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Comment by like_any_other | Hacker News Reader

So what's the point of taxing unrealized gains specifically? Why not wait until the gains are realized, tax them then, and still collect on average the same tax income? This would result in the same yearly tax income for the government, except in the years immediately after implementing or increasing unrealized gains taxes.

Is it just to force entrepreneurs to sell more stock and get more loans, as a gift to the financial sector?

Edit: On second thought, taxing unrealized gains results in lower tax income - the financial sector will take its cut, and that cut has to come from somewhere.

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Europe is a retirement home rigged to favor old people and old money. The thought that you could save on your own and enjoy compound interest is forbidden.

> They took an investment of 70M at a valuation of 1000M, in a country that has a well-known 1% tax of valuation, but they failed to write payment of that tax into the funding papers and fled the country to dodge a 10M annual tax bill.

The tax bill is 10M only if they control 100% of the shares. Given that they've taken funding from at least 15 investors/VCs, this is clearly not the case.

https://tracxn.com/d/companies/dune-analytics/__XskUZos4lkfE...

That's unrelated to my question.

The problem this tax attempts to solve is that rich people's gains are never realized.

Read about "Buy, Borrow, Die" scheme as an example of possibly dozens of methods to avoid having taxable realized gains.

Because many of the wealthiest individuals de facto realize their gains in the form of collateral for loans that allow them to live without ever realizing their gains from the perspective of the tax code. If you do well enough, you never have to pay taxes on stock holdings.

The very first sentence of TFA gives it away: Recently, my story as a Norwegian entrepreneur facing an unrealized gains wealth tax bill many times higher than my net income went viral

Many who are in the position to control how their compensation is doled out (board members, C-level) will often take it exclusively (or nearly so) in stock, specifically so they never have to pay taxes on it. Famously, several have taken $1/year incomes - e.g., Mark Zuckerberg and Steve Jobs, while Elon Musk didn't even bother with the charade and took $0/year.

* Side bonus: in the US, corporations paying out performance-based compensation like stock get additional tax breaks, so it's not just the executives which win the taxation game while doing this.

> de facto realize their gains in the form of collateral for loans that allow them to live without ever realizing their gains from the perspective of the tax code.

Can you explain how this works? I have my wealth in stocks, I use those stocks as collateral for a loan. To pay back this loan, I have to either get money from somewhere, or hand over the collateral to the bank. Let's say "get money from somewhere" is taxed (to avoid circular reasoning), so that leaves trade loan collateral for loan cash, which is on net no different than selling the stocks.

This is not taxed? And wouldn't it be infinitely easier to close that loophole, than taxing the estimated profit for the next N years, which is what unrealized gains tax amounts to?

> I have to either get money from somewhere

Take out another (slightly larger) loan against the stock. As long as the stock grows faster than the interest rate, you should be able to chain loans together forever. You need to only borrow a portion of the value of the collateral to provide a buffer from volatility, but that should also mean the loan is very safe and thus at a low interest rate.

To close the loophole you would need to be able to tax borrowed money which creates its own set of dangers.

Another way to close the loophole would be to amend the tax code to realize the gains for any stock used as collateral, since the person obtaining the loan is already de facto realizing the gains for the sake of the loan.

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