Also, if you are rich you will have less need to sell assets and can hold on to them in perpetuity.
IMO: Perhaps a fairer tax system would tax these gains and in turn reduce income tax. That would put more tax on “lazily earned” money.
Similar questions for a house that I’ve paid off prior to retiring. It doesn’t make sense to me to have people paying imputed capital gains on some number that Zillow or a government version thereof decides is right.
Over reasonably long time scales with reasonable assumptions about the profitability of such businesses, the vast majority of the value of the company comes from its preferential tax treatment.
Maybe the trading example isn’t great. I think a better example is simply Amazon - famously not making a profit for years.
What they are doing is reinvesting and avoiding tax on the “profit” but it’s hard to distinguish reinvestment from cost and so hard to tax.
Interestingly in my country there is an R&D tax credit for businesses and they are happy now to say that software devs are doing R&D (so like… an investment) to claim that ha ha.
The other angle is using profits to do buy backs instead of paying dividends. In both cases you give back to share holders. With buy backs you both defer and minimise tax for the investors.
Edit: hello downvoter!
https://smallbusiness.chron.com/gaap-accounting-rules-unreal...
The other thing is small time investors and pensions could be spared this tax.
hasn't it already been tried, and shown to fail?
Ideas like Georgism allow us to retain the most useful features of a market economy while taming its brutal, violent, undemocratic features. That's the premise of market socialism in general.
You don't have to sell shares when you can take a loan out against them instead.
That’s no different than a homeowner taking out a HELOC and never selling their house.
Taking a loan is not a benefit.
You never pay it back if you are rich. Remember a 10% loan would be billions to these people. As long as there isn’t a 90% crash then no liquidation.
It’s not like a middle class refinancing their house to buy a Ferrari and then getting into trouble when they lose their job.
Also: Almost no interest.
No tax (the tax is perpetually deferred, probably beyond death down the generations, although not sure in the US. There are trusts for this in other countries)
If you spend money, the opportunity cost is whatever else you might have done with that money in the meantime.
If you just take a loan out against the value of an asset you have, the opportunity cost is only the low cost of the collateralized loan, because you continue to own the asset and benefit from all its appreciation. AND you don't have to pay taxes on the capital gain because you haven't sold the underlying asset.
I strongly recommend looking into this at whatever depth is necessary until it clicks. This is one of the main differences in mental paradigm between people who become extremely rich and people who don't. It might be counterintuitive at first, but it's a really important, beneficial principle!
Would you argue that someone is “gaming the system” by not paying taxes on say a rental property but borrowing against it?
Is there an apartment in New York whose rent you can’t afford?
What is for sale as a private person that’s worth cashing in the billions and paying tax to buy? You already have a business you can use to turn that into more money anyway which is probably the most satisfying game.