“ It's not news that you don't pay taxes on invested assets you hold and don't sell.”
Unless, of course, we’re talking about the only meaningful asset an average person might own -their house- then we tax its assessed value every year.
Unless, of course, we’re talking about the only meaningful asset an average person might own -their house- then we tax its assessed value every year.
It depends on how the property tax is implemented. Is California's property tax with Proposition 13 a true "wealth tax" that people mentally think of in this thread?
Here's an example of a property in Silicon Valley being assessed at $146k but the real market value was $3+ million. The assessed value wasn't readjusted to the higher market value until it was sold in 2016: https://imgur.com/a/0OvqADN
The surveys I saw say majority of Californians (~64%) favor Proposition 13 and it's politically unpopular to repeal.
On a practical level, if this was implemented, I am sure the market would quickly create funds that payed out at exactly the right level to fund this. Here in Denmark, ETF's are always taxed this way and any losses can be carried forward.
The one area where this can get problematic is things like a a big family business that is not providing enough profit to pay the tax. Such a business would end up getting liquidated, which makes sense from a free market perspective, but would make for some great "taxman killed family business"-headlines.
Of course, there's always the problem that a lot of nominal asset appreciation is due to inflation.
You then have to pay tax on the $2k gain. You've lost purchasing power. Let's say your balance is now $101,800.
If you looked at this as monetary policy (rather than tax policy), wouldn't this essentially be a negative interest rate? Over time, wouldn't inflation rise exponentially?
Now, suppose the ETF tries to pace inflation + tax. Where does this extra money come from? Debt? Thus more inflation.
I find it interesting that the poster from Denmark considers it no big deal; Denmark has had negative interest rates for several years. That may make sense in a small, aging country that needs to stave off deflation, but the US currently has the opposite problem - inflation. Wouldn't a tax on inflationary "gains" send it into hyperdrive?
Judging by the increasing amount of US housing stock owned by investment firms, this doesn’t appear to be working.
I’m not against the idea so long as we make it progressive at the very bottom (though I understand my motivations there are explicitly moral ).
Gross sales of some product? or do you get to deduct it's cost?
Is trading labor (for instance, two independent farmers helping each other) considered income?
Edit: What happens if they invest their money? That's the moment you have won!