How the market speculation on the value of a company can affect its resiliency ? If tomorrow everyone sold Apple stock for 1 cent, why would Apple the company care ? Same revenue, same costs. Give me a break with the importance of the stock casino.
The problem would be if tomorrow everyone sold Apple stock for $1000, and the government took that as a reason to tax every Apple shareholder for “income” of over $800 per share in the stock casino, forcing Apple’s current shareholders to divest themselves to new shareholders and hence lose control of the company.
This is a cynical ploy to the part of the populace that can't tell a portfolio from a hole in the ground, and there seem to be surprisingly many of such people.
Also, to address GP's comment - Apple would then buy back all outstanding stock and destroy it, dramatically driving up the share price for folks who haven't sold.
Not really. They'd just print more money.
That is in contrast to me and everyone else who just gamble collectively.
For example, to buy some company to improve their business. They can do that in cash or they can issue more shares, e.g. with their Beats acquisition.
> On May 28, 2014, Apple officially announced its intention to acquire Beats Electronics for $3 billion—with $400 million to be paid in Apple stock and the remainder in cash.
If Apple crashed to 1 cent it would gut the entire market. Even just that crash alone, the amount of money wiped out, retiree savings etc., other companies would be valued lower and then the mass selloff would crush them as well.
Apple may not need to 'raise money now' but it very well could in the future - and - every company is somewhat of a proxy for every other company.
If there is no ROI, there is no investment, and there is no economy outside the government, it's that simple.
Taxes on unrealized gains are a separate thing, and probably a bad idea - just contemplate that they would have to be paired with tax-sheilds on unrealized losses as well. Due to speculation, it would open up the door to all sorts of shenanigans.
It's just a bad idea all around.
Elon Musk is a 'paper zillionaire' that's very, very different than someone with a zillion in the bank.
There are probably some very boring, old, already established ideas for increasing taxes on the ultra-wealthy that would probably work very well. Including getting rid of loopholes etc..
1) The market value of a company is true, aka the owners of this company must be taxed for the real value growth in their portfolio (since it constitutes income), even if they do not sell
2) It’s a casino, a share is just a ticket that may worth nothing or a billion. In that case we don’t need tax protections. The owners of the tickets must be taxed only when they cash out. The governments should actively disincentivize gambling into this and ensure the pensions of its citizens by funding public projects and enabling future growth.
You cannot have it both ways.
well, if you follow this logical conclusion, why are you not taxing a baby because the baby's value is the future income of that person's job. Sure, it's unrealized, but you're still considering it income even though it's unrealized.
If you are certain that your baby this year is bringing home tangible income due to its TikTok page, then yes tax it.
and yet, the claim originally was that it makes sense on the speculated value of stocks.
> If you are certain that your baby this year is bringing home tangible income due to its TikTok page, then yes tax it.
so tax the dividends, or tax the capital gains that are realized - because those are certain. To own stocks is to speculate.
But if we agree it is a casino, then we should not tax air, only the ones who cash their earnings and walk out of the casino. And goes without saying that we should stop incentivizing people to gamble their money and pensions on this. 401k, Roth and all these need to go.
And, it's ridiculous to try to tax unrealized gains in most situations, it's unfeasible the moment you try t put a policy around it.
It's a non-starter and any attempt at legislating it will fail badly and make the politicos that tried to do it look like clowns.
The tools we already use are much more effective.
Property tax taxes an asset that doesn't move, literally and figuratively. Before financial markets exploded, and especially in agrarian societies like the United States at its founding, a property tax was effectively a wealth tax. (It still is a wealth tax, technically speaking, it just no longer reaches the wealth of the richest in society.)
> In what intervals would you do this?
In whatever interval you'd like. Presumably yearly. But don't companies have to "mark-to-market" for their quarterly reports?
> Your bank account would go to zero.
This is already the case with inflation, very deliberately so.
I can't say I'm a fan of a wealth tax. And in any event I don't think it'll ever happen in the U.S. But the reasons for disliking a wealth tax are more complicated than the above.
But nobody wants this because we all know it’s pure speculation. That is why we call it “unrealized gains”.
If everyone tomorrow tries to cash out their Apple stock, except from the first few, all the rest will get 1 cent each. There is no value in these tickets, just the power of combined speculation.
We 'don't want it' to be taxed because it doesn't make sense.
Also, you'd have to provide a tax shield for the losses as well.
There are so many things wrong with taxing on 'mark to market value'.
We can barely get away with it in real estate, but that market acts more rationally, and most of it is about rent extraction.
Not really. My car is losing 10% of its value each year but nobody is returning me the sales tax I paid for the full price. Let alone returning me some of lost value.
Why if your stock depreciates do I have to compensate you?
Can you imagine if your Tesla was deemed to have a market value of 2x what you bought it for, because a few random idiots were trying to buy it up?
And you had a gigantic tax bill on that?
Unrealized gains are not gains.
What 'someone else' is willing to pay for your property isn't necessarily very well related to how you value it.
It might possibly work for real estate in controlled conditions but even then it's risky. For equities, it's really hard to have an asset tax.
Personally I believe that your claimed cars value is speculative since you don’t mass produce and sell it widely. As a result, it makes no sense to tax you for the unrealized gains.
When you actually find a loser to buy it for the asking higher price then you should be taxed for your lottery earnings.
Some states and countries actually do tax personal property like cars. Virginia and Rhode Island, for example.
In those jurisdictions, if you have a vintage car in 2021 worth $100k, then you pay $100k * TAX_RATE in 2021. If the value of your car jumps up to $200k in 2022 (due to a movie or something), then you pay $200k * TAX_RATE in 2022. As long as the property is still in your possession, you pay property tax on it.
There is such great risk in that to create self-serving definitions that the industry as a whole decided these terms needed standardization and definition.
Now we already have these standards, so let's just stick with them and all use the same meaning of "income" rather than switching to something based on personal intuition. If you want to change the tax code, change the tax code, don't try to redefine "income".