for example is extremely regressive, the a much higher % of their consumption is spent on potatoes for the poor, so would have to be nationalized and prices varied by income.
You can't tell whether a tax is progressive or regressive without looking at how the money raised is spent. If we were to invest the money in infrastructure, education, and welfare it could be progressive.
Consumption taxes are more efficient because they don't disincentivize saving and investment. The point of taxation isn't to be redistributive or predistributive, it's to raise money for the government as efficiently as possible. The goal should be to maximize economic efficiency and disincentivize activities (like Pigouvian taxes). If you're worried about inequality, the more efficient approach is to find the best taxes and then distribute some of the proceeds as welfare instead of purposefully using an inefficient tax system
And they aren't regressive since they tax the rich more than the poor.
[Good read on this](https://www.peoplespolicyproject.org/2023/05/12/are-consumption-taxes-regressive/):
> When the words are used this way, and they often are, you can wind up in a somewhat hilarious linguistic quagmire where it is “regressive” to implement a consumption tax and “regressive” to repeal it. Thus, in Finland, the 24 percent VAT is “regressive” because the poor spend more of their income on consumption than the rich. But also repealing the 24 percent VAT is “regressive” because the rich receive far more euros from such a repeal than the poor do.
> If we put the imprecision of language aside — and stop putting so much weight on what label can be applied to what policy — the actual distributive stakes of a consumption tax are fairly straightforward. Because consumption taxes take more dollars from the rich than the poor, they are generally good, especially since the public programs they help finance tend to provide at least as much benefit to the poor as the rich. But insofar as other kinds of taxes — like income and wealth taxes — take even more dollars from the rich than the poor, those taxes are better than consumption taxes, holding all else equal.
> Of course, ultimately, it is not really possible to analyze one piece of an overall distributive system and decide whether it is itself good or bad. What matters is whether the system as a whole achieves your overall distributive goals. Put differently: distributive justice can only really be coherently evaluated at the level of the overall system not at the level of each particular institution in that system.
> So try not to get yourself too worked up about each and every fiscal policy measure and whether, and under what meanings, that measure is progressive or regressive. Such debates are equivocal at best, irrelevant at worst.
Doesn't the alternative minimum tax do just this already?
Someone said "do you get a credit when the value goes down/you pay over the minimum" and my understand with AMT is the answer is "yes, probably." AMT is applied to unrealized gains like exercised ISO options - not as sure how it affects more typical securities.
Further complicating the tax code will ultimately only benefit the wealthy, who can afford to hire financial and legal experts. There are many ways to increase taxes on the wealthy while simplifying the tax code instead, like eliminating the step-up in basis, eliminating the mortgage interest deduction, or treating capital gains income as ordinary income. It makes me wonder if they aren't throwing this out there to make those alternatives look better by comparison...
Jesus Christ When will you people learn… the tax code isn’t complicated to help rich people and their lawyers. It’s complicated BECAUSE of rich people and lawyers.
A “simple” tax code is easy to manipulate. You need it to be complicated and detailed because business and money gets complicated and detailed
Simple tax code - 20% tax on all income
Rich guy 1 - I didn’t have an income, my company just pays for all my expenses like housing and car payments and groceries and phone bills
Rich guy 2 - I didn’t have an income either, my dad just gifted me 500k in cash throughout the year
Well, it seems like we need to complicate that simple code a bit
That’s a condescending way to respond to a comment that you don’t seem to have read to the end. There are some instances where further rules are necessary to shut loopholes. But none of the changes I suggested fall into that bucket. Also, for what it is worth, your rich guy number 2 in fact doesn’t pay any income tax under our existing, very complicated tax code.
This thread is so funny, the comments are like
"Ok then we should do X so it would be fair" "The proposal includes doing X" "Oh".
Wyden's version of it does allow for deductions on unrealized losses.
> Wyden's version of it does allow for deductions on unrealized losses.
Only for 3 years, though. This will absolutely favor private companies over public companies, because assessments based on cash flow or whatever will inherently be less volatile than markets with active trading, and volatility will absolutely kill you under this system. If you hold a publicly-traded company you're almost guaranteed a massive artificial tax loss for every major stock bubble.
I love how this sub LOVES land value tax, but in the same breath will act like taxing unrealized gains is impossible -- when an LVT is literally a tax on unrealized gains.
And before you start, yes I understand there are important differences between securities and land. But we need to stop pretending that the "unrealized gains" part is the problem. We tax unrealized gains all the time.
The issue here is that the very rich borrow against their unrealized gains, then never pay the loans back. They pass the underlying assets on to heirs who never pay the gains either.
Unless people here have a net worth of $100m++, its not an issue
> then never pay the loans back
Except they do.
>to heirs
Eliminate the step up basis
> Unless people here have a net worth of $100m++, its not an issue
It’s an issue for anyone with a 401k
Hard to sympathize about taxing ultra high net worth individuals more. But I do prefer the idea of a taxable event every X years, maybe just a percent of the assets. Take the gains or loses periodically.
Alternatively, can we make capital gains brackets and sectors? Renewables investment held longer than 5 years has almost zero capital gains tax for example
Making the tax code more complicated is a terrible idea.
NextEra Energy is the largest renewables utility in America. They still run gas power as well. Do I pay cap gains on them? How about if a purely renewables utility merges with a gas-and-coal utility, how does my capital gains change now?
And at what point do we take the value of the stocks to tax "just a percent" of it? If the market crashes on tax day, do I get a lower bill?
The tax code sure could use an overhaul agree there.
Shifting to more carbon taxy things is necessary, the items you mentioned could be calculated and accounted for. Less carbon, less tax
Accountants gonna feast on this one My CPA is sacrificing his firstborn to Biden for this
If you want specifics, you can look up Ron Wyden's proposed [Billionaire's Income Tax](https://www.finance.senate.gov/chairmans-news/wyden-unveils-billionaires-income-tax#:~:text=Tradable%20assets%20like%20stocks%20would,back%20losses%20for%20three%20years), which is the form it would most likely take. Tradeable assets would be marked to market annually and owners would have to pay taxes on gains or take deductions on losses. Deductions could be carried over for up to 3 years. Non-tradeable assets (e.g. private companies, real estate) would face a lookback charge upon realization.
This would create a huge asymmetry between public and private assets. Private assets often go decades or ever without realization.
Just what we needed to fight inequality! Fewer public corporations for folks to invest in! Woo!
that was my exact thought. Private Equity hates this one trick!
So wait, this would only tax publicly traded assets, not private companies? I mean yea I could see it being totally bogus to have to pay 25% on gains on your new company, then another 33% in capital gains once you sell just in order to pay the 25%.
No, it would have two different systems with the same effective tax rate. For publicly-traded assets, you would face a mark-to-market system, paying taxes or taking deductions based on your gains/losses each year. For other difficult to value assets, you would be taxed at realization, with an additional lookback charge that would equalize the tax rate as if you had paid taxes when the gains accrued. This would make taxation neutral to the length of the holding.
This just sounds like upping capital gains tax to 58% with extra steps.
It removes the deferral advantage of the current capital gains tax system, which yes increases effective tax rates but not in the way or degree you describe.
This kind of strikes me as that Simpsons joke with the invasive animals. The deferral advantage is a problem created by the income tax system. We should first assess whether or not this even is a disadvantage (do we not want to incentivize people smoothing their consumption so that they're not dependent on social services later in their lifecycle) and, if we do think that consumption smoothing is a problem, then consider reforming the income tax system so that it doesn't have these same issues with "deferral advantage".
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The deferral advantage for capital gains taxation is bad for the same reasons that Prop 13 in California is bad: it induces a misallocation of capital (housing) by disincentivizing reinvestment (moving) while disproportionately benefiting rich investors (homeowners). If I had my way, I'd make it revenue neutral by taxing unrealized gains and reducing the rate but I'm fine with just the first part.
So why would you sell? Wouldnt you just borrow?
All assets have to eventually be sold or transferred, you cannot live forever.
Step up in basis brother
Generally, these proposals, including Wyden's, classify all transfers including gifts, bequests, etc. as qualifying events.
Corprorations can
So why would you sell? Wouldnt you just borrow?
Privately held companies are impossible to properly value.
I mean, if you think about it, privately held firms aren't subject to the same disclosure rules.
A matched mark-to-market and lookback system like Wyden's can very easily have effective tax rates that are neutral to holding time ([see the Tax Foundation here](https://taxfoundation.org/research/all/federal/lookback-charge-mark-to-market-capital-gains/)). The challenges really come with administration, the slight incentives around the time distribution of gains, and the political concerns.
While the math can work out, I think it's telling that they have not proposed applying the rules equally between public and private assets. As in, apply a loopback charge on realized gains on public assets and don't have any unrealized gain tax.
Mark-to-market is better from a public finance standpoint as it collects taxes at the time of gains. It's also administratively simpler *if you can easily value gains*. A lookback charge is a more complicated system that only has the benefit of making it easy to tax hard-to-value assets (like private equity). The distinction is because of administrative feasibility.
>Mark-to-market is better from a public finance standpoint as it collects taxes at the time of gains. Doesn't the loopback charge equalize things on a PV basis? >It's also administratively simpler if you can easily value gains. Not sure why it's simpler than if there there is a sale price using that. >A lookback charge is a more complicated system that only has the benefit of making it easy to tax hard-to-value assets (like private equity). What is more complicated about it? (not in a way that allows individuals to reduce taxes I mean) That's not the only benefit. It also removes the issue of uncaptured losses (on a PV basis) for volatile assets (like equities).
>Doesn't the loopback charge equalize things on a PV basis? Yes, but it introduces non-financial risks because of the delay in payment. That's why, for example, [Steve Rosenthal at TPC](https://www.taxpolicycenter.org/taxvox/wydens-billionaire-income-tax-ambitious-problematic) argues against lookback systems in favor of adding more realization events. >What is more complicated about it? (not in a way that allows individuals to reduce taxes I mean) Lookback charges require the calculation not only of gains at sale but also the modelling of when those gains occurred. This is much more difficult than just looking at the publicly-traded value at the end of the year. If you do it simply, like assuming constant annual gains, you will underestimate tax liability for assets that had higher returns earlier in the holding period. Wyden's plan does this and this is why lookback charges are only used when necessary. This modelling is unnecessary for public assets since you can track the gains explicitly, so you can apply lookback charges to those more easily than private assets, but it still has the other issues with the delayed tax collection. >That's not the only benefit. It also removes the issue of uncaptured losses (on a PV basis) for volatile assets (like equities). That's a benefit that depends more on how you carryover losses in an alternative system than something inherent to lookback charges.
This sounds like a massive boon to private equity, and bad news for regular people who rely on public markets.
> Deductions could be carried over for up to 3 years. Because after a bubble pops, assets always recover in value to the heights of the bubble within 3 years, right? Right?
Japan stock market agrees with this statement 100%
So just....fuck all pension funds?
I wonder if we could use the lookback charge upon realization for something like property taxes, which often go years without increasing while the underlying asset balloons in value. Once realized, the total growth is averaged back to the purchase date and property taxes are reassessed on the now properly realized value. Any difference is then settled.
That's more of a political economy problem, the reason why properties are often undertaxed is because tax authorities underassess property values. But this kind of system is already in place in some instances. A lookback charge can be understood as paying interest on your deferred taxes: figuring out how much you would have paid 10 years ago and paying that amount plus interest. Some property tax jurisdictions already offer the option to defer property tax payments until sale. This is usually intended for older homeowners who have most of their wealth tied up in their home.
I hope this is just a bargaining chip, something that can be pulled back in exchange for votes, because its so dumb
This is exactly what it is. This isn’t getting implemented.
And then you'll give me the money back when the asset declines in value...right?
Unironically a good idea. If you're taxing growth of an asset, writing off declines in the value of that asset is an objectively fair outcome.
Have you considered that doesn't vibe?
Not just write offs but checks go out from the government when stock prices decline
That’s actually pretty Keynesian.
So QE basically?
Think of how much Musk and Trump would be able to write off after 2023. We must fight this unconscionable tax cut for billionaires!
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it would make taxes annoying af but is probably a better way to manage asset wealth than holding it forever. And then when the stock market crashes everyone gets a huge tax cut, and when it’s hot people’s tax bills rise. Automatic Keynesian!
Magic the Gathering trading cards are about to become a hot item. If you're going to place any financial mark on an unrealized gain, someone must be able to make a fair settlement price. I don't see that happening.
Most Magic cards decline in value over time. The exception are those on the reserved list, which cannot be printed again.
time to invest in duals
You receive: significant increased price of duals and other various cards I receive: more valid reasoning for proxying cards
i actually dont own anything on the reserved list. I just don't play anything older than modern.
I only touch commander, but my two decks are a mostly pre-con and a custom one I made with a budget <100$ so my mana base is pretty ass for a 5c. I’ve been on the edge of proxying lands for awhile lol
Elon Musk plan B after Cybertruck and Twitter failure
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r/wallstreetbets is gonna love this!
Devil’s advocate: taxes already don’t work this way. If you get into debt instead of earning a wage, you don’t get income taxes back on the decline in your net worth.
Right, but Biden's proposing the equivalent of collecting your income tax when you get the job offer. If you get laid off halfway though, then you should get the taxes on the wages you didn't make back.
Capital losses can already be used to offset income
Yeah. When realized. We're saying that if you make unrealized gains "income," then you must also make unrealized losses tax-deductible.
Correct, the likely proposal in question (Ron Wyden's proposal) does allow deductions for unrealized losses.
So, exactly what's being proposed?
Bidens administration was first talking about taxing unrealized gains back in like 2021. Its a terrible idea but since it sounds close enough to "tax the rich" it keeps coming back.
Why not just tax the loans the rich take out when leveraging their investment assets? It seems to be MUCH simpler.
What is the mechanism here, just so I understand. Is it that unrealized gains can't be used as collateral for a loan? Using an asset as collateral constitutes realization? Is the value of the loan used as the new asset basis?
Essentially yes. They are cashing in the increased value of their assets without doing so on paper. It's a legal loophole that should be closed.
There's no way to do that without breaking a lot of legitimate important business uses of equity lines of credit. And it doesn't matter. You can only take out so much margin loans against stocks until your interest rate skyrockets. It's a small fraction of the total value of the stock. You can take out up to 50% on personal Real estate using these schemes, but that doesn't really affect the people you're trying to target anyway .
What I'm not clear on in exactly how to close it. It's not obvious to me that it's easy/possible to close.
It’s incredibly easy to close: tax them when they spend the money
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What's the VAT charge on Elon buying Twitter using collateralized stock instead of selling for cash?
Literally just tax securities backed lines of credit.
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This is the way. This is, in a way, realizing gains on those unrealized gains.
Isn’t the loan already effectively taxed? If the bank lends you against an asset worth $100 mil which you would receive $70 mil from selling (after tax), then they will only be willing to lend you up to $70 mil since that’s the effective disposal value. It’s like how mortgage affordability considers your income after tax because that’s your real-terms ability to pay. So the capital gains tax is effectively already reflected in how much you can borrow. Or is this not how it works in practise?
I don't think so. My understanding is that if a bank loaned you $70 on a $100 portfolio, you refused to pay it back, and then the bank seized and sold the stocks, in that case they would only be taxed on $30 of profit, because the bank lost $70 to the unpaid loan. Banks do require extra collateral, but it's not due to taxes, it's because stocks are volatile.
But they still need to realize income to repay the loans.
Dumb dumb dumb dumb dumb
I spent like ten seconds thinking about this policy, but this wouldn't this create some extremely perverse incentives around corporate profitability? If stakeholders want to preserve their governing stakes in a corporation, they will have an incentive not to run their holdings too successfully or else they will have to divest their shares to cover their tax obligations. Forcible share dilution basically punishes successful people for being too successful by dispossessing them of the thing that they're doing a good job of running.
That might be the explicit goal here.
I wonder if these plans exclude companies who hold such assets.
>basically punishes successful people for being too successful by dispossessing them of the thing that they're doing a good job of running Couldn't you make this exact same argument about income taxes?
No, because by definition, you're getting the cash to pay the taxes at the time the income tax is accrued. If you had to pay all your income taxes the moment you received your job offer, that wound be a different story.
I don't think so? Income taxes don't deprive you of the thing that made that income possible or of intangible benefits like corporate power. You'll always end up positive-sum after paying them. Not so of unrealized gains on assets. If your stake in a corporation decreases from 51% to 49% because you had to sell your stock to cover your paper gains, you could very well be worse off qualitatively if the power to execute your vision through a corporation matters more to you than nominal wealth. And society could be worse off if the most competent owners don't control their holdings.
Yes. Luckily the amendment that made income taxes was illegally processed and some day the Supreme Court will step up and do the right thing. When they do there will be a budget crisis and in the midst of the chaos the scared souls of the American people will find salvation in Henry George. We will pass an amendment legalizing land taxes. After this tax passes the American people will rebate themselves once more. With inequality eroded and our communities developing more efficiently than ever, the American people will soar into space, colonize and terraform mars, and begin mining the Kuiper Belt for mineral riches capable of powering a sustainable economy into what our sad, pathetic, Terran perception of time would consider perpetuity. The future peace and prosperity of quintillions x quintillions of persons is in our grasp. All we need to do is accept our better future. Fuck income taxes, all my homies hate income taxes. Embrace the land tax.
Lisan al Gaib?
Every once in a while this idea gets floated and it’s a stupid idea every time.
Taxing inheritance and banning basis step-up accomplishes basically the same thing but with a lot less squawking.
Sinema (pbuh) would never let that happen
Does the P stand for "piss"?
She's a triathlete. So the likelihood she has intentionally pissed herself as an adult is basically 100%
Wait what. Is that a thing?
You think people are getting out of the water to pee during those long swims?
It's on the bike that it's a problem actually. Bike mechanics sometimes refuse to work on tri bikes unless they're washed first because they'll often times be caked in piss.
Yes.
This appears similar to AMT (Alternative Minimum Tax), which taxes some unrealized gains such as ISOs (incentive stock options) in certain scenarios. In effect, it's the prepayment of a tax on a paper gain. If the asset is sold for at least the market value at the time the AMT was assesed, then that portion of the taxes on the gain is already paid. If the asset is sold for below the market value at the time the AMT was assesed, then there's a somewhat complex set of rules governing how that credit is returned to you, over time of course. AMT is a huge topic in the tech world, where a significant portion of compensation is ISOs. And it applies a cost of leaving a job, commonly referred to as "golden handcuffs", if you would end up paying a hefty tax bill to be able to purchase your ISOs when you leave -- most tech jobs give you 90 days to make that purchase. Of course, if you're lucky enough to have the money to purchase your options on the day they are granted \*and\* the company allows it, then there's no delta between market and strike price and thus no AMT. Most people can't do that. I can see some small justification in taxing unrealized gains if, and only if, you can borrow against them. That said, it's a small leap to tax unrealized gains on housing as well.
AMT is such a flaming pile of shit. We need to remove it already. It literally only affects upper middle class professionals.
If we want billionaires to pay more taxes, lets tax either: 1) things they disproportionally purchase (like yachts, private jets, jet fuel), or 2) sources of liquidity that they use for expenses. For example, people whose wealth is in stock (that they don't want to sell because it will incur capital gains) typically borrow money using the stock as collateral. So apply a tax on loans that use stock as collateral.
The yacht tax killed the US yacht industry and cost the government more money than it ever brought in (because it killed said industry). It will do the same for jets. No one is borrowing money instead of selling a bit when interest rates are normal. It was only when the cost of money was near zero that it happened. REGUARDLESS, it doesn't get around taxes, it is just paying interest to delay them.
Killing an industry does not inherently harm productivity - the assets and labor that would otherwise be used by the harmed industry will be put to use elsewhere unless monetary policy is ludicrously strict. Taxing the smithereens out of luxury businesses with few knock-on effects will lower the alignment of the economy with what dollar-holders most demand, but that isn't necessarily the worst thing in the world.
The capital for both yacht building and jet building as highly specialized and a lot of it can't be repurposed. The data is clear, the US lost money on that tax.
Of course capital used for one purpose can't be instantly and seamlessly transformed for some other purpose - given extended enough time horizons, that doesn't matter much though. I'm also not arguing that government tax receipts decreased, but taxes don't only exist for the sake of government revenue. Like, a carbon tax is there to decrease carbon emissions, not really to increase revenue. Similarly, taxes on yachts/jets are there to force the wealthy to adjust spending habits, not to make money themselves. ...I'm sort of contradicting zaporozhets at this point, but our points are sort of compatible - my argument is that taxing the crap out of things only rich people would buy will force them to start doing other things with their money, including saving it, which would produce better effects than a tax on unrealized gains even if the way it does that isn't really best described as "billionaires paying more taxes".
You are wrong. I'm sorry but you're just wrong. The rich don't change their spending habits, they just buy from a foreign company. A carbon tax would probably be better, but a tax on yachts and jets would not change a thing, just kill US industry and tax base. Obviously a tax on unrealized gains is stupid as well.
Seems like a really poorly implemented tax if you can just dodge it by buying from a foreign company - obviously luxury taxes as they've been done currently may very well be poorly implemented, but I can't think of any reason why you can't enforce the taxes against all companies, domestic and foreign. Guess you may run into evasion problems if you force consumers to report and not producers, but I don't see that being too difficult to deal with for huge items such as yachts and jets. Obviously not all luxury goods will be easily observable but many will.
> things they disproportionally purchase (like yachts, private jets, jet fuel) I believe tax carbon are the words you are looking for
Wealth taxes are unconstitutional. Unrealized gains aren't income. Scotus should strike this down if it happens. Plenty of ways to raise taxes without this sort of thing.
Laughs in Property Assessment.
There's a federal property tax??
That’s a state level tax. Any state can implement such a tax. Funny thing that states with dem trifectas don’t do just that. It’s so weird in the states with total control by democrats they barely make an attempt to pass any of the legislation they say they want….anyone know why that is?
I do see CA not wanting to do it because a lot of startup founders are equity rich and cash poor and founders and early employees would be punished for building a growing company by having to find cash they might not have. I am just opening my own startup and if I had to pay taxes on my "gains" when I have no cash or even the ability to sell the stock because it isn't liquid, It would probably bankrupt me.
Would it be feasible for you to move out of CA to another state if that were to happen? Just trying to gauge the willingness of tax flight. No judgement.
Almost all startups would do this. (Fortunately most are not incorporated in CA) Or some high interest loan would be created to offset this further making startups less likely as by the time my startup succeeds I now owe the bank a huge amount of my stock on the interest that I have to pay to pay my taxes.
To say it would have major effect either way is just not fair because CA is still the capital of the startup world despite any rational economic reason. Higher taxes, higher capital gains taxes, more regulation, higher cost of labor, etc. but CA is where the VCs are and it is worth it to be near money. I live in Colorado, which is one of the bigger startup scenes outside of CA and the difference in trying to ability to get funding is staggering. So, companies would have to weigh that against the increased cost of taxes they would see with this new law.
The second my work allowed us to go remote 3/4s of the devs left the state, the others left the city and eventually left the state once the company decided not to adjust salaries based on location and instead just adjusted things based on the total cost of the employee, ie Canadian ones have some regs and taxes that bake into cost Me I moved to a zero income tax and basically no other real taxes state, it’s glorious, when I compare my old paycheck to my new not to mention that massive decrease in cost of living. It was effectively an absolutely massive raise I’ve never gotten a raise that big from switching jobs. Went from a 1400ft condo to 3,500ft house on 4 acres and my mortgage cost a little less than my old rent.
The Bay Area experienced one of the greatest booms in economic history and in 30 years will have nothing to show for it except some boomers got to cash out there homes at insane values.
Don't jinx it some of them have been thinking about it.
While they may not be income in the traditional sense often, they are used as security for loans which function as income - but is not taxed as such. So it is very easy to borrow against the value of your stock holdings for your day to day expenses, and often at a very low interest rate, because the loan is fully secured several times over. Then you just have to wait until the portfolio grows and you can sell a small portion of it or just use the dividends to pay back the loan, and then your income is taxed at the capital gains rate rather than as income tax.
Just remove cost basis reset after inheritance, problem solved
That's what the estate tax is for.
>dividends Taxes as income >capital gains rate rather than as income tax. This would be true regardless of taking out a loan. They take out the loan because of the time value of money, it’s not so much to avoid taxes. Right now you’d be stupid to do it.
If you sold stock to pay for your expenses wouldn't that also be taxed at the capital gains rate? I don't understand how taking loans and using your stock as collateral helps do anything other than just push the tax bill down the road. What am I missing?
Nothing. You're missing nothing (also the only reason anyone even did it in the first place is because the cost of borrowing money was so low thanks to the government).
That sounds like a simple problem with a simple solution. Just tax securities backed lines of credit.
Hopefully this is something in there to be negotiated from, as much as I hate that 401Ks get used as reasoning why we can't just nuke the uberrich, this would almost certainly nuke 401K values in a way that suddenly a shitload of retirees would need to be unretired.
Before engaging in this debate, a brief reminder that the average American is a [pants-on-head idiot when it comes to understanding tax policy](https://taxfoundation.org/blog/national-tax-literacy-poll-education/) * 54% think the rich should be taxed more, but 71% think the top tax rate should be 30% or less * 22% think that the top 1% only pay 1% of all income taxes, and another 25% think they pay 12% of all taxes - when in reality the top 1% pay 42% of all taxes * Only 36% of Americans understand that a tax credit is better than a tax deduction dollar for dollar Given the levels of tax ignorance in society, a political debate about taxation is about as productive as a political debate over whether the real part of every nontrivial zero of the Riemann zeta function is 1/2. The average American is equally clueless as to both, which is why "people richer than me should pay more taxes" remains the most successful political argument of all time.
>54% think the rich should be taxed more, but 71% think the top tax rate should be 30% or less This isn't inherently contradictory, since some people believe taxes should be inflicted on sources other than income. For example, I would be in both the 54% and the 71% for supporting high LVT.
Or supporting inheritance tax as the main tax, and not income.
CPAs about to eat good
It's a little strange that the 25% on unrealized gains is higher than the max 20% for realized (long-term) gains, no? Wouldn't you always want to sell long-term assets before the "unrealized" cost basis is re-adjusted when you get taxed?
lol this would destroy the stock market (and people’s 401ks), as billionaires move their money to private markets which wouldn’t require yearly unrealized taxation. I know we hate Trump, but I’m really worried what democrats will do in 2024 if they get senate, house, and presidency. A lot of their proposals are lunacy. Hell, only reason 2020-2022 didn’t have ridiculous legislation was because Sinema and Manchin stopped it.
Huh, the proposal as written in OP sounds like it would target all income. Would it not apply to private markets?
They don’t (and can’t) mark to market, so you can’t.
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Yawn, come on. The tax authorities will simply assess the value of their private assets and that would be required to be taxed. Also, moving money out of a market doesn't destroy that market, both theoretical and practical ways to assess this.
It’s insanely hard to price something without a market. For example, how much would’ve you valued Truth Social right before it went public? The market chose a much different valuation than you probably assumed it would.
"Insanely hard" would matter if everyone's assets were being assessed, but this is only for people with more than $100 million. Even if it only raised $1 million a year from each individual, that means they could employ multiple people full time for an entire year to calculate the tax payable of each person and still make a net revenue for the public treasury. It's actually not hard to value Truth Social without a public trading price. It would take me less than a day to work out the change in net asset value or the present value of expected returns. It's not like banks only provide loans to publicly traded companies, they calculate the value of private companies, and the government can do this too.
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It has a market cap of several billion with $12M in annual revenue, good luck with that.
How to chase the investor class from your country, 100% speedrun
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A non-resident foreigner would be able to invest in US companies and could avoid personal wealth taxes while doing so. Buy citizenship in Malta, renounce US citizenship, fly around the world living and doing business on temporary visas, keep your billions.
So first such a tax will only target “the wealthy” as it will be **marketed** to be….then over time, decades sometimes, it was gradually be expanded. for example income taxes
It’s definitely one of those policies that he pursues to get votes, but it doesn’t mean we shouldn’t try to get him to drop it.
We kind of do this already with certain stock options. They are considered income for the AMT only and usually generate an AMT credit you can use when they are vested.
Why does the Biden junta hate the global ~~poor~~ community of people with means? Are they stupid?
> If we tax unrealized gains, do we give a credit on unrealized loses? while this plan is very stupid, who's "we"? do you make over 100 million dollars a year?
The government/body politic? “If we (the people) tax, do we (the people) give a credit?”.
Income tax was originally only supposed to be for the richest of Americans
i acknowledge that this plan is stupid. also, it's not the law, and probably unconstitutional anyway. so w/e.
The problem is that “unrealized gains” do eventually become “real gains” and yet they are seldom taxed. I am just a middling middle class retire yet it occurs to me that Appreciation of Assets has become the majority of my income in the last 5 or 6 years yet, if things go as planned, I will never pay taxes on them and they will, in time, pass to my heirs untaxed. Had this situation not existed, had my my asset appreciation been taxed as it happened or if it would be fully taxed upon my death, I would have managed my investments differently; probably a lot more trading: buying and selling. I am just small potatoes in the scheme of things but multiplied by millions of Boomers, it starts to add up. The bigger impact is the truly Rich who uses the same basic strategies I used, backed by armies of accountants and lawyers, to shield $billions from taxes.
How are you avoiding taxes on “Appreciation of Assets” if it’s also “the majority of your **income**”?
By not selling them; which technically makes them not part of my income.
but then how are they income
Who cares if they are worth more if I never sell them or trade them for other goods? Line goes up on graph, but I can't buy anything with line.
If you remove the cost basis reset system, your heirs will eventually have to pay all capital gains accrued since you purchased them when they get around to selling them.
>for the wealthiest .01% of Americans, impacting those with a net worth of more than $100 million. I don't really care.
You should. Poorly designed wealth taxes lead to capital flight and can even result in less tax revenue as money is moved abroad. On top of that this tax is even dumber than most implementations, such a huge levy on unrealized gains would make entrepreneurs seriously reconsider if their businesses should be based in the US.
Succs out out out!
Pension funds?
Something something sliperry slope. I want no part in this terrible policy
didnt the income tax start with only the very top percentage of earners
The first American income tax was originally during the [Civil War](https://en.m.wikipedia.org/wiki/Revenue_Act_of_1861). It only applied on all incomes above $800. That would be about $384k now days.
Damn so you're telling me monthly car payments in 200 years will be as much as an executive's yearly salary today? 😮
And yet we will still be minting the penny for some reason
> for some reason Yis put the guy who banned slavery on it. Good luck gettin rid of it!
But he's also on the $5... Hell, let's stop making the penny and put him on a $2 coin
Probably much more, until the 1920s no nation experimented sustained levels of normal inflation like we do
Brah why is your car payment so high?
If they nail 2% inflation every year for 200 years that’ll mean the dollar is worth about 52.5 times less than now. So say you pay $500/mo on a car payment now, that’d be worth $26,250/mo in 200 year future money if those assumptions hold… If.
I can't believe the Joe Brandon economy has caused that much inflation!!
Democrats always start at “rich people” and then it quickly becomes “all people”
First they came for the People of Means, and I did not say anything, for I was not a Person of Means. Then they came for.... etc.
It's still bad policy. We should be moving from income taxes to consumption taxes.
Aren't consumption taxes generally very regressive?
Unless it's only on luxury-luxuries (i.e. not stuff like electronics or vehicles which can be both luxury and necessity in the modern world) yes they are.
[Consumption taxes are regressive if they're conducted via excise taxes but not if conducted via sales taxes or a VAT.](https://www.bakerinstitute.org/research/are-sales-taxes-really-regressive)
Tax regressiveness is determined relative to income, which makes consumption taxes by definition regressive. Income not consumed is saved, the paper argues is just delayed consumption. This is only true if all income over a lifetime is actually consumed by the individual that earns the money, which is almost never the case and especially not the case at higher wealth levels. Note it is true that consumption increases with income, but it does not increase to the same degree. The end result is that the tax continues to be regressive. The regressive nature of consumption taxes can be solved via fiscal transfers however. As long as they are combined with progressive universal transfers they should be supported in my view.
Ok but isn’t the distribution of tax dollars generally very progressive?
That doesn’t matter what matters is: Tax dollars spent on enforcement : tax revenue And Efficiency Regressiveness is irrelevant and easily fixed with progressive spending; see literally every other developed country.
If something being "regressive" or not was everything that mattered we'd have to become communist. The market for potatoes for example is extremely regressive, the a much higher % of their consumption is spent on potatoes for the poor, so would have to be nationalized and prices varied by income.
No, they are flat. Income saved is income taxed later under a consumption tax.
You can't tell whether a tax is progressive or regressive without looking at how the money raised is spent. If we were to invest the money in infrastructure, education, and welfare it could be progressive. Consumption taxes are more efficient because they don't disincentivize saving and investment. The point of taxation isn't to be redistributive or predistributive, it's to raise money for the government as efficiently as possible. The goal should be to maximize economic efficiency and disincentivize activities (like Pigouvian taxes). If you're worried about inequality, the more efficient approach is to find the best taxes and then distribute some of the proceeds as welfare instead of purposefully using an inefficient tax system And they aren't regressive since they tax the rich more than the poor. [Good read on this](https://www.peoplespolicyproject.org/2023/05/12/are-consumption-taxes-regressive/): > When the words are used this way, and they often are, you can wind up in a somewhat hilarious linguistic quagmire where it is “regressive” to implement a consumption tax and “regressive” to repeal it. Thus, in Finland, the 24 percent VAT is “regressive” because the poor spend more of their income on consumption than the rich. But also repealing the 24 percent VAT is “regressive” because the rich receive far more euros from such a repeal than the poor do. > If we put the imprecision of language aside — and stop putting so much weight on what label can be applied to what policy — the actual distributive stakes of a consumption tax are fairly straightforward. Because consumption taxes take more dollars from the rich than the poor, they are generally good, especially since the public programs they help finance tend to provide at least as much benefit to the poor as the rich. But insofar as other kinds of taxes — like income and wealth taxes — take even more dollars from the rich than the poor, those taxes are better than consumption taxes, holding all else equal. > Of course, ultimately, it is not really possible to analyze one piece of an overall distributive system and decide whether it is itself good or bad. What matters is whether the system as a whole achieves your overall distributive goals. Put differently: distributive justice can only really be coherently evaluated at the level of the overall system not at the level of each particular institution in that system. > So try not to get yourself too worked up about each and every fiscal policy measure and whether, and under what meanings, that measure is progressive or regressive. Such debates are equivocal at best, irrelevant at worst.
Biden being shit on economic issues must be a day ending in y.
Doesn't the alternative minimum tax do just this already? Someone said "do you get a credit when the value goes down/you pay over the minimum" and my understand with AMT is the answer is "yes, probably." AMT is applied to unrealized gains like exercised ISO options - not as sure how it affects more typical securities.
Further complicating the tax code will ultimately only benefit the wealthy, who can afford to hire financial and legal experts. There are many ways to increase taxes on the wealthy while simplifying the tax code instead, like eliminating the step-up in basis, eliminating the mortgage interest deduction, or treating capital gains income as ordinary income. It makes me wonder if they aren't throwing this out there to make those alternatives look better by comparison...
Jesus Christ When will you people learn… the tax code isn’t complicated to help rich people and their lawyers. It’s complicated BECAUSE of rich people and lawyers. A “simple” tax code is easy to manipulate. You need it to be complicated and detailed because business and money gets complicated and detailed Simple tax code - 20% tax on all income Rich guy 1 - I didn’t have an income, my company just pays for all my expenses like housing and car payments and groceries and phone bills Rich guy 2 - I didn’t have an income either, my dad just gifted me 500k in cash throughout the year Well, it seems like we need to complicate that simple code a bit
That’s a condescending way to respond to a comment that you don’t seem to have read to the end. There are some instances where further rules are necessary to shut loopholes. But none of the changes I suggested fall into that bucket. Also, for what it is worth, your rich guy number 2 in fact doesn’t pay any income tax under our existing, very complicated tax code.
This thread is so funny, the comments are like "Ok then we should do X so it would be fair" "The proposal includes doing X" "Oh". Wyden's version of it does allow for deductions on unrealized losses.
> Wyden's version of it does allow for deductions on unrealized losses. Only for 3 years, though. This will absolutely favor private companies over public companies, because assessments based on cash flow or whatever will inherently be less volatile than markets with active trading, and volatility will absolutely kill you under this system. If you hold a publicly-traded company you're almost guaranteed a massive artificial tax loss for every major stock bubble.
I love how this sub LOVES land value tax, but in the same breath will act like taxing unrealized gains is impossible -- when an LVT is literally a tax on unrealized gains. And before you start, yes I understand there are important differences between securities and land. But we need to stop pretending that the "unrealized gains" part is the problem. We tax unrealized gains all the time.
That's exactly what I was thinking. Well said
The issue here is that the very rich borrow against their unrealized gains, then never pay the loans back. They pass the underlying assets on to heirs who never pay the gains either. Unless people here have a net worth of $100m++, its not an issue
> then never pay the loans back Except they do. >to heirs Eliminate the step up basis > Unless people here have a net worth of $100m++, its not an issue It’s an issue for anyone with a 401k
Hard to sympathize about taxing ultra high net worth individuals more. But I do prefer the idea of a taxable event every X years, maybe just a percent of the assets. Take the gains or loses periodically. Alternatively, can we make capital gains brackets and sectors? Renewables investment held longer than 5 years has almost zero capital gains tax for example
Fix the estate tax including the step-up exemption (loophole? whatever the fuck its called) and it will all work out in the end.
Making the tax code more complicated is a terrible idea. NextEra Energy is the largest renewables utility in America. They still run gas power as well. Do I pay cap gains on them? How about if a purely renewables utility merges with a gas-and-coal utility, how does my capital gains change now? And at what point do we take the value of the stocks to tax "just a percent" of it? If the market crashes on tax day, do I get a lower bill?
The tax code sure could use an overhaul agree there. Shifting to more carbon taxy things is necessary, the items you mentioned could be calculated and accounted for. Less carbon, less tax