1810
Temporarily embarrassed millionaires pt. 2
(sh.itjust.works)
Welcome to politcal memes!
These are our rules:
Be civil
Jokes are okay, but don’t intentionally harass or disturb any member of our community. Sexism, racism and bigotry are not allowed. Good faith argumentation only. No posts discouraging people to vote or shaming people for voting.
No misinformation
Don’t post any intentional misinformation. When asked by mods, provide sources for any claims you make.
Posts should be memes
Random pictures do not qualify as memes. Relevance to politics is required.
No bots, spam or self-promotion
Follow instance rules, ask for your bot to be allowed on this community.
An income tax would be pointless for the wealthy. Most of their wealth is in unrealized capital gains or other investment vehicles, not from salaries.
There would need to be a mechanism to tax unrealized capital gains, or just networth in general.
I don’t know that there’s a fair way to do that, since they are unrealized: people can’t really use that wealth yet.
However, let’s worry about taxing capital gains: why is that rate so much lower than income tax
Let’s worry about hiding wealth through corporations to lower tax rates
At one point there were reports that Donald Trump managed his real estate through a network of over 500 companies. While I don’t know anything beyond the news articles, I find it believable that it could be both legal and could be used to hide both income and expenses from taxes and lenders. We need to use things like this as an example of what not to allow
While I completely agree on your later points, we do have a system already in place for taxing unrealized gains. They're called property taxes. I'm sure we could create a similar system for taxing other types of assets.
You can just literally take the ownership of a portion of the stocks and investments off them and place them in control of a government run sovereign investment team instead. It's not exactly hard to figure out what these are worth at any moment anyway, realized gains or not, that's what the stock market tracks for us and what they use to estimate worth and use as collateral for loans with banks. If banks trust this way of doing it then so can we.
It’s not pointless, because there are plenty who make an excessive salary. However, yeah, it’s not really sufficient because the well-off are already paying less taxes by using different types of income.
We also need to fix how low tax rates are on those other types of incone
If you look back on the tax reductions of the last several Republican administrations, you’ll see they predominantly reduce taxes in these non-salary situations that really only affect the more wealthy
It's pointless in that it's not going to earn enough tax revenue to make a difference. Billionaires didn't become billionaires from their paychecks.
I suppose it depends on what segment of “wealthy” you want to focus on. Billionaires make the news but there are very few of them
Massachusetts recently passed a “millionaires tax” on those earning $1M in the state. It affects 0.6% of the state’s population and has brought in enough to fund school lunches for everyone
This actually happened with bitcoin a while back due to its under-regulated nature. A few people lost their pants when the value of bitcoin skyrocketed on one day in december and then plummetted in early January, and the IRS came knocking for those unrealized gains.
Largely, We don't tax unrealized gains because unrealized gains is value that hypothetically can disappear as quickly as it shows up. It's like taxing someone after every hand of blackjack - you can end up broke AND owing 10x your starting money in capital gains taxes. In theory, a stock portfolio can go from way-up to way-down in 24 hours. Ditto with real-estate if there manifests an uncovered loss event or the title gets fucked, or environmental regulation changes in a way that affects the property, etc.
...I'm not saying there's not a way to do it right. It just needs to be done very VERY carefully so as not to bankrupt people. It would likely have to be more complicated than most tax law is now.
I know very little about stocks, unrealized gains, and taxes in general, but wouldn't it be simple to tax the incremental gain or loss of capital assets?
"What? Tax the gain of a gain? What's that?"
I believe that would be called a derivative in math speak. Basically, if there's a "spike" the up-spike would have a positive tax. The "down-spike" would have a negative tax. What you end up owing is the change from before to after.
How would this be done?
That's for someone smarter than me to figure out, but I would think there would be a way to plot the value over time, plot the derivative, then the value at the end of the year is what you owe. If it's negative then you get some back, if it's positive you owe.
That's what happeend with bitcoins. High volitility investments are quite literally the problem with taxing unrealized gains. If something is worth $1 for 364 days, an $1B for 1 day, how much do you tax? If that day was 12/31 and it's cryptocurrency, you tax that $1B, even if it's back down to $1 and the person's total net worth is in the single digits. YES, that's an exaggeration of what's really happened, but only to exemplify. This is also a real issue with forex and non-blue-chip stocks. To a lesser extent, it's true for real estate, especially high-risk real estate investments. There's a lot of things like possibly-landlocked properties for sale where the buyer is assuming fairly heavy risk. If things go well, they got a steal. If things go badly, they have a worthless deed.
Despite the general trends of property, the value of an actual piece of property (or any investments) any time before the moment it's sold is an estimate at best. That bitcoin example above was never worth $1B if the owner was not actionably able to liquidate it for that price, regardless of the estimated worth.
I HATE to defend Bezos on anything, but attempting to tax the value of his Amazon stock is problematic because he would 100% get MUCH less than the value of his stock if he sold it. Since he's ultra-rich, I'm ok with taxing him as if he made $1B if he could only get full price if he liquidates the first $5M of $1B in stock, but that same effect will happen to people who make a lot less than him. Now, he deserves to be paying more than he does, a whole hell of a lot more, but taxes are not just anti-rich corrupt, they're COMPLICATED to get money from the rich without having unexpected outcomes for everyone.
Not sure who you're quoting on that. Taxing the "wealth acceleration" seems bizarre and pro-ultra-rich to me. That actually WOULD punish people who make their first million while rewarding someone who makes $1B/yr consistently. I do have enough understanding of calculus to follow the ball on that one, and I don't think it lands how you think it would.
They still make liquid money no? Well above what any normal person takes home.
They do, but the point is it’s not those millions of dollars that are mentioned, so that high marginal rate just wouldn’t do a whole lot on its own.
Yes because there's no chance that this would end up having to be paid by every homeowner whose house has gone up in value since they bought it while rich people would just find another loophole to avoid it, while the government would piss all that extra money away on wasteful spending without addressing any actual problems.
Heh, this post is about you.
They're not wrong. The people who would write these laws are paid for by the people who would be negatively impacted by them, so I guarantee they'd be full of loopholes.
I hope you love your landlord, because with that attitude, you'll never own a home.
It's income, not assets. Anyone who's house increases value from 9 million to 10 million wouldn't have to pay it.
Unrealized gain is by definition not income, that's what "unrealized" means.
Let's say you buy a house for $300k and the value goes up to $400k. But you don't sell it because you want to keep living there. Too bad, now you have an unrealized gain of $100k and you owe taxes on that. At the current rate, if your regular income is between $47k and $518k, this would cost you 15 grand. Not to mention you'd have to pay this tax every year that your house appraises for more than you bought it for.
Still sound like a good idea?
Yeah, you don't magically have to pay income tax on unrealized gains. You pay income tax on income. That's why it's called income tax.
You owe property taxes on it, if it's an asset property, and your location has property taxes. If it's stocks and bonds, you wouldn't have the same problem.
This was a hypothetical, because thread OP was suggesting a tax on unrealized gains. I was just trying to explain the possible consequences of such a tax.
In order to tax unrealized gains, they WOULD have to be treated as income, even though they really aren't, because if you didn't sell an asset, you didn't make any money. Unless you rented it out, of course, but rental income is already treated as such.
As far as stock or bonds go, it's the same. Imagine you buy some stock to hold for the long term. Well, if it goes up, and there's a tax on unrealized gains, you'd be owing taxes on every dollar it has gone up from the purchase price, EVERY YEAR that you hold it. It would almost be like having to pay rent on something you already own, and of course that would make long term investing extremely unattractive, not to mention it would basically eliminate any chance that normal people have at building any wealth whatsoever.
Also, if long term investing becomes unattractive, that means people would likely just try to sell everything the same year they bought it, meaning there'll be a lot more short term trading (and thus rampant speculation) going on. Even if you put generous exemptions in place to avoid penalizing the lower and middle classes with this, taxing unrealized gains would lead the super rich to engage in more short term speculation, which means the markets would become much more unstable. It's literally the dumbest idea anyone could think of unless their goal is to just cause as much pain and chaos as possible.
I think you lost the thread. The grandparent post here said "There would need to be a mechanism to tax unrealized capital gains"
We're talking about someone thinking we ought to be taxing things that aren't income. What is currently true is not relevant to that discussion.
Sorry, I didn't realize the comment changed direction from the OP meme.
No worries :)
A chance? Sure. But it would require willful malicious writing of the bill. Many (most?) states have homestead protections for homeowners up to a certain conservative value. That protection could pivot to capital gains trivially. I think it's perfectly reasonable to tax valuation skyrockets in excess of (say) $500,000. The government can depreciate those value skyrockets, and we'd still honestly be paying less than our due since property value skyrockets cause property tax decreases (in most (all) municipalities, property taxes are just the town's expenses divided by property value).
In real state, that "loophole" is a law that exists in most states specifically saying you don't have to pay tax on property gain if you follow a specified process to reinvest into property in the same calendar year. But it's not a loophole if it's the damn law. The only way people are dodging real estate taxes now is because they wrote laws to. A law that says "fuck off, you still have to pay" would absolutely work.
Across the world, tax rates are largely proportional to health, happiness, and quality of life of the citizens. I prefer to trust the numbers over someone's distrust of the country they live in.
Have you been keeping track of politics AT ALL? You're if fool if you don't EXPECT precisely that to happen. The vast majority of politicians will foam at the mouth at the prospect of passing another tax and then happily add a few provisions to make sure their top donors aren't hurt too much by it. Or do you think it's just a tragic accident that the majority of taxes keeps getting paid by the poor and middle classes?
I don't have any data to prove or disprove that claim, but assuming it's true, then there's certainly better ways to achieve that, like increasing income tax rates on the wealthy. Yes sure, they'll try to avoid it by deferring or offsetting gains where they can, but in the end, whatever they own, they'll still have to convert a certain amount of it to cash in order to spend it, and that can be taxed. No need for such harebrained schemes as taxing unrealized gains.
I largely disagree. I don't wear a tinfoil hat, sorry. I have seen successful execution of homestead related profit protections, and there are very few "gotchas" in it, if any, for non-millionaires.
I'm an American, so blame my patriotism. But I like to think if EVERY other country can do it, we're not so pathetic as a country that we cannot.
There's a ceiling on the revenue potential in that. The wealthier you get, the less your income is "income". The wealthy don't even try to "avoid" it, it's just not relevant to them. Bezos wasn't lying that year he only made $80k in income. His unrealized capital gains simply were not taxable unless he chose to sell off lots of Amazon stock (which has non-tax-related repurcussions for him).