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Comment by alberth | Hacker News Reader

What's often ignored is whether or not these are Realized Gains

I wouldn't be surprised if a huge majority of that $42T wasn't realized gains (sold and attributed as a Capital Gain).

It's hugely unfair to tax non-Realized Gains ... because that would be like you having the pay Income taxes on the appreciation of your home - even though you still live in your home and haven't "realized" those gains (to pay the capital gain taxes)

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The larger problem in my mind is that a lot of asset purchases bestow a lot of tax deferment privileges because of how the tax code is presently written.

Consider someone who holds a lot of capital with unrealized gains but nonetheless needs cash flow. A common practice is to borrow against those unrealized gains, which itself doesn't count as income even though it nevertheless tends to result in a greater accession of wealth.

The play, hence, seems to be that we consider the borrowing against unrealized gains to be the taxable event, not a wholesale tax on all held assets.

One idea I read on Reddit is to only let people borrow against their cost basis, rather than the gains. If you want to borrow more, you're forced to sell your stock.

Alternatively, you could continue to allow them to borrow against the current price of the stock, but doing so causes gains to become realized for the sake of tax purposes.

If you want to be especially charitable, allow the stock owner to choose which of the two options to use when applying for the loan.

So you’d disallow someone from taking out a 2nd mortgage against their home, to help pay for medical bills?

It sounds like you’re suggesting banking / society to operate like a Pawn Shop.

I think it's fair to leave "unrealized" gains tax so long as the "gains" are never utilized or borrowed against.

Doesn’t property tax already do this but even more so? Taxing cost basis + gains

They do, but the financial impact to you is much less.

Example

- Let's say you bough a home for $100k - Property taxes are 1% of home value

In Year 1, you owe $1k in property taxes.

Let's say (dramatically) that property values double in Year 2.

- Now, you're $100k home is worth $200k

So your property taxes in Year 2 are now $2k.

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With taxing your unrealized gains at the nominal Federal & State income tax bracket.

- Your Federal Income tax rate might be 30% (dependent upon your earnings) - Your State Income tax rate might be 10%

So you have a combined 40% tax rate on "earnings"

Now in that example of your home going from $100k to $200k in Unrealized gains, you'd have to cut a check for $40K!

That's huge and most people wouldn't even have that kind of cash to pay.

Isn't that the very principle of property taxes? And it has no relation to income, it's the very possession of property (or in this case, financial assets) that triggers it.

then make sure you don’t move to Denmark where you pay tax on unrealized gains (for some asset classes)

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