Suppose there is a company with 200 shares, half of which you own. The last trade price was $1 per share, meaning you have $100. But you can't necessarily dump your shares for $100 because the $1 was based off the last trade. So on the margin you can sell a share for $1, but you won't necessarily be able to sell all 100 shares for $100.
Imagine you own a home that went from being worth $1 million to $2 million. Did you MAKE $1 million? Should you pay taxes on that delta as soon as the home's value became $2 million? It makes more sense to wait until you sell it and pay taxes on the net you made. Otherwise it's more complicated and you could end up paying taxes on $1 million when you end up selling it for a lot less. You could have a tax credit I guess but you're unlikely to have the IRS cut you a check for the money you paid that turned out to never be actualized.
Most proposals to tax giant piles of wealth in the market look nothing like what you've described. A wealth tax is more like: pay 1% per year on the current market value of your portfolio, if that amount is over $100 million.
Money attracts money. Wealth taxes are an attempt for reverse that effect and force some of that money to trickle down.
That said, any attempt to implement a wealth tax will probably be struck down as unconstitutional because moneyed interests want it to be declared so.
Wealth tax is different and I think it makes more sense compared to unrealized capital gains. But its not true no one is proposing an unrealized capital gains tax
> Biden’s fiscal 2023 budget request released Monday would impose a 20% minimum tax on the unrealized capital gains for households worth at least $100 million.
https://www.bloomberg.com/news/articles/2022-03-28/manchin-p...
Wealth is closely correlated enough to power that it's worth encouraging people to turn those on-paper gains into liquid forms - even if only to avoid "losing" if the stock then slides back from 100 -> 50. Especially since he can leverage it to spend in other ways!
To me, taxing wealth and only wealth seems like the most straightforward route to a truly progressive tax system. That’s not to say it’s simple or straightforward in an absolute sense, but neither is taxing income, is it?
At a high level, taxing wealth instead of income or transactions ensures that rich people are paying their share, while maximizing upward mobility so that people can become rich more easily. Think about how much easier it would be to become wealthy without income taxes, sales taxes, property taxes, taxes on corporate profits, etc. etc.
This is what we should optimize for imho: making it as easy as possible to become wealthy. Sure, there details to figure out, as with any approach, and maybe some rich people will face some difficult choices or be forced to sell assets; I’m ok with that and it seems well worth the tradeoff.
Pair it with a hefty pigeuvian carbon tax and you could probably do away with income taxes entirely.
(A nondistortionary VAT to replace sales taxes and corporate income taxes would be nice as well.)
Nobody disputes that it’s a nice idea to make life easier for the poor. The mechanics of how you actually do it are the hard part.
The funny thing is that hoards of people will come to defend a rich dude who really doesn't need it while poor people constantly get fucked over and could use a little bit of defending.
One improvement could be to just have a higher tax bracket (like the US had decades ago) and build more stuff for the common good. What doesn't help is that from my side of the big pond, the US sounds like a third world country if you are below middle-class. Can't judge if that is true for myself, but hey.
I don’t know if that’s a fair characterization generally, but it’s not the case with me and it’s actually a frustration/lament I have when discussing this topic.
I’m not particularly a fan of Musk or any of the current crop of billionaires or their companies. But I care about the principles and the practicalities.
There’s this tendency to say “There are terrible problems in the world. We need to fix them with money. Where can we get money from? Billionaires!”
But when you do the maths, i.e., total up all the wealth that billionaires have and divide it by all the people/causes in the world who “need more money”, you end up with basically nothing.
And that’s before you consider what the billionaires’ companies are doing - which in many cases involves things like making phones/goods/software/knowledge cheaper/free, which benefits everyone including poor people, making electric cars affordable and ubiquitous, which will benefit all humanity and the environment long into the future if it leads to climate change abatement, and creating millions of jobs including many for low-skilled people, and also that these companies do generate vast amounts of tax in the form of sales taxes, income/payroll taxes, and capital gains taxes when shareholders liquidate their shares, and you find that it’s not necessarily true that taking money away from these companies/owners would be net beneficial for society anyway; it could easily make the problems worse.
And now for the obligatory disclaimer - yes I know there are plenty of valid concerns about the merits and ethics of what companies do, and worker pay/conditions and externalities and other issues; but these are matters for regulators and consumers to consider and are separate from the principle of how billionaires should be taxed or how beneficial it would be for billionaires to be taxed more.
I’m also not in the U.S., and I see plenty of dysfunction in that country as well as many others - though we also see many people, including some of the world’s poorest people desperate to move there for a better life.
For what it’s worth I devote a large number of my brain cycles to contemplating how life could be better for the worst-off; I’ve spent much of my adult life dealing with health challenges that caused great difficulty in achieving steady employment and financial security, which I’ve now largely overcome, and do I think a lot about how the principles that helped me could be applied more broadly, including for people far worse off that I ever was. At this stage I find myself thinking there are certain things that could work, but a lot of it is just really really hard.
I imagine there’s a reason people feel more comfortable lending to Elon than to people with a smaller amount of assets, and that it’s not “lol fuck poor people”.
High level, it closes a financial engineering loophole (buy, borrow, die [1]). The taxable event is when you get liquid, and a loan is liquidity. The tax code requires a patch, that’s all.
I agree buy, borrow, die is a problem but the “weird” feature of tax law that makes that possible is the step up in basis. (Getting rid of that has its own challenges I’m sure.)
My issue with the whole "Elon has to pay taxes" thing is that there are loads of people (fans?) fighting over why he shouldn't have to. It's the richest dude in the world, he really doesn't need defending for everyday people.
I also like the cool stuff he does, don't like the non-cool stuff he does, as I do with a lot of people really
When those bits of stock bits are then transferred to ordinary people, they would be entitled to a bit of the dividends of eventually all companies.
Not thought this all the way through and I'm very much not an economist, so there are lots of impracticalities.
In a way, it's the opposite of 'cease the means of production': distribute the 'means' of capitalism.
What you are talking about is reputation and it will always be a part of the dynamic. It happens at the poverty level too. In any poor community there are people you trust and people you don't.
They do it with homes all of the time, what are you talking about?
Of course, this tax increase could be offset by also allowing unrealized losses to act as a tax deduction.
Should the 1st tweet NFT be taxed at its last sale price? The recent failed bid price?
Did you only read the first line of my comment? I specifically said that unrealized losses should also be a tax deduction.
If you are stock-rich and you can buy stuff on the collateral for that: normal people can't really do that. Ordinary people have a much harder time buying more stuff than they have the cash for. Or at least on worse terms when they do take out a loan.
Being rich is cheaper than being poor. Is it really so awful to change that?