You'd end up with a system where volatile companies have their investors taxed more than non-volatile ones (as fluctuations create unrealized gains during snapshot periods such as end of year, despite reverting back to the mean afterwards).
Is there a reason why investors should be taxed more for increased volatility? Should one lose their wealth to taxation more aggressively based on the degree of the stock fluctuations?
P.S.: We shouldn't mix in general wealth vs income taxation. Paul Graham wrote an insightful article explaining the fundamental difference of outcomes between them - http://www.paulgraham.com/wtax.html .
This is a red herring because taxation doesn't need to happen annually. Many wealth tax proposals focus exclusively on gift+inheritance intergenerational wealth transfers. Anyone in favor of un-earned wealth transfers from parent to child should also be in favor of taxing the rich more to feed, clothe, and house the poor.
But I don’t care about the poor, I care about my children, and I want to pass my wealth on to people I care about.
Ah, well, that's definitely a position.
In the long run it absolutely is. People wouldn't care about this if all the wealth went back to the poor after each billionaire dies.
> An inheritance tax is quite a different thing than a wealth tax.
What do you think is being inherited?
I assume you mean because he'd have to liquidate profitable shares in order to cover his taxes?
If the concern is the attachment of profit-sharing to control, we already have profit-sharing non-voting shares and non-profit-sharing voting shares. The necessary division for maintaining ownership while preventing infinite untaxed wealth accumulation already exists.
So it seems to me, then, that taxing unrealized gains only equates to giving up shares in your company in the same way that taxing income equates to giving up shares in your bank account. Do the taxes cost you future return/interest? Yes. And?