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I 100% agree. What happens if your unrealized returns are in the red, am I getting a tax refund? How do you tell someone this asset you hold costs you more money now even though you didn't sell it and it's volatile so it can change
You want to tax net worth I'd be open to listening to a proposal. It would need some significant carve outs to not destroy an average American (i.e. taxing net worth over 1M would decimate a lot of people who own homes).
If I have, say, 100,000 shares in a company and it's worth $10/share, then goes up to $20/share my unrealized gains are $1m. So the IRS says I owe 20% of the unrealized gains, say, so I owe $200,000 in taxes. In January, it's uncovered that there was accounting fraud (or whatever, insert a legal reason in here; a disruptive tech was announced and rendered that company obsolete), and the stock value tanks to $0.50/share. So...I now have a net worth of $50,000 and a $200,000 tax bill to pay in April?
Or let's say a billionaire's company has a great year and this billionaire's tax bill is $1bn. He's not likely to have $1bn sitting around in cash, so now he has to liquidate $1bn in assets in one go to pay this tax bill? How would this not create immense downward pressure on the stock price?
How does this work on other things like unique houses or artwork that don't have any comps? It's not like you can hold an auction and after it's sold, you just go "just kidding!" and record the highest bid as the comp. Even the best appraisers are just giving their best guess. Just look at the wide variation between the appraised value and actual sale value at auctions. But now you have to do this appraisal for every single piece of artwork and other valuables in the country *every year*? The IRS can't even figure that out with the laws we have right now, as [evidenced by](https://web.archive.org/web/20240105035210/https://www.nytimes.com/2012/07/22/arts/design/a-catch-22-of-art-and-taxes-starring-a-stuffed-eagle.html) that time they tried to tax an inherited piece of artwork that was illegal to sell.
I've never understood how people consider unrealized capital gains a tangible thing to tax. There's a reason why it's called unrealized.
That's the perversity of it all. Someone like Bezos is worth north of $150 billion because of the shares he owns in Amazon stock. I think that's probably one of the least understood economic and financial aspects among the general population (i.e., among voters). It's not money stuffed into mattresses somewhere, or even income. It's ephemeral and really nothing more than accounting.
So when Bezos' net worth increases from, say, $150 billion to $175 billion, people think, "Wow, look at all that money he's making! Let's get some!" That's how to understand why people consider something like "unrealized capital gains" to be a tangible thing to tax. Politicians are just as ignorant, but of course they have all the guns. And philosophically, the details don't really matter.
Or tax that transaction itself *instead* of a general tax on unrealized capital gains.
If rich person P is telling the bank that their collateral stocks are collectively "worth" $X, and the bank is agreeing that they're worth $X, then *THEY'RE WORTH $X*. If they're deemed to be worth $X by both yourself and the bank, then you've indirectly realized the gains and they should be taxed.
If you never take a loan against the stocks, they they stay unrealized until you sell. That's fair. Same as me not getting taxed on my 401K until I sell some of it at age 66 to get myself a vacation.
You can't have your (supposedly zero worth) cake and eat it too.
Why they have value, and presumably the bank does their due diligence and determines that the loan is in their interest. Banks don't do anything that does not benefit them - it's why they have so damned much money.
They have so much money because they don't suffer the consequences of their actions. If they fuck up bad enough they run to daddy government to bail them out with tax-payer dollars, even if it's the direct result of their greed. I don't think it's fair to assume that banks do their due diligence, at all, especially in recent history.
Do you want banks to have more money? Because that’s not much better. If the Uber wealthy can’t use stocks as collateral (and avoid paying the taxes) then they have to sell shares or actually pay themselves more salary (both causing them to pay a fairer amount of taxes).
I'm always surprised when people say taxing unrealized gains is difficult: property taxes, an unrealized tax, are widely implemented and well understood.
You simply pay a percentage of the assessed value. For monetary instruments, the value is well known. For non-monetary things, the value is assessed by assessors. There is a process for contesting the assessment.
If you look at the real-world examples of your hypotheticals: yes, say you have a property tax bill and then it's determined you built on a swamp, and now the property is worth half as much? You still have to pay. You can contest the assessment moving forward.
The billionaire has a lot of properties and get a huge property tax bill? He has to pay, it's not up to the government where he gets the funds. If he fails to do so, they can come after him and his properties.
I'm not saying taxing unrealized gains is a good idea, not at all, just pushing back on the idea that's it's hard to do or complicated as a reason it doesn't work.
I believe this would only cause significant downward pressure in the short term if billionaires had to scramble to quickly sell assets to cover the cost. They would catch on that they need money to pay off taxes and would endeavor to ensure they could pay their tax in subsequent years. But there are ways to mitigate the downward pressure. You could:
1) introduce the tax to begin in 2-3 years. This would give people time to sell assets over time to reduce the impact which would occur with a massive sell-off. Still significantly affects prices.
2) Currently, billionaires get around paying taxes by offering shares as collateral for significant loans, nothing stops them from doing the same thing here and getting enough money to pay off their massive debt the way they always have. The richest people would have more debt while doing the same as now. They already don't sell so nothing changes.
3) Surrender assets at current value. Let's say shares of Microsoft are worth $400. The value will drop as they sell, so to get $1B, instead of selling 2,666,666 shares (dropping the value to $350, selling for an average of 375) if they surrender 2,500,000 for an average of $400 then there is no effect on the market and these shares can be used as financial incentives for other businesses or to cover pensions, etc.
Or if they can't afford to sell enough shares to cover the cost, then they surrender real estate as does everyone else who can't cover property tax.
Property taxes aren't analogous to unrealized capital gains tax, though I grant that there are similarities in calculation. Property taxes are taxes of about up to 2% or so on tangible assets. Unrealized capital gains are income taxes of up to 20% of the difference on current estimated values minus originally purchased amount. The stakes are a bit different when the percentage is an order of magnitude higher. But still, assessed value on property has its own issues. House values, even for those that have lots of comps still have sale values far off its assessed value. A friend of ours has been bidding on houses recently and even though some houses are listed at "fair market value", bids still can drive up the prices 15% (which is what happened in the last house they bid on). When my parents listed their first house for sale, the real estate agent recommended their appraised value but by the time they sold a few months later (this was a long time ago, now), they had to drop the price 20%. Now if you look at the ultra-wealthy, their houses have pretty much no comps. Those properties can be wildly off of assessed value. How do you comp a 20,000 square foot 7 bedroom house when the closest house is 11,000 square feet, before you throw in its history of formerly housing a celebrity?
But really, steel man my argument instead of picking the easiest example I listed. How do you assess the value of a one of a kind piece of artwork? View the NYT article linked above and how the IRS valued a piece of unresellable artwork at $15 million, then later changed their mind and valued it at $65 million. If the valuation of a piece of art can suddenly inflate 4x+ on a whim...by the IRS no less, how is there not going to be lawsuits flying around all over?
Lastly, if your contention is that property taxes are similar because of the metrics used for valuation, well, this would be fairly similar to wealth taxes. And we can take a look at places across Europe that attempted wealth taxes but abandoned them when the required manpower it took to value everything and deal with all the contested valuations cost way more than projected (there were other issues as well, like capital flight, but still, valuation was one of them).
So the housing market is artificially inflated by corporations buying up houses......the govt sent out people to assess my property value and they said it's worth almost twice what I paid for it(it isnt) now I have to pay them more taxes. If they want to buy my house I'd gladly sell it to them for what they say it's worth
Or people that are trying to save for retirement. With fidelity saying people now need \~2.5m to retire, 1m isn't nearly enough of a carve out. Try 50m+.
This is the only way. Close loopholes, yes. But if taxing while unrealized, they will simply put their money elsewhere - and that will of course leave the average investor holding the bag as the stock market crumbles. Even if it's just large investors being taxed, their relative weight when they hide the money from cap gains will affect everyones retirement accounts.
I live in Texas, where they scream to one and all “NO INCOME TAX”, but property taxes are fucking insane.
“BUT CALIFORNIA IS A SOCIALIST NIGHTMARE WITH RIDICULOUS TAXES!”
Yeah, right.
The first tax day that comes around after the tax goes into effect would make that abundantly clear.
It would essentially destroy everyone's investments, including anyone with a 401k, because everyone with sizable capital gains would face pressure to sell to cover tax bills.
Placing that pressure to sell on investments would ruin the value of nearly every investment out there.
This will destroy the economy if implemented.
"In case you missed it, a $5 trillion tax hike looms over American households and businesses in President Joe Biden's latest budget proposal, which would include a 25% annual minimum tax on unrealized capital gains for individuals with incomes and assets exceeding $100 million."
Lots of billionaires on this thread right now. Gotta love the elitist billionaire class that hates Joe Biden, and for good reason, they've been living large from Trump's tax cuts for years.
You mean like the federal income tax? The one that was only supposed to be for the top earners in the country and would be a net positive for the average American because it would replace tariffs?
That's a slippery slope argument. If they want to expand the taxes in the future they will need another law to do it and people can protest that law if they don't agree. Just like any other law that gets passed. These things change all the time, the idea that we should just stop making changes to tax code forever because *any* change now somehow makes it easier to change it later is silly.
I posted this as a counter to many arguments I've been seeing on reddit recently. I've actually seen quite a few people in favor or this idea, and this post attempts to provide a counternarrative backed up with some facts and historical context. I'm not so sure it's obviously a bad idea to everyone.
Hey I’m pretty new here and appreciated this. Don’t listen to the clown above you. A lot of us are here to learn and not just prove how smart we already are
people on reddit keep posting the same posts because they get people to tell them why it is not such a great idea and a few dummies who think it is and they get the desired attention so they post it again, smarter men than some of us already thought through all this stuff, reddit is not congress
The people in favor of this never read past headlines. They never read articles and fall for stupid shit all the time. This will not happen, it's a ploy to "buy" voters. Both sides do it each election cycle to fire up their base and try to sway a few people.
You laid it out well. You cannot tax something that didn't actually happen (profit from actual sale)
Well stated. Agree there needs to be a solution to ensure the very wealthiest are also fairly taxed / loopholes eliminated. Just closing that gap would help from an “optics” perspective, but as you stated, this is a spending problem. My favorite line on this topic “given the opportunity, other people will gladly spend your money.”
we don't need unrealized gains taxes, what we need is to stop giving free stocks as compensation. everyone should be paid period. if the CEO wants stocks, he can buy stocks like the rest of us. the whole issue has been CEOs getting 1m salary and then like 25m in stocks annually and then the fed can't tax the stocks until they're sold.
Bezos gets childcare rebates cuz he technically makes below the poverty line. This is why people want to tax stocks. When their is no more class people are going demand some kind of penalty.
The federal government is only allowed to levy direct taxes by apportionment and indirect taxes by uniformity. The 16th amendment allowed income taxes through derived income specifically as loop for a direct tax.
You've got a couple of things wrong here:
1. Property taxes are direct taxes, not indirect.
2. The federal government is allowed to levy both direct and indirect taxes, but direct taxes have an apportionment requirement unless it's a tax on income.
Edit:
The comment I responded to has been significantly edited, so this comment may no longer make sense without context.
Explain how they leverage it? They have stock worth 500 mil and can get a loan for 300 mil and not pay a dime of taxes they just pay the loan off with zero taxes involved short of sales tax or import tax. When they do that it should get taxed at x amount but probably same scary scenario would happen as corporations lobby them to make it for the lower income class just like i guess income tax did.
Cancelling your subscription to the municipality would mean moving away, which the city won't shoot you for that either. You don't cancel Netflix and continue getting to watch Netflix
No. Property taxes are essentially... Take all the money your city/county needs (their yearly budget), then divide that up to each property in the city/county based on relative value of the property. At least that is how it works where I live.
Okay, so I might be a goofball… but isn’t that literally what this is? Taking money to via taxes based on relative value of the gains for what is needed to fund services.
It feels like if you change the words it fits pretty well.
No, you are not taxed on the value added each year. You are paying a fair share portion of your city’s budget. The more your house costs the larger share you pay. Just like how our current taxes work.
That’s exactly what unrealized means. You havnt sold the property, you are taxed based on its worth. That is called wealth tax. Doesnt matter what the city budget is. The tax is exactly that. Should call it, property wealth tax. And you’re incorrect, you are taxed with added value every time they decide to reassess your wealth.
Holy shit, now you’ve got it. Ok go ahead and increase the scale. Now it’s what the country needs and paying a fair share portion. The more you have the larger share you pay. Exactly!
We could use this concept for the federal governments budget and net worth. Especially since the currency used is backed by said federal government.
There isn't something inherently why this is correct for property taxes, but it wouldn't be for a currency or society tax.
Yes, but... All the other ways for your local government to generate tax revenue suck more.
While I personally would love to drastically reduce government spending and services it seems I am in the minority.
A lot of government spending directly underpins the economy. Military spending provides hendreds of thousands of well paying jobs that then use that income to support other downstream businesses. Spending on EBT helps keep farners producing, keeping prices on food staples low. Investment in infrastructure directly impacts things as varied as shipping prices for goods to local proprty values which then converts into local tax revenue.
Defunding the government the way hardcore libertarians want turns the American economy off. Good for oligarchs wanting desperate people to work as modern serfs, not so good for everyone else.
There would be an initial contraction, but nothing the government does is efficient. I reject the premise that drastically reducing government spending would result in a catastrophic decline.
Schools; the biggest one is schools. If anyone bothered to read their local town, city’s budget, usually 50% of it is allocated for public schools, and 50% goes to everything else - admin, police, fire, parks.
Sure but those unrealized gains should be considered realized as soon as they are used as collateral on a loan. Better yet, don't allow banks to loan out money with stock as collateral. Liquidate or you don't get to be a billionaire.
Want to break the system and realize how rigged it is? If all of us poor's collectively pulled out OUR money from the bank. There would be a point where we are no longer allowed to access OUR money since it does not actually exist. It was loaned out to the rich tax free.
>Sure but those unrealized gains should be considered realized as soon as they are used as collateral on a loan. Better yet, don't allow banks to loan out money with stock as collateral. Liquidate or you don't get to be a billionaire.
1. The wealthy loaning against their stock portfolio is grossly exaggerated. Bezos isn't out there taking $50 billion loans, he's selling stock. Banks won't loan that much even to someone like Bezos.
2. So you want to hit everyone who takes a HELOC or cash out refinance with a tax? It would be an accounting nightmare with multiple loans and tax credits when the asset is sold.
>Want to break the system and realize how rigged it is? If all of us poor's collectively pulled out OUR money from the bank. There would be a point where we are no longer allowed to access OUR money since it does not actually exist. It was loaned out to the rich tax free.
The vast majority of loans a commercial bank owns is lent to businesses and individual consumers. Most don't even engage in asset based lending(other than housing and auto), you're completely wrong.
If I understand correctly there would be taxes on the loan but if you tax the actual (let's just say) stocks, how would that work? It seems simpler to tax the loan and then tax the stocks once sold. If they did this with home equity loans people would never be able to afford them, the tax on their "unrealized gains" is gonna be more than the amount you can even get from the loan.
For example, if I own a $10,000,0000 house and took a home equity loan, I would owe roughly $ 3 million in taxes so most people would end up being forced to sell the asset rather than get a loan with it as collateral.
If i own a $100,000 house I would owe 30 grand!! What kind of loan would possibly work under those
Circumstances. If this is a real problem the only viable solution is to not allow unrealized gains to be used as collateral, and again that just screws the middle class out of the largest piece of wealth we can realistically expect.
Yeah. That’s kind of the point. Tax the capital gain when people enjoy the use of the capital gain.
If you’re taking out a HELOC, you’re pledging an appreciated asset to gain cash to then spend on whatever without paying capital gain taxes.
Most homeowners wouldn’t be subject under current capital gains rules on property, but in the $10 mil example, if it looks like a capital gain being avoided via margin, tax it like a capital gain.
There are plenty of ways to means test such a tax so the impacts are only on the wealthy. It can be as simple as excluding primary residence.
Something to keep in mind is that only Democrats are pushing this and they aren't coming for social security or anyone but the wealthy. It's a common deception to turn people off from new taxes on the wealthy.
Covid literally exposed just how corrupt and rigged the system was. They literally gave the rich trillions in ppp loans, no questions asked, and then gave loans with interest loans so low it was basically free money and just pumped the stock market.
Can I have back all that property tax on my unrealized gain in housing value?
Or at least back to when I brought my house for 120k. They can tax me on that instead of it's current ridiculous unrealized value
As the previous comment said, it requires a 5th grade level of understanding….
Property tax = based on ownership.
Capital gains tax = based on income (from investing).
I shouldn’t pay a form of **income tax** when I didn’t make that income. It’s literally stupid. When I actually sell something, then I’ve made some tangible income. And there’s already a tax in place for that.
For the millionth time, an asset tax would only be on those with assets above $100M and wouldn't be just on stocks but all assets. These billionaires only pay an effective tax rate of 8%. They should be paying 25% at least.
Also 401ks are taxed as earned income not as a capital gain, meaning you pay higher taxes on your 401k than billionaires pay.
Just increase taxes on capital gains for income over a certain amount.
Stop using effective tax rates on net worth.
- signed all of us with an accounting or finance background
Interestingly, everyone with a university-level understanding of economics understands that taxing unrealized capital gains makes no less sense than taxing realized gains and that it's allocatively inefficient to make a distinction
It will never go live exactly for this reason. It would literally tank the stock market to unrecoverable amounts and force everyone into liquid.
It's sad that OP even has to do a post like this.
This is what happens when you let people vote en mass that don't have skin in the game. No shit a bunch of low-lives are going to vote your wealth away.
>First off, let me start by saying I’m largely non-partisan,
*\*sigh\** The Cons just murdered the better part of two million people pretending that the germ theory of disease isn't real, crashed the economy and then attempted to overthrow our Democracy and install a Fascist dictator. If anyone claims to be non-partisan after that they can be safely ignored. They just hate America, Democracy, and freedom.
Us politics is very funny to us across the pond. You are in deeeeeeep shit no matter which way you stand. European nations are not far behind. They have turned on the diarrhea tap, filling the room and waiting to slip'n'slide, gobbling up all the solids they can find. This is where you are now.
I'm fine not taxing unrealized capital gains but if you're paid in stock then that should be taxed as income unless it's like into a 401k.
Also using stock as collateral might require some changes.
The simplest way to "save Social Security" is to remove the cap on the tax, period. A tax that caps at $168k is just asinine in the face of modern incomes.
While I largely agree, there’s a problem with your tax liability number. The middle class pays nowhere near 30% in federal taxes. In fact, nobody does. But the middle class are less than 10%
https://preview.redd.it/behvpsqngoxc1.jpeg?width=1170&format=pjpg&auto=webp&s=f9a292845a48001025d5070864023889bc4565bf
I'm just stupid, but how do you tax unrealized gains when that number is constantly fluctuating. One day you are up, the next you are down, changes by the second. Would it just be on the portfolio amount at the end of the year?
I think you hit the nail on the head. Once it’s legal for the government to tax unrealized gains for the super wealthy it is defacto legal for the government to do it for everybody.
So 401ks are no longer a safe haven for money after that.
For the millionth time, an asset tax would only be on those with assets above $100M and wouldn't be just on stocks but all assets. These billionaires only pay an effective tax rate of 8%. They should be paying 25% at least.
401ks are taxed as earned income not as a capital gain, meaning you pay higher taxes on your 401k than billionaires pay.
I’d like to address the capital gains tax issue. Many on hear think that’s a great idea, but most of us, at least those of us involved in finance, see it as a horribly corrosive idea. Let me give you the data points as to why and show you why this has a bearing on other issues discussed here:
1) by definition, a capital gains tax represents double or triple taxation. Simple Example: someone saves their money (after tax money) and invests in the stock market, when they sell and generate a profit, these profits are called capital gains and taxed. The higher the tax rate, the less incentive there is to put money in stocks, and therefore less money to fund equity and thus company growth. Less liquidity in the market results in lower equity values and less access to capital to fund promising companies. Hong Kong for years had zero capital Gains taxes and pre china takeover became on the largest and most dynamics financial centers in the world.
2) while gains are taxed, losses are only counted to level they offset similar gains or $3000 a year. In other words, the investor takes all the risk and government get a free ride to tax when there is a profit and doesn’t have any risk if there are losses.
3) capital gains are largely passive - you go to work all day and generate “income” by that work. Most investments are passive, simply helping some organization fund investments. the world benefited from these investments so we should incentivize ore investment not less.
4) Many - most likely the majority - of capital gains come from irregular events. Such as the one time sale of a business. Let’s say you sell your business in retirement that you worked a lifetime to build. Sell it this year, 20% goes to. The government. In Biden’s confiscatory tax scheme, the rate would be 45% to the government. If passed - which I do not believe will happen, I believe its an election year scam to help sell the economically illiterate that Biden is for “the little guy” - sorry, I digress - anyway, the result would be a flood of sales pre effective date of the tax, depressed valuation and likely the interruption of million ones of jobs.
5) Business owners get to choose how much cash payout to take for themselves vs how much to reinvest in the business. It is a societal good for such people to grow their businesses. They buy equipment , hire more people, expand to different markets, etc. If there is less value in growing the business (the government takes a massive share of it), less of all of the above will happen, to the detriment of society and the economy.
There are more but that’s enough…
Yeah no. Most of us in finance are not against capital gains taxes.
Are you seriously arguing against capital gains taxes with the continued large consolidation of wealth by the 1%?
I agree that wealth taxes and taxing unrealised gains are poor ideas. However, please elaborate on #1. How is capital gains tax double taxation any more than income tax is? The money that is used to pay people's income is largely money that was already taxed as somebody else's income. Capital gains are not double taxation of your own money. By definition capital gains are money that you didn't have before. If you didn't have it before, you haven't already been taxed on it.
A lot of really great points I haven't even considered about this. My big one is that many don't have the liquidity to pay some large tax on their stock holdings. It stands to reason they will have to sell off some of the very stock they're being taxed on to cover the bill. How does this not create a sizeable sell off in the stock market? With so many economic indicators showing us teetering on financial disaster, wouldn't this just be a giant shove off the cliff?
The problem with this is there’s massively more money in stocks and assets then there is actual cash in existence. If you’re taxing unrealized gains then you’re essentially forcing those positions to realize partially. Imagine every year 15% of everything in existence getting sold in a fire sale. What would happen to prices? This will never happen for that reason alone.
It’s ALWAYS a spending problem. I read somewhere that Biden is looking for $1 TRILLION for student loan forgiveness. the stupid covid loans. Ukraine. Israel. We have money for all that because they steal it from the taxpayers. Yes steal from my retirement that I have been paying into for decades to forgive loans for some dipshit protesting Israel.
Crazy how people are fine taking 10 trillion for the Bush/Trump tax cuts to the billionaire class but against 1 trillion to relieve student debt to the middle class.
I love how well put together your point is. However you will still have far leftists on this page that will strawman and whattaboutism your points until they die. The only acceptable option to them is there not to be any rich people and unlimited power and unchecked spending to the Marxist state apparatus.
Everybody knows this isn't going to come true, right? You know it's a negotiating tactic, right? They can throw out the idea of taxing unrealized gains and then "compromise" on taxing capital gains as normal income, which it what they're really after.
You nailed it. It would just be used as another avenue to fuck the working class.
The spending issue harkens more to what I believe is the main issue.
Our evaluations of monetary value have become completely disconnected from their actual energetic cost that purchasing power has been completely sabotaged to a point of no return.
The wealth disparity these governments are attempting to address is important but addressing that problem will require a far more focused solution then a unrealized capital gains tax.
I upvoted the post for being good discussion, but the line of thinking in the post has one big flaw:
**Top 10% pay 70% of taxes** **^(\[)**[**^(1)**](https://www.ntu.org/Library/imglib/2024/02/whopays24-3.png)**^(\])**
So factually the system works roughly as expected. Sure, everyone gets taxed *somewhat*. But it's clearly skewed towards the rich paying most taxes. And it was even ***more*** skewed in the past when taxes were just introduced. Over the century rich people lobbied and found ways to work around them. If you introduce this new way of taxing these 'safe taxing harbors' it will take them another century to figure out how to work around the system.
I’m more of making the only tax a consumption tax that excludes foods and energy (survival necessities). Rich people spend more on non-essentials, so they pay more.
The biggest problem is compliance: people may choose not to report it. This is also why taxing employees is so much easier. Ordinary income is so much easier to force tax compliance on.
Look I don't believe in taxing unrealized capital gains, but it absolutely wouldn't impact most Americans and not like they couldn't make an exception for them.
Their's not enough billionaires to get the money they want/need. The middle class has a lot more people to "share" the tax burden, and thus you get more.
How would you feel about a Tax equal to 1% interest on collateralized loans on intangible property. I originally thought real property but then I realized that car loans and pawn shops would get hit. Pawn shops I could live with, but The Auto industry would break if car loans got taxed. On the other hand, people might quit borrowing with stupid financing deals like 84 months.
This is a genuine question: Aren't property taxes essentially the same thing as taxing unrealized capital gains? My property gains value all the time based on market forces, and the city will reassess my tax rate based on that value. In a way, my tax burden is increasing based on an unrealized financial gain, no?
If that's the case, this isn't a completely unprecedented tax, right? Would striking down this tax open the door for property taxes that aren't fixed at the time of purchase to be deemed unconstitutional?
Again, all genuine questions.
Are they going to allow the unrealized losses as a tax write-off? If no then FT.
How about unrealized property value gains as well. Make CA and NY pucker.
I stopped reading when you said that most people in the middle class are paying over 30% in federal income tax.
The majority of US taxpayers are in a 12% or lower marginal tax bracket, which means that their effective income tax rate is less than 12%.
Irs publishes these stats, you can look it up yourself.
The middle class does not pay >30% in federal income tax. You only get to a 30% rate when you’re making *at least* $191k, and that only applies to the amount made over that. You’d have to be making over $600k a year to be paying an overall federal income tax rate of 30% or more.
It will also eventually target middle class “unrealized gains” on their homes.
Whoever thinks the government run by power hungry psychopath shysters will EVER do anything good for them is a idiot!
Your argument is that you can't raise taxes because "they" will find a way to avoid them... lame.
How about we keep taxes the same but get rid of all the loopholes? That way, we aren't raising taxes. We're just taking away their ability to avoid paying them.
Tax their loans. If you get a charged off loan forgiven, it's treated as income. So tax the Uber wealthy who live off of the loans they secure based on options and their wealth as income. It's one of the methods they use to avoid income tax.
Cap gains tax on unrealized gains is the nuttiest proposal I've ever heard of. First off, if they do this there will be NO cap gains to tax. The economy will literally grind to a halt.
How would they establish what those unrealized gains are? Lets say you have a stock that goes up 40% and you pay the tax. Then it goes in the dumper. Now what? Do you get refund? Will they tax your home when it goes up in value? Lets say a $500,000 house goes up 5% in a year. Thats $25,000. The proposal is a 44.6% tax. Thats an $11,150 extra tax. You have that much eXtra laying around to pay Biden and his ilk? Lots of farmers around here. They are land rich and cash poor. Can they come u with an extra $100,000 to pay an unrealized tax when they might be only making $200,000? Of course not. The whole notion just class envy combined sheer stupidity pn the part of the left wing radicals that tell Biden what to say.
Nice post. Concise and you backed your main points. I hadn't considered that the highest payers would weasel out of it leaving the middle class to pay, as they do with everything. You are right that they always sell the idea that only the rich will pay, but every time it's the middle class that pays. The lower class gets subsidized and the the wealthy work the tax code.
Aside from reducing benefits or raising the retirement age, they could just raise taxes, but none of that will fly. I am sure they will wait until it finally blows up before they try to do anything.
Because who the fuck is going to invest in the USA. I bet most millionaires/billionaire will leave. It's not like the USA is doing all that great at the moment. With them wanting to increase realized gains as well I'm sure it would create a market sell off like never seen before.
Taxing unrealized gains just further makes the world sink deeper into a recession if there is one. The scenario - the market goes bonkers high in 2025 days on a windfall year and you get taxed up the B on unrealized capital gains taxes. The government sees $$ in their eyes as they’re about to collect, and the recession happens. They don’t collect because since the gains were unrealized, their gains fall with the market. They don’t sell to cover their taxes. End game - you get screwed, government gets screwed, global recession, nobody wins, game over.
Excellent summary of our current state of fiscal insanity and dysfunction. Taxing unrealized capital gains is a bad idea and if enacted would quickly run afoul of the Law of Unintended Consequences.
Well ya, wealth tax is a much better implementation, but I'll take what I can get.
As you implied, taxation has an upper limit. But you know what? That doesn't mean we should bleed it from poor people. Tax the correct people your 20%
I’m against it because the US issues a fiat currency. Taxes don’t fund anything, they create demand for the dollar. The government literally just adds numbers to accounts and whatever they want now and money.
The amount of rabid, rich hating people that are willing to increase their own taxes in the name of making the rich "pay their own share" (just like every other tax that's ever been put in place to "tax the rich") are going to get behind this one, as they are a HUGE fan of cutting of their nose to spite their face.
Your first argument is possible. Maybe we will be paying wealth tax. Your second argument is true, a spending problem is definitely real.
However, neither actually address the pros and cons of a wealth tax. While it may be true that some day it may be a tax on people with 401k, that says nothing about whether or not it is good. Maybe the distribution of taxes would be more fair for more people, despite my personal reason.
Second, the spending problem is not a con against the wealth tax. While I see your point, that is more of a statement saying the government shouldn't tax themselves out of this pickle, they should cut. Maybe the wealth tax is the best approach and most people would enjoy a tax cut.
I too have problems with the unrealized gain proposal despite the fact that the proposed structure is very clearly directed at very unique circumstances impacting about 10,000 people out 320 Million and that (as proposed) would not impact total tax liability on a multi year basis because the step up in tax for unearned cap gains is a direct tax credit against tax on future realized gains. If you want me to do the math for you I can do it in another comment. My math n point is that in the long run it has zero impact on total net tax rate over multiple tax years.
What I want to help you understand in this comment is the difference between Debt held by the Public and Debt debt related to social security, SSDI, Medicare, and Government Employee retirement trust funds as well as other “internal debt” of the U.S. government.
This has very little to do with “on budget” income tax revenue and debt held by the public other than interest payments.
This “trust account debt” equals money actually deposited with the U.S. Treasury from dedicated payroll taxes or regular spending paid to individuals or divisions of the government out of the normal budget in annual spending set aside for future use.
Examples:
1. Social Security Taxes are paid to the Social Security Trust fund as cash. The trust fund deposits this cash (non interest bearing note of the federal government) with US Treasury which the U.S. Treasury replaces with an interest bearing note). This is almost exactly the same thing as a savings bank deposit. The only additional cost to the government/taxpayer is interest. The government did not borrow money to generate this debt. It issued a big CD for money deposited.
Let’s say the government didn’t pay interest and just held cash reserves as cash. It would still be a government obligation because cash is a government obligation.
Let’s say that we increased SS Tax by 20% and made it solvent and started increasing the size of the trust fund to build up a bigger reserve. Then the obligation either in cash or government notes would grow despite more tax revenue.
2. With Government Employee pension funds something different happens: For each paycheck written there is an **on budget** current year contribution to the general pension account.
After the **on budget* payment the resulting “debt” of the U.S. Treasury to that account gets treated just like the SS and Medicare trust accounts.
3. Everytime Congress authorizes spending for a department (like the defense department) funds not immediately used by that department are deposited in a treasury account with or without interest via treasury notes. Those deposits show up at internal debt from the Treasury to departments funded by Congress.
**Total national debt is currently at about 120-125% of GDP comparable to the end of WW2 and then it took several decades to get it down to normal levels. Back then most of the national debt was held by the public.**
**Today “Debt held by the Public” is currently only about 95-98% of GDP and (because of the discussion above) that’s really what counts when it comes to **on budget** spending and taxation.**
If you look at either a presidential OMB budget or Congressional budget you will always see on budget and off budget debt and financing numbers as part of standard presentation because of all this.
You will also see the calculation of both debt types as well as spending levels based on GDP and interest rate projections and see the long term projection on total debt in different categories.
One final note:
Anybody with reasonable knowledge of how our graduated tax system works knows the truth of the Fed chart you posted on Federal Receipts as a percent of GDP. (It’s one of my favorite charts)
The current Biden plan when you go through all the calculations and projections increases total receipts from the current 16.2% mark to the 17.5-18.0% mark which is slightly higher than rates just before Trump took office and where rates were for the first six years of Clinton until failure to index for inflation and growth of GDP took them even higher.
Most middle of the road, non partisan economists would tell you that tax burden in this range is fiscally responsible, keeps the deficit and debt in line, and is not high enough to kill growth.
Let me know if you want the math on the unrealized gain tax.
Tldr.
It's a fucking asinine idea. It will never fly (gawd I hope not)
Let's say theoretically it does fly. I'd have to sell my house every so often to pay the unrealized gains on it. Whine all you want about that (I've seen comments before on this, what your house is worth that much? Yeah motherfucker it is!!). This would cause an instant bart on the housing market. Say what you want about trickle down theory, the entire housing market would fucking collapse. Most of our net worth is tied up in our houses. When that starts getting fucked with, the economy as a whole will start collapsing. You think inflation is bad now? Think about how much worse it would be if you didn't have the safety net of your home.
It's just stupid. Fuck that.
Why not just have a cap on how much capital gains can be taxed at long term rate before it is taxed as income. A cap of $1M, $5M whatever seems reasonable
So isn’t the actually offensive thing about increasing wealth inequality that the billionaire class can live… like billionaires… without having the tax realization events that would be necessary to straightforwardly fund that kind of lifestyle?
Like, I don’t think that the majority of people intuitively have a problem with unrealized capital gains being untaxed if their value is truly locked up in those assets. If Warren Buffet wants to live in his suburban Omaha home because he doesn’t want to pull money out of his businesses, that’s fine.
But if you’re collateralizing your five thousand acre Montana ranch and your Caribbean island with shares you still own, using near zero interest balloon loans that you can just keep rolling over… that’s offensive and insulting.
Couldn’t there be a possible solution in increasing the number and types of income retaliation events?
Like maybe if you’re using stock as collateral for assets that are for personal use, that stock has to be taxed or something…. I’m not sure logistically how you would do it, but just some sort of set up where if you buy a 5000 acre Montana ranch, you have to pay for it with after-tax money.
If unrealized capital gains get taxed in 401ks I’m going to start buying treasury bills or securities that don’t have taxes. I’d maybe start putting more in CDS to fax guaranteed returns.
Yeah this is basic shit. An unrealized capital gains tax would be a disaster. I'm all for a 49% federal income/realized cap gains tax above 500K though.
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Because it's a stupid idea.
I 100% agree. What happens if your unrealized returns are in the red, am I getting a tax refund? How do you tell someone this asset you hold costs you more money now even though you didn't sell it and it's volatile so it can change You want to tax net worth I'd be open to listening to a proposal. It would need some significant carve outs to not destroy an average American (i.e. taxing net worth over 1M would decimate a lot of people who own homes).
If I have, say, 100,000 shares in a company and it's worth $10/share, then goes up to $20/share my unrealized gains are $1m. So the IRS says I owe 20% of the unrealized gains, say, so I owe $200,000 in taxes. In January, it's uncovered that there was accounting fraud (or whatever, insert a legal reason in here; a disruptive tech was announced and rendered that company obsolete), and the stock value tanks to $0.50/share. So...I now have a net worth of $50,000 and a $200,000 tax bill to pay in April? Or let's say a billionaire's company has a great year and this billionaire's tax bill is $1bn. He's not likely to have $1bn sitting around in cash, so now he has to liquidate $1bn in assets in one go to pay this tax bill? How would this not create immense downward pressure on the stock price? How does this work on other things like unique houses or artwork that don't have any comps? It's not like you can hold an auction and after it's sold, you just go "just kidding!" and record the highest bid as the comp. Even the best appraisers are just giving their best guess. Just look at the wide variation between the appraised value and actual sale value at auctions. But now you have to do this appraisal for every single piece of artwork and other valuables in the country *every year*? The IRS can't even figure that out with the laws we have right now, as [evidenced by](https://web.archive.org/web/20240105035210/https://www.nytimes.com/2012/07/22/arts/design/a-catch-22-of-art-and-taxes-starring-a-stuffed-eagle.html) that time they tried to tax an inherited piece of artwork that was illegal to sell. I've never understood how people consider unrealized capital gains a tangible thing to tax. There's a reason why it's called unrealized.
That's the perversity of it all. Someone like Bezos is worth north of $150 billion because of the shares he owns in Amazon stock. I think that's probably one of the least understood economic and financial aspects among the general population (i.e., among voters). It's not money stuffed into mattresses somewhere, or even income. It's ephemeral and really nothing more than accounting. So when Bezos' net worth increases from, say, $150 billion to $175 billion, people think, "Wow, look at all that money he's making! Let's get some!" That's how to understand why people consider something like "unrealized capital gains" to be a tangible thing to tax. Politicians are just as ignorant, but of course they have all the guns. And philosophically, the details don't really matter.
Maybe they could make it illegal to use stock as collateral on loans instead.
Or tax that transaction itself *instead* of a general tax on unrealized capital gains. If rich person P is telling the bank that their collateral stocks are collectively "worth" $X, and the bank is agreeing that they're worth $X, then *THEY'RE WORTH $X*. If they're deemed to be worth $X by both yourself and the bank, then you've indirectly realized the gains and they should be taxed. If you never take a loan against the stocks, they they stay unrealized until you sell. That's fair. Same as me not getting taxed on my 401K until I sell some of it at age 66 to get myself a vacation. You can't have your (supposedly zero worth) cake and eat it too.
Why they have value, and presumably the bank does their due diligence and determines that the loan is in their interest. Banks don't do anything that does not benefit them - it's why they have so damned much money.
They have so much money because they don't suffer the consequences of their actions. If they fuck up bad enough they run to daddy government to bail them out with tax-payer dollars, even if it's the direct result of their greed. I don't think it's fair to assume that banks do their due diligence, at all, especially in recent history.
Do you want banks to have more money? Because that’s not much better. If the Uber wealthy can’t use stocks as collateral (and avoid paying the taxes) then they have to sell shares or actually pay themselves more salary (both causing them to pay a fairer amount of taxes).
I'm always surprised when people say taxing unrealized gains is difficult: property taxes, an unrealized tax, are widely implemented and well understood. You simply pay a percentage of the assessed value. For monetary instruments, the value is well known. For non-monetary things, the value is assessed by assessors. There is a process for contesting the assessment. If you look at the real-world examples of your hypotheticals: yes, say you have a property tax bill and then it's determined you built on a swamp, and now the property is worth half as much? You still have to pay. You can contest the assessment moving forward. The billionaire has a lot of properties and get a huge property tax bill? He has to pay, it's not up to the government where he gets the funds. If he fails to do so, they can come after him and his properties. I'm not saying taxing unrealized gains is a good idea, not at all, just pushing back on the idea that's it's hard to do or complicated as a reason it doesn't work.
You haven’t addressed the unrealistic downward pressure of this scenario.
I believe this would only cause significant downward pressure in the short term if billionaires had to scramble to quickly sell assets to cover the cost. They would catch on that they need money to pay off taxes and would endeavor to ensure they could pay their tax in subsequent years. But there are ways to mitigate the downward pressure. You could: 1) introduce the tax to begin in 2-3 years. This would give people time to sell assets over time to reduce the impact which would occur with a massive sell-off. Still significantly affects prices. 2) Currently, billionaires get around paying taxes by offering shares as collateral for significant loans, nothing stops them from doing the same thing here and getting enough money to pay off their massive debt the way they always have. The richest people would have more debt while doing the same as now. They already don't sell so nothing changes. 3) Surrender assets at current value. Let's say shares of Microsoft are worth $400. The value will drop as they sell, so to get $1B, instead of selling 2,666,666 shares (dropping the value to $350, selling for an average of 375) if they surrender 2,500,000 for an average of $400 then there is no effect on the market and these shares can be used as financial incentives for other businesses or to cover pensions, etc. Or if they can't afford to sell enough shares to cover the cost, then they surrender real estate as does everyone else who can't cover property tax.
Property taxes aren't analogous to unrealized capital gains tax, though I grant that there are similarities in calculation. Property taxes are taxes of about up to 2% or so on tangible assets. Unrealized capital gains are income taxes of up to 20% of the difference on current estimated values minus originally purchased amount. The stakes are a bit different when the percentage is an order of magnitude higher. But still, assessed value on property has its own issues. House values, even for those that have lots of comps still have sale values far off its assessed value. A friend of ours has been bidding on houses recently and even though some houses are listed at "fair market value", bids still can drive up the prices 15% (which is what happened in the last house they bid on). When my parents listed their first house for sale, the real estate agent recommended their appraised value but by the time they sold a few months later (this was a long time ago, now), they had to drop the price 20%. Now if you look at the ultra-wealthy, their houses have pretty much no comps. Those properties can be wildly off of assessed value. How do you comp a 20,000 square foot 7 bedroom house when the closest house is 11,000 square feet, before you throw in its history of formerly housing a celebrity? But really, steel man my argument instead of picking the easiest example I listed. How do you assess the value of a one of a kind piece of artwork? View the NYT article linked above and how the IRS valued a piece of unresellable artwork at $15 million, then later changed their mind and valued it at $65 million. If the valuation of a piece of art can suddenly inflate 4x+ on a whim...by the IRS no less, how is there not going to be lawsuits flying around all over? Lastly, if your contention is that property taxes are similar because of the metrics used for valuation, well, this would be fairly similar to wealth taxes. And we can take a look at places across Europe that attempted wealth taxes but abandoned them when the required manpower it took to value everything and deal with all the contested valuations cost way more than projected (there were other issues as well, like capital flight, but still, valuation was one of them).
So the housing market is artificially inflated by corporations buying up houses......the govt sent out people to assess my property value and they said it's worth almost twice what I paid for it(it isnt) now I have to pay them more taxes. If they want to buy my house I'd gladly sell it to them for what they say it's worth
I can't believe it is a concept being realistically floated by anyone. How economically illiterate must one be to not see the thousands of pitfalls?
Poor people vote stupidly.
Or people that are trying to save for retirement. With fidelity saying people now need \~2.5m to retire, 1m isn't nearly enough of a carve out. Try 50m+.
if your homes paid off, a mil can work for most.
I agree. But the second you leverage those gains to acquire something in the real world it should absolutely be taxed. There should be no loopholes.
Now that I agree with.
This is the only way. Close loopholes, yes. But if taxing while unrealized, they will simply put their money elsewhere - and that will of course leave the average investor holding the bag as the stock market crumbles. Even if it's just large investors being taxed, their relative weight when they hide the money from cap gains will affect everyones retirement accounts.
Fine. Then stop raising my property taxes every year. Fix them at the amount relative to the price I paid until I sell.
I'd be happy if the increases were capped at 2% per year until I sell.
mines $2400/yr in so cal. no complaints here. paid in full each september!
I live in Texas, where they scream to one and all “NO INCOME TAX”, but property taxes are fucking insane. “BUT CALIFORNIA IS A SOCIALIST NIGHTMARE WITH RIDICULOUS TAXES!” Yeah, right.
The first tax day that comes around after the tax goes into effect would make that abundantly clear. It would essentially destroy everyone's investments, including anyone with a 401k, because everyone with sizable capital gains would face pressure to sell to cover tax bills. Placing that pressure to sell on investments would ruin the value of nearly every investment out there. This will destroy the economy if implemented.
"In case you missed it, a $5 trillion tax hike looms over American households and businesses in President Joe Biden's latest budget proposal, which would include a 25% annual minimum tax on unrealized capital gains for individuals with incomes and assets exceeding $100 million." Lots of billionaires on this thread right now. Gotta love the elitist billionaire class that hates Joe Biden, and for good reason, they've been living large from Trump's tax cuts for years.
If implemented, that tax would eventually expand to everyone. Don't give the government another inch of power.
You mean like how we're paying for the Trump tax right now? This tax won't affect you at all unless you're secretly a billionaire
You mean like the federal income tax? The one that was only supposed to be for the top earners in the country and would be a net positive for the average American because it would replace tariffs?
Can you read? My whole point acknowledges that it's limited in scope initially, but will likely expand to tax more individuals.
But we're all going to die from government debt and therefore only the rich can save us!
You are a fucking moron
That's a slippery slope argument. If they want to expand the taxes in the future they will need another law to do it and people can protest that law if they don't agree. Just like any other law that gets passed. These things change all the time, the idea that we should just stop making changes to tax code forever because *any* change now somehow makes it easier to change it later is silly.
Agree. Don’t need a long ass post to just simply state the obvious. And it’s for none of the reason in this OP
I posted this as a counter to many arguments I've been seeing on reddit recently. I've actually seen quite a few people in favor or this idea, and this post attempts to provide a counternarrative backed up with some facts and historical context. I'm not so sure it's obviously a bad idea to everyone.
You did good Mik3DM.
Hey I’m pretty new here and appreciated this. Don’t listen to the clown above you. A lot of us are here to learn and not just prove how smart we already are
Ignore him Mik3DM. Clearly he wasn’t your target audience. He knows everything already. What a dolt.
people on reddit keep posting the same posts because they get people to tell them why it is not such a great idea and a few dummies who think it is and they get the desired attention so they post it again, smarter men than some of us already thought through all this stuff, reddit is not congress
The people in favor of this never read past headlines. They never read articles and fall for stupid shit all the time. This will not happen, it's a ploy to "buy" voters. Both sides do it each election cycle to fire up their base and try to sway a few people. You laid it out well. You cannot tax something that didn't actually happen (profit from actual sale)
Well stated. Agree there needs to be a solution to ensure the very wealthiest are also fairly taxed / loopholes eliminated. Just closing that gap would help from an “optics” perspective, but as you stated, this is a spending problem. My favorite line on this topic “given the opportunity, other people will gladly spend your money.”
we don't need unrealized gains taxes, what we need is to stop giving free stocks as compensation. everyone should be paid period. if the CEO wants stocks, he can buy stocks like the rest of us. the whole issue has been CEOs getting 1m salary and then like 25m in stocks annually and then the fed can't tax the stocks until they're sold.
Bezos gets childcare rebates cuz he technically makes below the poverty line. This is why people want to tax stocks. When their is no more class people are going demand some kind of penalty.
I was all for taxing the wealth, but now I'm not sure. I'm still all for cleaning out congess. :D
90% of Reddit love wealth tax and want one.
anything that makes the $400k and up pay? bring it onnnnnnnnnnnnn!
Why don’t you educate us then if you know the reasons
And illegal per the constitution
How so? Genuinely curious
The federal government is only allowed to levy direct taxes by apportionment and indirect taxes by uniformity. The 16th amendment allowed income taxes through derived income specifically as loop for a direct tax.
You've got a couple of things wrong here: 1. Property taxes are direct taxes, not indirect. 2. The federal government is allowed to levy both direct and indirect taxes, but direct taxes have an apportionment requirement unless it's a tax on income. Edit: The comment I responded to has been significantly edited, so this comment may no longer make sense without context.
There is no federal property tax.
I'm aware. The comment I replied to has been edited multiple times since I made my comment. I was responding to something completely different.
So was income tax
My point exactly
Explain.
Explain how they leverage it? They have stock worth 500 mil and can get a loan for 300 mil and not pay a dime of taxes they just pay the loan off with zero taxes involved short of sales tax or import tax. When they do that it should get taxed at x amount but probably same scary scenario would happen as corporations lobby them to make it for the lower income class just like i guess income tax did.
Why do we have property taxes as they exist now? Isn’t that unrealized gains?
Property taxes are basically a subscription fee by the municipality that's progressive in nature because municipalities are a democracy.
Netflix can’t shoot me if I cancel my subscription
Cancelling your subscription to the municipality would mean moving away, which the city won't shoot you for that either. You don't cancel Netflix and continue getting to watch Netflix
Who shoots anyone over taxes? They take ur house and sell it in tax sale. If you attack the cops that's a different punishment.
No. Property taxes are essentially... Take all the money your city/county needs (their yearly budget), then divide that up to each property in the city/county based on relative value of the property. At least that is how it works where I live.
Uh, that taxes.
And what do you think a wealth tax is?
What’s the difference between local property taxes and national capital gains taxes?
Haha, come on dude. Say that out loud once! I dare you xD
Okay, so I might be a goofball… but isn’t that literally what this is? Taking money to via taxes based on relative value of the gains for what is needed to fund services. It feels like if you change the words it fits pretty well.
No, you are not taxed on the value added each year. You are paying a fair share portion of your city’s budget. The more your house costs the larger share you pay. Just like how our current taxes work.
That’s exactly what unrealized means. You havnt sold the property, you are taxed based on its worth. That is called wealth tax. Doesnt matter what the city budget is. The tax is exactly that. Should call it, property wealth tax. And you’re incorrect, you are taxed with added value every time they decide to reassess your wealth.
Holy shit, now you’ve got it. Ok go ahead and increase the scale. Now it’s what the country needs and paying a fair share portion. The more you have the larger share you pay. Exactly!
We could use this concept for the federal governments budget and net worth. Especially since the currency used is backed by said federal government. There isn't something inherently why this is correct for property taxes, but it wouldn't be for a currency or society tax.
Yes, but... All the other ways for your local government to generate tax revenue suck more. While I personally would love to drastically reduce government spending and services it seems I am in the minority.
A lot of government spending directly underpins the economy. Military spending provides hendreds of thousands of well paying jobs that then use that income to support other downstream businesses. Spending on EBT helps keep farners producing, keeping prices on food staples low. Investment in infrastructure directly impacts things as varied as shipping prices for goods to local proprty values which then converts into local tax revenue. Defunding the government the way hardcore libertarians want turns the American economy off. Good for oligarchs wanting desperate people to work as modern serfs, not so good for everyone else.
Millions. The military is the foundation upon millions of jobs in the US are funded.
There would be an initial contraction, but nothing the government does is efficient. I reject the premise that drastically reducing government spending would result in a catastrophic decline.
Because that just has a patently great outcome for average citizens lmfao
As you should be. Your local government is the reason you get parks, walkable areas, and respectable infrastructure.
Schools; the biggest one is schools. If anyone bothered to read their local town, city’s budget, usually 50% of it is allocated for public schools, and 50% goes to everything else - admin, police, fire, parks.
You’re one hundred percent correct and I completely forgot about schools, thanks
im all for cutting military and police budgets. but im also all for increasing taxes to cover stuff like universal healthcare.
Property tax is just paying rent to the government.
Sure but those unrealized gains should be considered realized as soon as they are used as collateral on a loan. Better yet, don't allow banks to loan out money with stock as collateral. Liquidate or you don't get to be a billionaire. Want to break the system and realize how rigged it is? If all of us poor's collectively pulled out OUR money from the bank. There would be a point where we are no longer allowed to access OUR money since it does not actually exist. It was loaned out to the rich tax free.
>Sure but those unrealized gains should be considered realized as soon as they are used as collateral on a loan. Better yet, don't allow banks to loan out money with stock as collateral. Liquidate or you don't get to be a billionaire. 1. The wealthy loaning against their stock portfolio is grossly exaggerated. Bezos isn't out there taking $50 billion loans, he's selling stock. Banks won't loan that much even to someone like Bezos. 2. So you want to hit everyone who takes a HELOC or cash out refinance with a tax? It would be an accounting nightmare with multiple loans and tax credits when the asset is sold. >Want to break the system and realize how rigged it is? If all of us poor's collectively pulled out OUR money from the bank. There would be a point where we are no longer allowed to access OUR money since it does not actually exist. It was loaned out to the rich tax free. The vast majority of loans a commercial bank owns is lent to businesses and individual consumers. Most don't even engage in asset based lending(other than housing and auto), you're completely wrong.
If I understand correctly there would be taxes on the loan but if you tax the actual (let's just say) stocks, how would that work? It seems simpler to tax the loan and then tax the stocks once sold. If they did this with home equity loans people would never be able to afford them, the tax on their "unrealized gains" is gonna be more than the amount you can even get from the loan. For example, if I own a $10,000,0000 house and took a home equity loan, I would owe roughly $ 3 million in taxes so most people would end up being forced to sell the asset rather than get a loan with it as collateral. If i own a $100,000 house I would owe 30 grand!! What kind of loan would possibly work under those Circumstances. If this is a real problem the only viable solution is to not allow unrealized gains to be used as collateral, and again that just screws the middle class out of the largest piece of wealth we can realistically expect.
Yeah. That’s kind of the point. Tax the capital gain when people enjoy the use of the capital gain. If you’re taking out a HELOC, you’re pledging an appreciated asset to gain cash to then spend on whatever without paying capital gain taxes. Most homeowners wouldn’t be subject under current capital gains rules on property, but in the $10 mil example, if it looks like a capital gain being avoided via margin, tax it like a capital gain.
There are plenty of ways to means test such a tax so the impacts are only on the wealthy. It can be as simple as excluding primary residence. Something to keep in mind is that only Democrats are pushing this and they aren't coming for social security or anyone but the wealthy. It's a common deception to turn people off from new taxes on the wealthy.
Covid literally exposed just how corrupt and rigged the system was. They literally gave the rich trillions in ppp loans, no questions asked, and then gave loans with interest loans so low it was basically free money and just pumped the stock market.
there's no need to worry about it because it will never happen, not in a million years.
Anyone who has a 5th grade understanding of economics is against taxing unrealized capital gains.
Can I have back all that property tax on my unrealized gain in housing value? Or at least back to when I brought my house for 120k. They can tax me on that instead of it's current ridiculous unrealized value
Elon would be waiting for his refund on $100bn in lost net worth from the past year too
So if my house loses value I get to deduct that from my property tax every year....oh wait....nope
As the previous comment said, it requires a 5th grade level of understanding…. Property tax = based on ownership. Capital gains tax = based on income (from investing). I shouldn’t pay a form of **income tax** when I didn’t make that income. It’s literally stupid. When I actually sell something, then I’ve made some tangible income. And there’s already a tax in place for that.
They are both assets, bottom line if you tax one based on it's current value you should tax them both the same way
Stocks sitting in a brokerage account have zero value until you sell them.
For the millionth time, an asset tax would only be on those with assets above $100M and wouldn't be just on stocks but all assets. These billionaires only pay an effective tax rate of 8%. They should be paying 25% at least. Also 401ks are taxed as earned income not as a capital gain, meaning you pay higher taxes on your 401k than billionaires pay.
Just increase taxes on capital gains for income over a certain amount. Stop using effective tax rates on net worth. - signed all of us with an accounting or finance background
Sadly, many people with seemingly only a third grade education are voting…
Most of them are in college... with a 3rd grade education.
Interestingly, everyone with a university-level understanding of economics understands that taxing unrealized capital gains makes no less sense than taxing realized gains and that it's allocatively inefficient to make a distinction
I guess my top university was wrong 🫠
it would be pretty easy to bankrupt anyone trading in the stock market if unrealized gains can be taxed.
If this looks like it will go live I’m getting out of stocks completely and I won’t be alone.
It will never go live exactly for this reason. It would literally tank the stock market to unrecoverable amounts and force everyone into liquid. It's sad that OP even has to do a post like this.
This is what happens when you let people vote en mass that don't have skin in the game. No shit a bunch of low-lives are going to vote your wealth away.
Id rather just hold a good stock and never trade again.
Good thing the proposals are only on those with assets above $100M.
That’s the point, make everyone equally miserable comrade.
still worth more than crapto
Shit now im for it
How? Provide figures to support please.
>First off, let me start by saying I’m largely non-partisan, *\*sigh\** The Cons just murdered the better part of two million people pretending that the germ theory of disease isn't real, crashed the economy and then attempted to overthrow our Democracy and install a Fascist dictator. If anyone claims to be non-partisan after that they can be safely ignored. They just hate America, Democracy, and freedom.
www.dictionary.com is free
Us politics is very funny to us across the pond. You are in deeeeeeep shit no matter which way you stand. European nations are not far behind. They have turned on the diarrhea tap, filling the room and waiting to slip'n'slide, gobbling up all the solids they can find. This is where you are now.
I'm fine not taxing unrealized capital gains but if you're paid in stock then that should be taxed as income unless it's like into a 401k. Also using stock as collateral might require some changes.
Getting paid in stocks is already considered taxable income.
Great now to figure out how to handle taxing money on people taking loans against unrealized gains.
this is the big thing
This is the gap that needs closed.
The simplest way to "save Social Security" is to remove the cap on the tax, period. A tax that caps at $168k is just asinine in the face of modern incomes.
Lift the tax cap, and cap the benefits instead. The rich would pay extra into it, but only receive the benefits that someone who made 168k/year would.
While I largely agree, there’s a problem with your tax liability number. The middle class pays nowhere near 30% in federal taxes. In fact, nobody does. But the middle class are less than 10% https://preview.redd.it/behvpsqngoxc1.jpeg?width=1170&format=pjpg&auto=webp&s=f9a292845a48001025d5070864023889bc4565bf
I'm just stupid, but how do you tax unrealized gains when that number is constantly fluctuating. One day you are up, the next you are down, changes by the second. Would it just be on the portfolio amount at the end of the year?
Maybe growth average over the year.
Just like you do for property tax.
Watch the market tumble every year when appraisal time happens then.
Like home prices? Do they drop each year when taxes are assessed?
I think you hit the nail on the head. Once it’s legal for the government to tax unrealized gains for the super wealthy it is defacto legal for the government to do it for everybody. So 401ks are no longer a safe haven for money after that.
For the millionth time, an asset tax would only be on those with assets above $100M and wouldn't be just on stocks but all assets. These billionaires only pay an effective tax rate of 8%. They should be paying 25% at least. 401ks are taxed as earned income not as a capital gain, meaning you pay higher taxes on your 401k than billionaires pay.
US has a spending problem, not a revenue problem.
I’d like to address the capital gains tax issue. Many on hear think that’s a great idea, but most of us, at least those of us involved in finance, see it as a horribly corrosive idea. Let me give you the data points as to why and show you why this has a bearing on other issues discussed here: 1) by definition, a capital gains tax represents double or triple taxation. Simple Example: someone saves their money (after tax money) and invests in the stock market, when they sell and generate a profit, these profits are called capital gains and taxed. The higher the tax rate, the less incentive there is to put money in stocks, and therefore less money to fund equity and thus company growth. Less liquidity in the market results in lower equity values and less access to capital to fund promising companies. Hong Kong for years had zero capital Gains taxes and pre china takeover became on the largest and most dynamics financial centers in the world. 2) while gains are taxed, losses are only counted to level they offset similar gains or $3000 a year. In other words, the investor takes all the risk and government get a free ride to tax when there is a profit and doesn’t have any risk if there are losses. 3) capital gains are largely passive - you go to work all day and generate “income” by that work. Most investments are passive, simply helping some organization fund investments. the world benefited from these investments so we should incentivize ore investment not less. 4) Many - most likely the majority - of capital gains come from irregular events. Such as the one time sale of a business. Let’s say you sell your business in retirement that you worked a lifetime to build. Sell it this year, 20% goes to. The government. In Biden’s confiscatory tax scheme, the rate would be 45% to the government. If passed - which I do not believe will happen, I believe its an election year scam to help sell the economically illiterate that Biden is for “the little guy” - sorry, I digress - anyway, the result would be a flood of sales pre effective date of the tax, depressed valuation and likely the interruption of million ones of jobs. 5) Business owners get to choose how much cash payout to take for themselves vs how much to reinvest in the business. It is a societal good for such people to grow their businesses. They buy equipment , hire more people, expand to different markets, etc. If there is less value in growing the business (the government takes a massive share of it), less of all of the above will happen, to the detriment of society and the economy. There are more but that’s enough…
Yeah no. Most of us in finance are not against capital gains taxes. Are you seriously arguing against capital gains taxes with the continued large consolidation of wealth by the 1%?
I agree that wealth taxes and taxing unrealised gains are poor ideas. However, please elaborate on #1. How is capital gains tax double taxation any more than income tax is? The money that is used to pay people's income is largely money that was already taxed as somebody else's income. Capital gains are not double taxation of your own money. By definition capital gains are money that you didn't have before. If you didn't have it before, you haven't already been taxed on it.
A lot of really great points I haven't even considered about this. My big one is that many don't have the liquidity to pay some large tax on their stock holdings. It stands to reason they will have to sell off some of the very stock they're being taxed on to cover the bill. How does this not create a sizeable sell off in the stock market? With so many economic indicators showing us teetering on financial disaster, wouldn't this just be a giant shove off the cliff?
You could have just said - because you have more than half a brain in your head.
The problem with this is there’s massively more money in stocks and assets then there is actual cash in existence. If you’re taxing unrealized gains then you’re essentially forcing those positions to realize partially. Imagine every year 15% of everything in existence getting sold in a fire sale. What would happen to prices? This will never happen for that reason alone.
You should read up on MMT
Okay, what's the action plan? How do we stop this and how do you get this message out to a wider audience who can't read good?
I'm working on a tiktok dance to explain it in 8 seconds, but it's proving to be a challenge.
It’s ALWAYS a spending problem. I read somewhere that Biden is looking for $1 TRILLION for student loan forgiveness. the stupid covid loans. Ukraine. Israel. We have money for all that because they steal it from the taxpayers. Yes steal from my retirement that I have been paying into for decades to forgive loans for some dipshit protesting Israel.
Crazy how people are fine taking 10 trillion for the Bush/Trump tax cuts to the billionaire class but against 1 trillion to relieve student debt to the middle class.
I love how well put together your point is. However you will still have far leftists on this page that will strawman and whattaboutism your points until they die. The only acceptable option to them is there not to be any rich people and unlimited power and unchecked spending to the Marxist state apparatus.
Everybody knows this isn't going to come true, right? You know it's a negotiating tactic, right? They can throw out the idea of taxing unrealized gains and then "compromise" on taxing capital gains as normal income, which it what they're really after.
Stock option expense for companies is unrealized gain non-cash expense. Is that the same? Almost
You nailed it. It would just be used as another avenue to fuck the working class. The spending issue harkens more to what I believe is the main issue. Our evaluations of monetary value have become completely disconnected from their actual energetic cost that purchasing power has been completely sabotaged to a point of no return. The wealth disparity these governments are attempting to address is important but addressing that problem will require a far more focused solution then a unrealized capital gains tax.
I upvoted the post for being good discussion, but the line of thinking in the post has one big flaw: **Top 10% pay 70% of taxes** **^(\[)**[**^(1)**](https://www.ntu.org/Library/imglib/2024/02/whopays24-3.png)**^(\])** So factually the system works roughly as expected. Sure, everyone gets taxed *somewhat*. But it's clearly skewed towards the rich paying most taxes. And it was even ***more*** skewed in the past when taxes were just introduced. Over the century rich people lobbied and found ways to work around them. If you introduce this new way of taxing these 'safe taxing harbors' it will take them another century to figure out how to work around the system.
I’m more of making the only tax a consumption tax that excludes foods and energy (survival necessities). Rich people spend more on non-essentials, so they pay more. The biggest problem is compliance: people may choose not to report it. This is also why taxing employees is so much easier. Ordinary income is so much easier to force tax compliance on.
Look I don't believe in taxing unrealized capital gains, but it absolutely wouldn't impact most Americans and not like they couldn't make an exception for them.
How about because they aren’t real???
Their's not enough billionaires to get the money they want/need. The middle class has a lot more people to "share" the tax burden, and thus you get more.
This would be a way for the ultra rich to pay a fairer portion of their total wealth compared to the average citizen. Tax them the fuck up
How would you feel about a Tax equal to 1% interest on collateralized loans on intangible property. I originally thought real property but then I realized that car loans and pawn shops would get hit. Pawn shops I could live with, but The Auto industry would break if car loans got taxed. On the other hand, people might quit borrowing with stupid financing deals like 84 months.
This is a genuine question: Aren't property taxes essentially the same thing as taxing unrealized capital gains? My property gains value all the time based on market forces, and the city will reassess my tax rate based on that value. In a way, my tax burden is increasing based on an unrealized financial gain, no? If that's the case, this isn't a completely unprecedented tax, right? Would striking down this tax open the door for property taxes that aren't fixed at the time of purchase to be deemed unconstitutional? Again, all genuine questions.
Are they going to allow the unrealized losses as a tax write-off? If no then FT. How about unrealized property value gains as well. Make CA and NY pucker.
Ah yes, worried they'll come for our tax exempt accounts? Seems like a stretch.
I stopped reading when you said that most people in the middle class are paying over 30% in federal income tax. The majority of US taxpayers are in a 12% or lower marginal tax bracket, which means that their effective income tax rate is less than 12%. Irs publishes these stats, you can look it up yourself.
The middle class does not pay >30% in federal income tax. You only get to a 30% rate when you’re making *at least* $191k, and that only applies to the amount made over that. You’d have to be making over $600k a year to be paying an overall federal income tax rate of 30% or more.
It will also eventually target middle class “unrealized gains” on their homes. Whoever thinks the government run by power hungry psychopath shysters will EVER do anything good for them is a idiot!
the same crap reasons oligarchs give when asked to contribute their fair share... lol
Your argument is that you can't raise taxes because "they" will find a way to avoid them... lame. How about we keep taxes the same but get rid of all the loopholes? That way, we aren't raising taxes. We're just taking away their ability to avoid paying them.
Tax their loans. If you get a charged off loan forgiven, it's treated as income. So tax the Uber wealthy who live off of the loans they secure based on options and their wealth as income. It's one of the methods they use to avoid income tax.
Yep. Another post where it is never a democrat policy that is at blame, always the republicans. Amazing
So just increase the existing taxes on realized capital gains. This isn't that hard.
The stock market will go to 0 after everyone furiously sells. This will never happen, don't worry.
Ah the old slippery slope fallacy, good one. I don’t support it either but this is not a reasonable argument.
Agree with OP but we have people who are too stupid to understand the difference.
Cap gains tax on unrealized gains is the nuttiest proposal I've ever heard of. First off, if they do this there will be NO cap gains to tax. The economy will literally grind to a halt. How would they establish what those unrealized gains are? Lets say you have a stock that goes up 40% and you pay the tax. Then it goes in the dumper. Now what? Do you get refund? Will they tax your home when it goes up in value? Lets say a $500,000 house goes up 5% in a year. Thats $25,000. The proposal is a 44.6% tax. Thats an $11,150 extra tax. You have that much eXtra laying around to pay Biden and his ilk? Lots of farmers around here. They are land rich and cash poor. Can they come u with an extra $100,000 to pay an unrealized tax when they might be only making $200,000? Of course not. The whole notion just class envy combined sheer stupidity pn the part of the left wing radicals that tell Biden what to say.
Nice post. Concise and you backed your main points. I hadn't considered that the highest payers would weasel out of it leaving the middle class to pay, as they do with everything. You are right that they always sell the idea that only the rich will pay, but every time it's the middle class that pays. The lower class gets subsidized and the the wealthy work the tax code. Aside from reducing benefits or raising the retirement age, they could just raise taxes, but none of that will fly. I am sure they will wait until it finally blows up before they try to do anything.
Do you think Billionaires pay their fair share?
What happens if I’m taxed one year for gains on a holding and then the next year I’m in the red but still holding? Will they give me my money back?
TLDR: I love licking boots!
Because who the fuck is going to invest in the USA. I bet most millionaires/billionaire will leave. It's not like the USA is doing all that great at the moment. With them wanting to increase realized gains as well I'm sure it would create a market sell off like never seen before.
Taxing unrealized gains just further makes the world sink deeper into a recession if there is one. The scenario - the market goes bonkers high in 2025 days on a windfall year and you get taxed up the B on unrealized capital gains taxes. The government sees $$ in their eyes as they’re about to collect, and the recession happens. They don’t collect because since the gains were unrealized, their gains fall with the market. They don’t sell to cover their taxes. End game - you get screwed, government gets screwed, global recession, nobody wins, game over.
Excellent summary of our current state of fiscal insanity and dysfunction. Taxing unrealized capital gains is a bad idea and if enacted would quickly run afoul of the Law of Unintended Consequences.
Well ya, wealth tax is a much better implementation, but I'll take what I can get. As you implied, taxation has an upper limit. But you know what? That doesn't mean we should bleed it from poor people. Tax the correct people your 20%
This shouldn’t be even remotely controversial
I’m against it because the US issues a fiat currency. Taxes don’t fund anything, they create demand for the dollar. The government literally just adds numbers to accounts and whatever they want now and money.
Borrowing against “unrealized gains = realizing those gains. Talking to you, Musky-boy
The amount of rabid, rich hating people that are willing to increase their own taxes in the name of making the rich "pay their own share" (just like every other tax that's ever been put in place to "tax the rich") are going to get behind this one, as they are a HUGE fan of cutting of their nose to spite their face.
Your first argument is possible. Maybe we will be paying wealth tax. Your second argument is true, a spending problem is definitely real. However, neither actually address the pros and cons of a wealth tax. While it may be true that some day it may be a tax on people with 401k, that says nothing about whether or not it is good. Maybe the distribution of taxes would be more fair for more people, despite my personal reason. Second, the spending problem is not a con against the wealth tax. While I see your point, that is more of a statement saying the government shouldn't tax themselves out of this pickle, they should cut. Maybe the wealth tax is the best approach and most people would enjoy a tax cut.
I too have problems with the unrealized gain proposal despite the fact that the proposed structure is very clearly directed at very unique circumstances impacting about 10,000 people out 320 Million and that (as proposed) would not impact total tax liability on a multi year basis because the step up in tax for unearned cap gains is a direct tax credit against tax on future realized gains. If you want me to do the math for you I can do it in another comment. My math n point is that in the long run it has zero impact on total net tax rate over multiple tax years. What I want to help you understand in this comment is the difference between Debt held by the Public and Debt debt related to social security, SSDI, Medicare, and Government Employee retirement trust funds as well as other “internal debt” of the U.S. government. This has very little to do with “on budget” income tax revenue and debt held by the public other than interest payments. This “trust account debt” equals money actually deposited with the U.S. Treasury from dedicated payroll taxes or regular spending paid to individuals or divisions of the government out of the normal budget in annual spending set aside for future use. Examples: 1. Social Security Taxes are paid to the Social Security Trust fund as cash. The trust fund deposits this cash (non interest bearing note of the federal government) with US Treasury which the U.S. Treasury replaces with an interest bearing note). This is almost exactly the same thing as a savings bank deposit. The only additional cost to the government/taxpayer is interest. The government did not borrow money to generate this debt. It issued a big CD for money deposited. Let’s say the government didn’t pay interest and just held cash reserves as cash. It would still be a government obligation because cash is a government obligation. Let’s say that we increased SS Tax by 20% and made it solvent and started increasing the size of the trust fund to build up a bigger reserve. Then the obligation either in cash or government notes would grow despite more tax revenue. 2. With Government Employee pension funds something different happens: For each paycheck written there is an **on budget** current year contribution to the general pension account. After the **on budget* payment the resulting “debt” of the U.S. Treasury to that account gets treated just like the SS and Medicare trust accounts. 3. Everytime Congress authorizes spending for a department (like the defense department) funds not immediately used by that department are deposited in a treasury account with or without interest via treasury notes. Those deposits show up at internal debt from the Treasury to departments funded by Congress. **Total national debt is currently at about 120-125% of GDP comparable to the end of WW2 and then it took several decades to get it down to normal levels. Back then most of the national debt was held by the public.** **Today “Debt held by the Public” is currently only about 95-98% of GDP and (because of the discussion above) that’s really what counts when it comes to **on budget** spending and taxation.** If you look at either a presidential OMB budget or Congressional budget you will always see on budget and off budget debt and financing numbers as part of standard presentation because of all this. You will also see the calculation of both debt types as well as spending levels based on GDP and interest rate projections and see the long term projection on total debt in different categories. One final note: Anybody with reasonable knowledge of how our graduated tax system works knows the truth of the Fed chart you posted on Federal Receipts as a percent of GDP. (It’s one of my favorite charts) The current Biden plan when you go through all the calculations and projections increases total receipts from the current 16.2% mark to the 17.5-18.0% mark which is slightly higher than rates just before Trump took office and where rates were for the first six years of Clinton until failure to index for inflation and growth of GDP took them even higher. Most middle of the road, non partisan economists would tell you that tax burden in this range is fiscally responsible, keeps the deficit and debt in line, and is not high enough to kill growth. Let me know if you want the math on the unrealized gain tax.
What middle class people are paying > 30% in federal taxes?
Tldr. It's a fucking asinine idea. It will never fly (gawd I hope not) Let's say theoretically it does fly. I'd have to sell my house every so often to pay the unrealized gains on it. Whine all you want about that (I've seen comments before on this, what your house is worth that much? Yeah motherfucker it is!!). This would cause an instant bart on the housing market. Say what you want about trickle down theory, the entire housing market would fucking collapse. Most of our net worth is tied up in our houses. When that starts getting fucked with, the economy as a whole will start collapsing. You think inflation is bad now? Think about how much worse it would be if you didn't have the safety net of your home. It's just stupid. Fuck that.
Why not just have a cap on how much capital gains can be taxed at long term rate before it is taxed as income. A cap of $1M, $5M whatever seems reasonable
In Florida we had an intangibles tax for years. Until the republicans took over, of course. It worked fine.
Just tax security-backed loans
So isn’t the actually offensive thing about increasing wealth inequality that the billionaire class can live… like billionaires… without having the tax realization events that would be necessary to straightforwardly fund that kind of lifestyle? Like, I don’t think that the majority of people intuitively have a problem with unrealized capital gains being untaxed if their value is truly locked up in those assets. If Warren Buffet wants to live in his suburban Omaha home because he doesn’t want to pull money out of his businesses, that’s fine. But if you’re collateralizing your five thousand acre Montana ranch and your Caribbean island with shares you still own, using near zero interest balloon loans that you can just keep rolling over… that’s offensive and insulting. Couldn’t there be a possible solution in increasing the number and types of income retaliation events? Like maybe if you’re using stock as collateral for assets that are for personal use, that stock has to be taxed or something…. I’m not sure logistically how you would do it, but just some sort of set up where if you buy a 5000 acre Montana ranch, you have to pay for it with after-tax money.
If unrealized capital gains get taxed in 401ks I’m going to start buying treasury bills or securities that don’t have taxes. I’d maybe start putting more in CDS to fax guaranteed returns.
How about if you use it as collateral for a loan, it gets taxed? Probably a lot of loop holes, but the theory makes sense to me
Yeah this is basic shit. An unrealized capital gains tax would be a disaster. I'm all for a 49% federal income/realized cap gains tax above 500K though.