Unrealized capital gains are not income.
This article wants a wealth tax because they think this is "income" that is going untaxed.
This article wants a wealth tax because they think this is "income" that is going untaxed.
Is the tax assessed value of your house actually the same or higher as its most recent market value? If something happened that would put your house market value below its tax assessed value, then you typically won't have any "unrealized capital gains" at all.
Somehow I doubt that, it usually lags true market value by at least 3-5 years.
Why does this matter? Set an "appraised" value of stock portfolios > $10m, make it like the "worst downturn last 100 years" or something, and it would be more fair than home appraisals, and still generate the money we need.
These arguments are not in good faith IMO.
> It gets adjusted once in a while
It gets adjusted nearly every year for most people.
> if it's too high you can bring it down
No, you can't. Not really.
Personally, my property taxes are about 2.25% on a appraised value that is about 70% of the actual home value. This sounds great, let's use these numbers for a wealth tax.
For inflation, yes. Real re-valuations that mark the house to market are a lot more rare, and tend to only happen when a house is sold.
> No, you can't. Not really.
I have personally done this a couple of times, and all it tends to take is a nice letter explaining why the value is too high. At worst you need to get a new appraisal to support the letter. The value is rarely too high, though.
Property taxes in my area are also relative: the tax rate floats depending on how much the local government needs to raise. The sum of the appraisals for the city is added up, and your property tax is your proportional share of the total amount that needs to be raised. For me, that's usually around 1-1.5%.
This is all to say that property tax is not at all a tax on unrealized gains of your house. It's a tax on an imaginary number that occasionally adjusts to be similar to your unrealized gains, and often even has a rate that floats relative to it.
If I work my ass off doing manual labor, $y gets taxed more than if I merely own equity that got me the same amount.
And people wonder why the middle class is dying.
Tax rates ideally should be flat for all sources of income net of risk, loss, and inflation. To achieve this you either allow deductions for these, which are limited or non-existent in the US, or you lower the tax rates to offset the fact that you can't deduct these.
No, you don't.
You actually get a tax credit (e.g. you pay LESS taxes), if you incur certain types of capital losses.
You still haven't pointed out which capital losses get you taxed more. If you were referring to inflation, then why not just say that directly?
I think there are two considerations here: (1) fairness, (2) good economic policy.
It's certainly not fair to have such a large proportion of power concentrated in such a minuscule number of people.
It's hard to see how it's a good economic policy either. We want there to be capital available to be invested in further economic activities (I think we do, anyway; there are people who would debate that). But we don't want -- and certainly don't need -- so much of it in so few hands. A wealth tax is a way to drain some of that away.
One reason the author is probably suggesting this is that there are a wealth of schemes whereby income can be deferred and tax avoided by use/misuse of unrealized gains.
This is just false in my experience, well atleast for how you've stated it.
It may be true for some particular company but I don't know a single fund that doesn't track unrealized cap gains. Specifically around this time we start to look at how to defer realizing these gains till next year to push off the tax burden until the new year.
I mean, alot of large in the money option trades get written at this time of year just to lock in a price on a position that expires next year. We wouldn't do this if we didn't track unrealized cap gains.
Heck, the single largest impediment to growing wealth is taxes, we fixate an awful lot on the type of tax we pay and when we pay it.
Maybe you can expand on your response as it seems completely false to me that the concept of Unrealized cap gains doesn't exist.
My point was that finance in and on itself doesn't depend on a concept of unrealized gains. It's perfectly possible to devise a system of taxation that just says you have to mark to market and then pay tax on that. There would for sure be complications around how you get valuations for illiquid investments etc.
Things that banks and financial companies hold for a long time get a lot more care in terms of their accounting, in general.
Those markings don't create cash, though. In cash terms, they are no different. Individuals are largely taxed in cash terms.
Under such a system — unless I've badly misunderstood something — if a billionaire's assets decreased in value over the course of a year, they would still pay 2% on their assets. I can't think of any sense in which a decrease in the value of one's assets would be defined as income.
I have an opinion of the wisdom of a wealth tax, and I could be wrong. Regardless of my opinion, I think it's indisputable that a wealth tax and an income tax are different and that conflating the two makes a debate on the merits much more difficult.
Even without a wealth taxes there are situations where someone may need to borrow or sell assets to cover a tax bill. The billionaires will be ok.
It is already! It's called the Fed's target inflation rate. Currently, everyone's net wealth is getting reduced at over twice that rate.
The "billionaire's tax" Biden proposed earlier this year is closer an income tax that also includes unrealized gains and only if there are tens of millions in unrealized gains in that year.
That said: you pay property tax even if the value of your home declines. It's not that crazy.
Therefore, my conclusion is that a 2% wealth tax on the ultra-wealthy on average wouldn't even keep them from gaining wealth; they would just increase their wealth more slowly.
I find the article pretty clear, though brief and not very well written. The actual report it's discussing is crystal clear.
The situation is that the wealthy keep getting wealthier without generating any taxable income. Obviously a minimum income tax rate could not possibly solve this problem unless we also redefine income.
https://www.propublica.org/article/the-secret-irs-files-trov...
Twitter, the company, took out a loan as part of the financing to help Musk close. That is why Twitter desperately needs to return a profit. Because it now has to service that loan.
Those are different things.
EDIT: For reference it looked like he originally was going to back the loan with Tesla shares—so he wouldn't have to sell. It looks like he abandoned that idea and sold about $15.5B shares of Tesla to finance the deal. Maybe that's where the confusion is from? https://www.aljazeera.com/economy/2022/10/28/how-elon-musk-f...