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Comment by PaulDavisThe1st | Hacker News Reader

> Suppose you buy a stock at $100 and it go up to $200. Do you pay taxes on $100 because that's "income", even though its just a number. If its 30%, I would have to sell 15% of my stock, which would also trigger capital gains tax.

Suppose you buy a house (or land) for $100,000 and it increases in value to $200,000. Do you pay taxes on [the] $100,000 [gain] because that's "income", even though it's just a number?

Why yes, yes you do.

Feel free to argue that buying real estate is a different kind of capital holding than buying stocks. There are some plausible cases to be made for it. But let's not pretend that there's no precedent for taxing unrealized capital gains.

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> But let's not pretend that there's no precedent for taxing unrealized capital gains.

Are you mistaking property taxes for something else ? Property taxes are imposed on property value and have nothing to do with the gain or loss in the value of the property.

But if you want to apply the same parallel to stocks then I think we should call it 'wealth tax' rather than anything to do with income and do not tax the gains (realized or otherwise) but the total value. So if you buy a stock worth $100 and it is $50 next day you still pay $0.5 as taxes even though you might have lost money. I do not think that is a good idea but that would be somewhat consistent with property taxes.

> Property taxes are imposed on property value and have nothing to do with the gain or loss in the value of the property.

I don’t understand what you’re trying to say here. If the value of your property goes up you pay more in taxes. Of course property taxes have something to do with the gain or loss in the value of the property. The relationship is in fact direct and unambiguous. (I think people are just getting caught up on the article's use of the word, "income," which was indeed well-poisoning from the start.)

> Of course property taxes have something to do with the gain or loss in the value of the property.

Which is not same as taxing the unrealized gain. Property tax is a wealth tax and not any kind of income (or gain) tax.

Yes, as I said in another comment, I think people are just getting caught up on the article's use of the word, "income," which was indeed well-poisoning from the start. Obviously it’s not income in the ordinary sense and it’s not taxed like income.

> Suppose you buy a house (or land) for $100,000 and it increases in value to $200,000. Do you pay taxes on [the] $100,000 [gain] because that's "income", even though it's just a number?

You do not.

> Why yes, yes you do. [...] But let's not pretend that there's no precedent for taxing unrealized capital gains.

I think you may be confused; that's not how capital gains taxes work in the US (or anywhere else I'm familiar with offhand.)

(I assume you're not trying to conflate property taxes and capital gains taxes, because comparing a tax on a stock versus a tax on a flow like that would be quite silly. But if you are doing that, then I'd suggest making the argument explicit, and also providing some pretty extensive justification, because that's going to be a hard mountain to climb.)

I understood him to mean that your annual property tax bill is usually a proportion of the property value, and increases with the property's value, and that's a precedent for doing something similar to other property like stocks.

Why is it an inappropriate analogy?

Of course you do. You don't get a bill that says, "you made $100k and here's your tax bill for that," but you do get a bill that says "your property is now worth $200k and here's your new tax bill for that increased valuation."

You're paying a higher tax because you possess an asset whose value increased, even though you've realized none of the gain.

That's pretty obviously the point being made here.

No. Look, if OP wants to suggest a wealth tax, I think that's a concept that can usefully be debated. They're not without precedent; France has had one, off and on, for many years, and sure, property taxes are closely equivalent.

If OP wants to suggest a tax on (realised) income, then, well, we already have that. There's not a lot to debate here.

If OP wants to suggest a tax on unrealised income, that's a pretty silly idea with enormous practical obstacles. Also, it is fundamentally not a wealth tax. It is different in every particular; one is a tax on a stock, and the other is a tax on a flow; they are charged at different times, on different things; if an asset declines in price, the wealth tax levy declines, whereas an unrealised gains tax would...what, have to issue tax credits to be carried forward? The whole thing is unworkable.

(And even if it was workable, it would be in principle and in effect, vastly different than a wealth tax.)

It really feels like everyone responding to this is willfully missing the point. The question everyone is asking is, "but how can you levy a tax on an asset before any gains have been realized?"

And the analogy to property taxes is a good one. You pay more in taxes when your property increases in value. If the value goes down it'll be reassessed and you'll pay less. And this repeats year after year.

Now, look, you can think that's a good system or you can think it's a bad one. But it's not some esoteric, inscrutable concept.

Depends on the state. For instance, NY is below.

Those taxes are a percentage based on the value of your home. It's real estate taxes. No one considers this "income" and is not taxed as such. If you want a wealth tax, you can do something like this. But let's not play games and say I "made" 100k because my house appreciated 100k and I'm somehow skirting taxes by not paying taxes on that 100k. It's incredibly dishonest to say people with unrealized capital gains "made income" and they're getting preferential tax treatment on that "income"

> Reassessment and its effect in property taxes

> Conducting a reassessment does not mean that your assessment or your taxes will automatically increase. Your taxes may increase, decrease or stay the same.

> Over time, market value of properties change. The value of some properties may increase, while the value of some properties may decrease. Frequent reassessments ensure that your property is assessed based on current market values, rather than on market values from 20 years, like the example.

> If your assessment increase, it doesn't mean that your taxes will automatically increase. If the increase in your assessment is less than the average increase, your taxes will actually decrease. For example:

> If, your assessment increased by 12% and the average assessment increase was 15%, then your taxes will decrease (assuming your school and municipal budgets remain stable and the tax levies do not increase)

https://www.tax.ny.gov/pit/property/learn/reassess.htm

> Your taxes may increase, decrease or stay the same.

That's because your actual taxes depend on the "millage rate" (i.e. dollars of tax per dollars of value) which can be adjusted at every budget cycle. That's equivalent to lowering (or raising) the capital gains tax - just because you realized $100k in CG every year, "your taxes may increase, decrease or stay the same".

Not in California, you don't pay taxes on (most of) your unrealized gains!

But it's a good point, wealth taxes are very doable for things that you can't easily hide from the government.

Georgists of the world, unite!

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