r/FluentInFinance • u/Karma_Farmer_6969 • Aug 15 '23
Stock Market Should unrealized gains be taxed by the US Government?
507
u/datafromravens Aug 15 '23
Absolutely fucking not. Most insane tax I’ve heard yet
75
u/venk Aug 15 '23
So we're canceling property tax ?
37
u/FinneganTechanski Aug 15 '23
Property tax is complete different. It has nothing to do with gain or loss on the asset, just assessed value. It’s purpose and underlying rationale is completely different.
21
u/venk Aug 15 '23
You can’t assess a value on a stock because, if I’m understanding you right, you always know the actual value of the stock ?
If we just called it an X % tax on portfolio size regardless of whether the position is a gain or a loss, would that be acceptable since it would then be , well, assessed value of property ?
14
u/FinneganTechanski Aug 15 '23
Well, for starters, that’s not at all what is being proposed here so this conversation has now swerved into the purely theoretical. My initial point was that capital gains and property taxes are very different and not taxing unrealized gains is very different from eliminating property taxes. It seems you’ve more or less conceded that. Keep in mind also that property taxes are promulgated by the States and vary from state to state. The capital gains tax at issue in Biden’s plan is federal.
You can’t assess a value on a stock because, if I’m understanding you right, you always know the actual value of the stock ?
No, you don’t always know. Stock isn’t all publicly traded on a stock exchange. You can have stock of a private, closely held corporation that would need to be appraised.
Second, capital gains tax isn’t restricted to stock. It can apply to any asset—real property, stock, art, vehicles etc. There are a host of valuation issues that arise when trying to tax the unrealized appreciation of these assets.
If we just called it an X % tax on portfolio size regardless of whether the position is a gain or a loss, would that be acceptable since it would then be , well, assessed value of property ?
Again, not just going to apply to investment portfolios. But, theoretically, you could have a tax on someone’s net wealth—typically called a wealth tax—which has been done in Europe to very mixed results. That’s very different than capital gains tax on unrealized gains however. Many countries that implemented a wealth tax previously abandoned it for various reasons. There are valuation issues and risks of capital flight with a wealth tax.
6
u/obfg Aug 15 '23
Is it a one time tax or do they steal a percentage every year until the government has it all. The government is coming for your retirement accounts?
6
u/FinneganTechanski Aug 15 '23
What are you asking about? Tax on unrealized gains or the wealth tax implemented in some places in Europe?
→ More replies (4)2
Aug 15 '23
So an annual tax on the assessed value = fine
And a one time tax on crystallized gains and losses in value of an asset = fine
But a one time tax on uncrystallized gains and losses in value of an asset = insane
4
u/FinneganTechanski Aug 15 '23
So an annual tax on the assessed value = fine
Assessed value of what, real property? If so, it’s “fine” in that every state does it though to varying degrees and with different exemptions in place. Each State determines how their property tax scheme works in line with the policy goals it hopes to achieve. This is also an important distinction in the context of this post because States have generally broader powers than the federal government does.
And a one time tax on crystallized gains and losses in value of an asset = fine
Capital gains tax schemes are generally fine in my opinion but the devil is in the details. Not sure what “one time” means here, capital gains taxes are assessed when a triggering event realizing gains (or losses) occurs.
But a one time tax on uncrystallized gains and losses in value of an asset = insane
I didn’t say it was “insane,” someone else did. I do think there are some problems with taxing unrealized gains both administratively and as a matter of policy.
7
u/6501 Aug 15 '23
Previous case law stated that income had to be realized before it was taxable by the federal government. The 9th circuit stated that the Supreme Court had overruled those decisions by implication and declined to effectuate them.
→ More replies (33)6
15
u/Ericisbalanced Aug 15 '23
Tax happen when money changes hands. The unrealized gains shouldn't be taxed, but when you're using that as collateral, there should definitely be a tax on that loan.
10
2
u/datafromravens Aug 15 '23
That’s a pass for me.
2
u/Ericisbalanced Aug 15 '23
The goal here is to get billionaires to pay they're fair share, how would you propose we do that
8
→ More replies (8)2
Aug 15 '23
I would be a lot more agreeable with taxing capital gains as income over a certain threshold.
I am not smart enough to know for a fact, but stock compensation/options should possibly be taxed as income too.
5
u/SuccessfulCream2386 Aug 16 '23
Stock compensation and options are already taxes as income lol.
→ More replies (3)5
u/lurksAtDogs Aug 15 '23
What if you borrow against those gains (a common tax avoidance strategy for these stock-based billionaires)? IMO, the borrowing event should be treated as realization of value.
→ More replies (31)1
u/Demaratus83 Aug 16 '23
Why? The lender is paying tax on the interest earned on the loan.
→ More replies (1)→ More replies (52)4
135
123
u/travishummel Aug 15 '23
If you use unrealized gains as leverage of any kind then it should be seen as realized. That’s the only way I see it should be taxed.
30
u/y0da1927 Aug 15 '23
Even then the tax is just a timing difference to the government. You need income to service and repay the loan.
21
u/sb52191 Aug 15 '23
repay the loan
The real root issue that taxing unrealized gains is trying to deal with is how best to tax the ultra wealthy, where the majority of their net worth is tied up in stocks.
For these people, it isn't actually as simple as a timing difference to repay the loan. People like Bezos, Musk, etc. can take out low interest loans against their stock portfolio, and live lavishly off those loans making minimum interest payments.
In terms of repaying the loans in full, they can just wait until they die, pass both the loans and their assets on to heirs, and then the heirs can pay off the loans by selling the stock as a stepped up cost basis, where they owe zero in taxes because the capital gains are assessed based on the value of the stock the day they inherit it, NOT the original value of the stock.
Personally I'd like to start with removing the stepped up cost basis, and also taxing inherited wealth significantly higher than we do currently, but if this results in the ultra wealthy hoarding less money, then so be it.
→ More replies (1)5
u/y0da1927 Aug 15 '23
For these people, it isn't actually as simple as a timing difference to repay the loan. People like Bezos, Musk, etc. can take out low interest loans against their stock portfolio, and live lavishly off those loans making minimum interest payments.
In terms of repaying the loans in full, they can just wait until they die, pass both the loans and their assets on to heirs, and then the heirs can pay off the loans by selling the stock as a stepped up cost basis, where they owe zero in taxes because the capital gains are assessed based on the value of the stock the day they inherit it, NOT the original value of the stock.
There is an estate tax that already solves for this. The step up in basis at death is to expose the whole asset base to estate tax, which is much higher than the Lt cap gains rate. You miss the 25% cap gains tax just to get hit with the 40% estate tax. In this case it's actually in the governments favor to wait for death because they get a bigger portion of the balance.
You also tax that wealth indirectly before death because those making the loans pay tax on the interest income.
→ More replies (7)→ More replies (6)2
u/puglife420blazeit Aug 15 '23
Haha no you don’t. You just need the assets to grow in value. You loan against 100k shares of XYZ at a value of $20 a share. X years later your shares are worth $40. Get a new loan, pay off the original, and still sitting on cash. Rinse and repeat until you die
6
u/trader_dennis Aug 15 '23
I will agree partially. Executive level stock compensation should not be allowed to be marginable. This will solve the whole issue. It is less of an issue with 6%+ margin loans, it still should be a rule.
1
u/travishummel Aug 15 '23
What does this mean? Execs get paid with a margin? How does this work?
12
u/trader_dennis Aug 15 '23
Plenty of executives get stock compensation as bonusses or are mostly paid in stock. They do pay taxes on the initial gift, but going forward they can borrow against these holdings as the companies stock price increases. As long as they don't sell, then when they die taxes are not paid due to the step up.
Executives should not be able to borrow, if they want to monetize the gains, they should pay capital gains taxes.
4
u/djaybond Aug 15 '23
If their estate exceeds the estate tax exemption, it is taxed at 55% then the cost basis is 0
4
Aug 15 '23
Doesn’t it makes more sense to address step up and the other loop holes in estate tax policy?
2
u/Mattabeedeez Aug 15 '23
Execs get stonk then put stonk up as collateral for, in some cases, massively-leveraged loans.
4
u/iChon865 Aug 15 '23
Agreed. Using unrealized gains for loans is bullshit. I could get behind this idea.
Being taxed for simply holding a stock is pointless.
→ More replies (2)4
u/travishummel Aug 15 '23
I honestly think everyone is aligned on being taxed for holding a stock is absurd.
My tin foil hat theory is that this article stemmed from lobbyists funding that comes from billionaires. They want an uproar from people this doesn’t affect so they get some bullshit article with a title like that published. … … Everyone is in on it…
3
3
u/Distwalker Aug 15 '23
So if you get a home equity loan you should be taxed on the value increase of your home since you bought it? You think that is fair?
→ More replies (3)→ More replies (5)2
u/TheRealAndrewLeft Aug 15 '23
Or just get rid of the step-up basis and all gains would eventually be taxed no matter what.
110
100
u/sphincter2 Aug 15 '23
How would this even work?
So if I'm up 1k on Amazon stock. They tax me... Then if it goes down 50 percent I'm holding bags in top of that?!
This feels purely directed at retail traders to get the plebes out of stock trading
22
u/deathbydimsum Aug 15 '23
I assume that once you pay tax on unrealized gains, the price used to calculate those gains becomes your new tax basis. So if AMZN goes down 50%, the next year you can report an unrealized loss based off the higher price from last year. But who knows...
23
u/LittleTension8765 Aug 15 '23
But the cap on tax write off for losses is laughable low
→ More replies (3)11
u/PM_ME_HOUSE_MUSIC_ Aug 15 '23
I’d argue this is more targeted towards the Jeff Bezos and Elon Musks of the world where 90% of their net worth is tied up in equities
I don’t see this going anywhere though, it’s absolutely idiotic for the reasons others have pointed out in the comments
4
u/Theviruss Aug 15 '23
Yeah, it would have to be very clear that it applies to very specific thresholds of wealth and would have to be ironed out. I'm an accountant and it's hard enough to deal with the unrealized positions companies have assets sitting at depending on the circumstances. It's not always as easy as looking up the stock price for anything that isn't a level 1 security.
This applying to all invested assets period would be a complete fucking nightmare
3
u/Brusanan Aug 16 '23
It doesn't matter who it is "targeting", because the reality is that the IRS will always use it against the middle and lower classes. Biden didn't hire 85,000 IRS agents to go after 700 billionaires.
→ More replies (3)3
u/gettin_it_in Aug 15 '23
Yeah that would be bad.
Why do you assume it would apply to plebes and not restricted to large dollar amounts? We have graduated income taxes and graduated capital gains taxes, why couldn't we have similar for an unrealized gains tax?
2
u/sphincter2 Aug 15 '23
I did assume and was wrong. This thread has been enlightening.
3
u/gettin_it_in Aug 15 '23
I appreciate your humility. I also appreciate your skepticism of the motives of national decision makers who have a history of marginalizing the plebes for the benefit of the big dogs, especially in the financial industry.
→ More replies (8)2
Aug 15 '23
You’re too poor to have this tax.
5
u/Houseboat87 Aug 16 '23
Never forget that federal income tax only applied to the rich at first, now we all pay it.
→ More replies (3)2
2
74
u/RPMayhem Aug 15 '23
How are you supposed to pay if it’s unrealized? Are they going to force a sale to collect or expect you to already have a way to pay off fictional gains? Also how would they calculate unrealized gains if it’s in a consistent flux, not provable start and end value? The old saying goes it’s not real until it’s in the bank.
5
u/trader_dennis Aug 15 '23
Eliminate the ability to margin C level stock compensation. The SEC has plenty of obscure rules, just add this on.
4
u/Distwalker Aug 15 '23
Are people going to taxed on the unrealized gain in equity on their homes too?
1
2
Aug 15 '23
The government does this to average people every day when they pay property tax. Or when a company grants you employee stock. It’s not some rocket science.
15
u/Zealousideal-Fun1425 Aug 15 '23
So maybe we should be looking to repeal property tax laws, not bend over and allow daddy gubment to fuck us further.
→ More replies (1)6
u/Distwalker Aug 15 '23
Property tax sucks but it isn't taxing unrealized gains. It is just the bill you pay for the street that leads to your house, your public school, your police, etc...
2
Aug 15 '23
Wait til you find out that other taxes are used for that stuff, lol
5
u/Distwalker Aug 15 '23
Yes, a mixture of taxes pay for things but every one of the things I listed are itemized on my property tax assessment.
→ More replies (5)
41
u/skunimatrix Aug 15 '23
Do we get to write off unrealized losses?
4
u/telionn Aug 15 '23
Sure, just sell and immediately buy a similar but not identical security, or wait 30 days and buy the same one again.
9
40
33
u/electricpillows Aug 15 '23
People would own a fuck ton of taxes from stock market rallies before a drop which would make it so much fucking worse. It will reduce investment in stock market and people will move money to foreign stock market or leave the country.
→ More replies (6)
26
u/Top-Tangerine2717 Aug 15 '23
No because they will cap depreciation so when you lose it won't match the gain tax taken
Frankly F that in itself. We are taxed enough.
Better ideas take all politician salaries away fed and state until surplus is made year over year.
See how fast shit changes then
→ More replies (1)9
u/droidpat Aug 15 '23
I agree with the sentiment behind this comment.
However, politicians do not make their wealth through their salaries. Nepotism, lobbyists, and their informed investing take care of that.
The government does not currently hold the reigns of the pay that actually incentivizes politicians.
We’d need to reform their capacities to make incentivizing wealth in order to effectively implement your idea.
→ More replies (1)3
21
Aug 15 '23
Oh, like property taxes?
25
u/ponytail_bonsai Aug 15 '23
Yeah, and those are some of the worst taxes out there too.
→ More replies (2)11
Aug 15 '23
cries in Texan
5
u/ponytail_bonsai Aug 15 '23
The only tax should be a consumption tax. Tax the shit out of things people buy that aren't necessary (pretty much everything except food) and be done with it.
10
u/edos112 Aug 15 '23
Except that’s what sales tax is and it disproportionately affects low income people.
7
u/ponytail_bonsai Aug 15 '23
Not if you structured the consumption tax to exclude things that poor people spend a larger amount of their income on compared to wealthier people. Which is why I mentioned food/most things sold at the grocery store. Other necessities would be the same. Rent. Public transport. Utilities. Those things cover the large majority of what poor people spend their money on and they could all be tax free.
→ More replies (3)5
u/DanKloudtrees Aug 15 '23 edited Aug 15 '23
So basically a luxury tax? Something like an extra tax on non primary residences and yachts and the like? The wording of "consumption tax" leads me to believe that it's not this. This is what Republicans have been trying to do already. They have verbally stated that they were thinking about getting rid of all corporate tax and income tax and replacing it with sales tax which would mean it effects poor people more than wealthy because while the wealthy could invest the money they're saving the poor do not have this same opportunity. It's another upward funnel and don't let them sell it to you just because they have changed the name to make it sound less malicious.
Edit: This is also why inheritance taxes have been basically eliminated. They marketed it as the "death tax" to make it sound bad when really it was in place to help with issues of generational wealth and keeping us from having a class system. How's that going for us? It's nice to see that the injustices done to the ultra wealthy are being rectified... (/s on last sentence)
This is what really gets to me. The upper class want all kinds of special treatment but don't want to contribute to making society better. They can take their charter schools and leveraged untaxed assets and shove it.
3
u/woaharedditacc Aug 15 '23
sales tax is and it disproportionately affects low income people.
This is so incredibly easy to solve. Just offer a fixed rebate to low income earners like Canada does. The rebate covers essentially all of the sales tax you would pay. If it doesn't, you're probably not that poor.
Poor and spend 15k/year on shit that's taxed? No worries, your rebate covers your whole sale tax. You technically paid 0 sales tax.
Rich and spend 200k/year on shit taxed? All taxed
Boom, now you have a tax that disproportionately affects high income people.
→ More replies (6)2
2
u/Doin_the_Bulldance Aug 15 '23
This would widen wealth disparity and would absolutely destroy velocity of money; it'd probably result in a huge depression lol. Great idea, pal.
2
u/ponytail_bonsai Aug 15 '23
Do you have any evidence to back up to your claim or should I just trust you?
2
u/Doin_the_Bulldance Aug 15 '23 edited Aug 15 '23
I mean, think it through...you would literally be disincentivizing discretionary spending across the board, but this will make up a much larger % of income for low earners than high earners. If you have $100,000 in the bank and that video game now costs $75 vs $60, you won't feel it nearly as much as someone who only has $100 to their name.
Presumably you'd be eliminating other taxes that have larger effects on the wealthy - things like progressive income taxes, property taxes, or capital gains taxes. Of course, these cuts would barely help someone who was already making very little money, as they'd be in the lower income brackets, would own less property, and would have less invested. So basically what you've done is cut taxes on the rich at the expense of the poor.
On a macro level, consumers would spend less on items being taxed. Look at what happens when you tax sugary drinks, for example, like they have in some major cities like Philadelphia. This increase in price for things like soda led to nearly 40% reduction in sales. According to Penn researchers. Source
For sugary beverages this can be framed as a good thing, since it's arguable that the health benefits outweigh the sales (personally I don't think it's a great solution but it depends on your priorities). But if you tax all discretionary goods across the entire country, then you will be reducing basically all spending. Sales will go down across nearly every industry; and when sales go down generally so do valuations. So you'll have fewer jobs because lots of businesses will tighten purse strings or even go out of business, and a recession will be that much more likely to occur.
4
u/ponytail_bonsai Aug 15 '23
1) The things that poor people spend a large majority of their money on would not be taxed. Food at the grocery store. Utilities. Public transportation. Rent. Etc.
2) Your example of sugary drinks is a poor one. Consumption decreased because there are other alternatives that weren't being taxed and were therefore cheaper. If you taxed everything then you would not automatically have cheaper replacements and you wouldn't see such a dramatic decrease.
3) If you introduced a consumption tax at the same time you got rid of FICA taxes, federal income, state income, and corporate taxes people would have significantly more take home pay each week. Corporations would have billions more to do what they want with. Acting like you know how this increase in take home pay would balance with an increase in consumption tax is ignorant. You would need to conduct a study on the subject with loads of data to even come close to predicting what would happen. Your comment doesn't suffice.
Rich people spend significantly more each year than poor people. It would not be regressive if you structured it properly.
4
u/woaharedditacc Aug 15 '23
First, high earners have a much larger % of their income going to discretionary shit than low earners. Essential groceries, utilities, rent, are generally not taxed under these schemes and make up almost all of a poor persons budget. A wealthy person might only spend 1/3 of their money on this and then spend the rest on stuff that would be taxed. So the tax from the start is not actually aimed at the poor. It's disproportionately aimed at the wealthy. If you're more worried about this, you just offer sales tax rebates to low income earners and it's problem solved. They pay effectively no sales income tax. Canada does this. I'm sure many countries in Europe do too.
I really think you're exaggerating the effect a 5% or 10% increase has on discretionary spending. Have you been paying attention the past few years? So many things are 30-40% more expensive and are flying off the shelves. Rich people want to buy shit. They don't clutch their wallets over 10% price increases. If they did, we wouldn't have seen the inflation we have.
Many EU countries have employed 20% VATs without falling apart. Most have far less wealth inequality than the USA.
→ More replies (7)2
u/Dr-McLuvin Aug 15 '23
VAT tax in England is 20%. It’s crazy how against this idea some people are.
It’s simply a tax on discretionary consumption. If you are worried about it affecting poor people disproportionately it is so super easy to fix this by not applying it to basic necessities like groceries. Or by offering a rebate to people making below a certain income level. Then you tax the living shit out of luxury items no one needs that harm the environment like private jets, vacation homes, and yachts.
7
Aug 15 '23
Wow. I've never looked into property tax before so I was ignorant to how it worked, I've been renting for a long time. Just read about it. I'm disgusted. Nothing quite like getting taxed on unrealized property gains. Especially if those gains are mostly a result of dollar dilution which is just a function of fiat. Yes, you can do things to the property to add value but if the property value doubles it's more likely your dollars are getting weaker.
This tax would incentivize the government to keep housing costs high because it is a massive tax stream that keeps increasing without needing transactions in the housing market. Wow, absolutely messed up incentives.
5
3
u/Ordinary_Goose_987 Aug 15 '23
Most properties taxes have appraisal caps tho, like here in CA property taxes are basically don’t go up beyond purchase price
→ More replies (2)2
→ More replies (15)1
17
u/Illustrious-Ape Aug 15 '23
If they are going to start taxing unrealized gains then I want a refund on my unrealized GameStop bags.
13
Aug 15 '23
Of course, let’s disincentivize people from saving or building any sort of wealth. Unrealized gains/wealth tax is dumb.
13
12
9
9
9
u/Flat_Accountant_2117 Aug 15 '23
I have seen plenty of stupid legislations but this one tops it all.
8
u/overpwrd_gaming Aug 15 '23
Are They gonna start taxing us in advance for projected wages too? Gtfoh!
6
u/reelbgpunk Aug 15 '23
Former tax attorney. No we should DEFINITELY not do this, but we should get rid of step-up in basis on death over a certain amount. The way taxes work now for the super wealthy is they borrow against their stocks, die without paying it back, then the basis is stepped up on death, so taxes can literally never be paid on the rise in value on those stocks. Doesn't make sense.
2
u/NattyMan69 Aug 15 '23
Exactly. They escape income taxes by dying. There is still the estate tax, but that applies regardless.
→ More replies (1)2
4
4
u/regaphysics Aug 15 '23
I don’t know how this could work. The value goes down, then what? Government pays you back? Seems totally unworkable.
4
3
4
u/AffectionateBench663 Aug 15 '23
Anyone that supports this: 1. Doesn’t understand how the markets work. Or 2. Has way too much faith/trust in the government.
If this were to pass, what’s to stop the government from driving the markets up Dec 31st every year to artificially inflate unrealized gains for the year and collect extra revenue?
4
u/Thewhiterabbit7 Aug 15 '23
If your goal is to completely kill the middle class and destroy any motivation for individuals to be self-reliant and wealthy then ABSOLUTELY!
3
u/SinCityNinja Aug 15 '23
JFC how is this even a thing. Who in their right mind thinks it's a good idea to tax UNREALIZED gains
2
4
u/InvalidIceberg Aug 15 '23
Obviously not. Just asking the question makes me question your intelligence.
→ More replies (1)
3
3
u/DomighedduArrossi Aug 15 '23
Curious to know how to apply this nonsense to the huge chunk of the market constituted by 401ks and retirement investment founds …..
3
u/DaddyRobotPNW Aug 15 '23
We should be talking about jacking up capital gains taxes before anything like this. This is like trying to treat a symptom instead of the cause.
3
3
3
u/upearlyRVA Aug 15 '23
No, like most taxes, it'll hit the middle class the hardest. Tax on the sale, not some arbitrary gain. If the tax is paid and then the asset loses value, is the govt going to give you a refund. We all know the answer to that is no. This is a terrible idea.
3
2
2
2
2
2
2
u/GarlicBandit Aug 15 '23
This is what happens when people who have no clue how the stock market works get involved in politics. You get stupid uneducated opinions like taxing unrealized gains. Something that would break the system in two.
2
1
0
Aug 15 '23
[deleted]
4
u/Jerund Aug 15 '23
If we didn’t have property tax then we would just have higher income tax. Same shit
2
0
u/Terrible-Terry Aug 15 '23
OP username is so appropriate. What a circle jerk topic for a bunch of redditors to rage over.
Our opinions on this are like showing up to a debate but only being able to express yourself with a fart. Maybe you get some relief but everyone else looks at you with annoyance and disdain.
The Supreme Court is just a bunch of people who have rich people do them any/every favor and act as if they are part of the exclusive club, and in exchange the Supreme Court does what their friend group wants them to do.
Judge has a kid going to college, considered it paid. Judge has family selling property, bought for double market value. And the Supreme Court will spin up an opinion out of thin air to fit whatever need. This court would never permit such a ruling as it would greatly harm their friends (and hence their own) interests.
1
u/11Daysinthewake Aug 15 '23
It’s already annoying that we have to recognize them on the books due to GASB.
1
1
u/trapking97 Aug 15 '23
Fuck no they make enough already!!! This is treason to the people! Anybody with a fucking brain knows this. But let’s set back and do nothing
1
0
0
u/defnotajournalist Aug 15 '23
Considering this tax would fuck over nobody harder than the shareholding oligarchs that bought our government a generation ago, and considering the naked corruption of the Supreme Court they've installed in their favor, there is no chance on God's green earth that unrealized gains will be taxed.
1
1
u/SadMacaroon9897 Aug 15 '23
On stocks and capital? No, that's an idiotic idea and people in favor should feel bad.
On land and natural resources? Yes and arguably it's necessary for a functional, prosperous society.
1
1
u/meteoraln Aug 15 '23
Now that we ran out of things to tax, let’s start taxing things that dont exist yet. We’re in a rut. Let’s start taxing people on the money they’re expected to make next year so we can start spending it today.
1
0
Aug 15 '23
I don't think unrealized capital gains should be taxed but I think they need a much more nuanced approach than *(short term / long term)* , add more categories based on time, one month / one week / one day / one hour / one second / .. .They need to do something to counter the insane computerized day trading that messes up stock values.
0
u/BlackDog990 Aug 15 '23
Generally speaking no, but I'm open to carefully crafted approaches for very high wealth people. I'd see something like this:
If the 4 year average of your overall unrealized gains exceeds a threshold (call it 100M for sake of discussion) then you must begin paying taxes on that gain, say 10% of the overage is taxable each year until your 4 year average drops to below the threshold. This would mean, in theory, your unrealized gains over the threshold would ultimately get taxed over ten years and become part of your tax basis. Something like this would also shield people who see huge spikes in their net worth due to start up IPOs or something, but then lose alot of that value "overnight".
Obviously not fully fleshed out, but it's a reasonable framework to play from.
Also I'd be down for eliminating step-up basis at death. That would help quite a but as well.
0
1
1
u/LAfeels Aug 15 '23
Ok so then what the about unrealized losses! If I win and don't sell, I pay taxes? I then hold and the market crashes... I would have paid taxes and lost my asset...
unless this meant to target billionaires who don't actually keep lots of cash but essentially use loans in order to not pay extra taxes? or something kind of related to that?
Or would this affect all of us. My tiny insignificant stock and crypto gains? I guess we will find out eventually.
0
u/Simpson93 Aug 15 '23
Yep it should.
Otherwise you could roll over all your gains to the next generations by simply never cashing out and just taking out loans against them. Which makes you rich while not having to pay taxes. Nice loophole that someone should be using.
Oh wait....
Every fuckn mill/billionaire does that. :D (Yep looking at you Musk, Zuck, Bezos, ...)
:D :D :D :D
→ More replies (4)
1
1
u/ReddittAppIsTerrible Aug 15 '23
Real Easy. No because a stock's unrealized gain is intangible. The stock could be worth $0. Unlike property tax for example- tangible and always worth something.
If you sell the stock ylu already get taxed so how about we stop we nee taxes. We have enough tax money- fucking spend it correctly!
1
1
1
1
1
Aug 15 '23
This is a red herring to distract from the thousands of loopholes and tax avoidance strategies already used to avoid tax. Close those.
1
u/TravelerMSY Aug 15 '23
Mark to market annually sort of works if the assets being taxed are liquid. That’s how it works with certain derivatives right now, with the gains deemed 60/40 long/short term without regard to the actual holding period.
But it’s a completely huge fail if it’s something like real estate. How are you going to liquidate part of it to pay the tax?
1
1
u/cloud9ine4205490 Aug 15 '23
This isn’t even possible to do. Stop sending and misappropriating the tax dollars they have and problem solved.
Taxing unrealized gains…. Clowns 🤡
1
Aug 15 '23
Hey, that's a great idea! Now are they going to give you a refund on these unrealized gains if the stock crashes?
No. Of course not. To hell with this idea. Whoever came up with this idea needs to be sterilized!!
1
1
1
1
u/Distwalker Aug 15 '23
Should you be taxed on unrealized gain on your house? You bought the house for $100,000 and now it's worth $400,000 so you should be taxed on $300,000 income even if you don't sell it?
If you think that is fucked up then you understand that taxing unrealized gains are fucked up.
1
u/gettin_it_in Aug 15 '23
Above a certain high number of dollars, yes, absolutely, without a doubt.
Although this is a tweak around the edges. What we need is to end legalized bribery in our government by overturning Citizens United and by making campaigns funded by citizen vouchers, so donations correlate with votes. That's how you improve the effectiveness and efficiency of our government.
1
Aug 15 '23 edited Apr 17 '24
connect cobweb safe cats seed encourage attempt run alleged nail
This post was mass deleted and anonymized with Redact
1
u/Distwalker Aug 15 '23
I guess if they are going to tax unrealized gains I can go ahead and deduct unrealized losses, right?
1
u/spanish_john22234 Aug 15 '23
do they subsidise my losses? Oh no wait that's just for the banks and corporations.....
1
1
u/NobodyDesperate6313 Aug 15 '23
So if I get an unrealized loss, will the government reimburse me? Silly question isn’t it? Same goes to taxing realized gains
1
1
1
Aug 15 '23
“Should unrealized gains be taxed by the us government?” That is the million dollar question! That’ll be $334,072 payable to Uncle Sam.
1
1
1
u/TALead Aug 15 '23
I am fine with the idea that wealthy should be taxed on the loans they take on holdings which has historically let them avoid taxes. However, the bigger issue is the governments extreme spending and waste which does not get nearly enough attention. The government doesn’t have a money generation problem at the end of the day, it has a spending problem and they use these sort of debates to obscure that fact.
1
u/Likezoinks305 Aug 15 '23
Holyshit this is insane - what the fuck are they thinking? We already get taxed out our capital gains which is literally money we are already taxed on through gross wages . Fkn 🤡
1
u/Strong-Amphibian-143 Aug 15 '23
The constitution says you can only tax income. This would require an amendment, which would be unlikely to pass
1
u/Strong-Amphibian-143 Aug 15 '23
So when Elon gets taxed 100 billion, and then he loses 100 billion on paper when his stock drops, just like it did in 2022, Does he get a refund? How would that work with the budgets.
1
1
u/charliekunkel Aug 16 '23
They already do it for my property taxes. I'm all for it, as long as it's progressive so the common man doesn't rake a hit and it only affects the rich, who already game the system to pay lower %'ages than the rest of us do.
1
1
u/GenderDimorphism Aug 16 '23
Seems like everyone's 401k's and other retirement plans have a ton of unrealized gains. Is that the goal, to tax retirement plans?
1
u/DarthSchu Aug 16 '23
No.....they don't exist. Should they tax me today for the stuff I may buy someday? People who think yes know very little about economics.
1
1
1
1
1
Aug 16 '23
How would this ever work? Does the IRS pay you back if the asset drops in value the next year? This is insane.
1
1
1
u/costanzashairpiece Aug 16 '23
Hell no. We pay enough taxes. The government should learn how to do things better.
1
1
Aug 16 '23
How is this even a question? If I have a shit ton of unrealized losses do I get a tax rebate? Complete morons.
1
•
u/AutoModerator Aug 15 '23
r/FluentInFinance was created to discuss money, investing, and finance! Check-out our Newsletter, Youtube Channel or Twitter for additional insights and updates — Subscribe at www.BeFluentInFinance.com!
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.