51 votes

Kamala Harris plans to tax unrealized US stock gains — but only for people worth $100 million

38 comments

  1. [29]
    gary
    Link
    Someone mentioned elsewhere that Bill Ackman proposed taxing at the time of taking a loan out, which would be a cleaner solution than the messiness of trying to determine fairness of unrealized...

    Because taxes are imposed only when stocks are sold, the wealthy have deployed a strategy popularly called "buy, borrow, die," which involves buying assets and borrowing against the value of those assets to buy even more assets. This a tax-free action, which allows for the assets to be passed on to heirs, who end up paying no taxes on the assets. Ultimately, over the lifetime of the ownership of a given asset, no tax is paid.

    Someone mentioned elsewhere that Bill Ackman proposed taxing at the time of taking a loan out, which would be a cleaner solution than the messiness of trying to determine fairness of unrealized gains/losses. I appreciate that Harris is making this an issue because it's about time someone did, but I don't much like this approach and I don't think it'll go anywhere either.

    Oh yeah, let's get rid of the inheritance tax shenanigans. If you're inheriting $100 million, you're inheriting more than any person needs. Some taxes there is more than fair, especially if taxes had been avoided this whole time.

    56 votes
    1. [26]
      nacho
      Link Parent
      Whoever managed to get "death tax" to stick as a description for inheritance taxes of all sorts managed to do an incredible amount of harm. Inheritance taxes have to be some of the most benign and...

      Whoever managed to get "death tax" to stick as a description for inheritance taxes of all sorts managed to do an incredible amount of harm.

      Inheritance taxes have to be some of the most benign and effective ways of holding everyone to the same tax standards. It baffles me that they're so hated by many, despite being so effective at doing very good things for society.

      34 votes
      1. [7]
        JordanM
        Link Parent
        That would be Frank Luntz. Also coined "death panels" and "climate change" over global warming, to name a few. He's responsible for a lot of the language the Republican party uses today.

        That would be Frank Luntz. Also coined "death panels" and "climate change" over global warming, to name a few. He's responsible for a lot of the language the Republican party uses today.

        20 votes
        1. [6]
          Minori
          Link Parent
          Climate change at least makes some scientific sense because global warming can cause more extreme cold weather events, but it's unfortunate he was so successful at rebranding issues.

          Climate change at least makes some scientific sense because global warming can cause more extreme cold weather events, but it's unfortunate he was so successful at rebranding issues.

          9 votes
          1. [5]
            Englerdy
            Link Parent
            I recognize where you're coming from, so this is just to add to the discussion and not me outright disagreeing with you. It does make scientific sense when you're willing to give it some mental...

            I recognize where you're coming from, so this is just to add to the discussion and not me outright disagreeing with you.

            It does make scientific sense when you're willing to give it some mental flexibility and if you're already tracking the conversation on what's happening and not sticking your head in the dirt. However the global average temperature continues to rise every year and so global warming is still a more accurate description and what the conversation was originally about. But it's also a very scary idea. So the spin doctor creation of "climate change" was solely because it evoked the image of a nice day at the beach rather than a steady march to scorching dry summers. Much easier to keep pushing the pro-status quo train with climate change because it evokes significantly less urgency as global warming in people's minds.

            15 votes
            1. Minori
              Link Parent
              Yep, I don't disagree with you. I just find "climate change" useful sometimes when explaining global warming. When someone asks what tornados and snowstorms have to do with carbon emissions, it's...

              Yep, I don't disagree with you. I just find "climate change" useful sometimes when explaining global warming. When someone asks what tornados and snowstorms have to do with carbon emissions, it's easy to just say: "climate change means we get more extreme weather."

              7 votes
            2. [3]
              skybrian
              Link Parent
              Oddly, I imagine the opposite. To someone who didn't know what it really meant, I imagine that "global warming" would sound rather pleasant, like a nice spring day, and a small increase in average...

              Oddly, I imagine the opposite. To someone who didn't know what it really meant, I imagine that "global warming" would sound rather pleasant, like a nice spring day, and a small increase in average global temperatures would sound like nothing to worry about. Meanwhile, "climate change" is vague but foreboding. What kind of change? Could be anything!

              But these aren't new terms to us, so I'm not sure it matters how they first sounded? Lots of terms sound funny or meaningless at first, but they take on new meanings from use.

              5 votes
              1. updawg
                Link Parent
                Yes, I first had "climate change" presented as a way to defend against people who point out things like extremely cold winters. It's interesting to see that it was initially a way to make it seem...

                Yes, I first had "climate change" presented as a way to defend against people who point out things like extremely cold winters. It's interesting to see that it was initially a way to make it seem less concerning to the layman.

                3 votes
              2. sparksbet
                Link Parent
                I took a course on climate change in the environmental sciences department at my university to fill an undergrad gen-ed requirement, and the professor seemed very positive about the use of the...

                I took a course on climate change in the environmental sciences department at my university to fill an undergrad gen-ed requirement, and the professor seemed very positive about the use of the term "climate change", framing it as genuinely better addressing the scope of the problem.

                3 votes
      2. [18]
        Eji1700
        Link Parent
        Because it routinely punishes the poor and is arguably kicking someone in a major moment of grief? The wealthy have all sorts of ways to dodge an inheritance tax anyways, and it's pretty ugly from...

        Because it routinely punishes the poor and is arguably kicking someone in a major moment of grief?

        The wealthy have all sorts of ways to dodge an inheritance tax anyways, and it's pretty ugly from a logic standpoint of "Hey we know your parent worked really hard to pass this on to you, but we're taking our cut first. Even though your parent probably already paid taxes on every cent of this".

        People always think of the hyper rich in these cases, but it's so often middle and lower class who wind up eating the mess on these deals. You can say "well just tax the rich" but it so often expands, and doesn't often work in practice.

        12 votes
        1. [17]
          MimicSquid
          Link Parent
          Do you know what the current inheritance tax lower limit is? It isn't something that's a concern for the lower or middle classes.

          Do you know what the current inheritance tax lower limit is? It isn't something that's a concern for the lower or middle classes.

          20 votes
          1. [3]
            Arlen
            Link Parent
            Because I was curious, and you neglected to include the numbers:

            Because I was curious, and you neglected to include the numbers:

            the estate tax exemption amount, currently $13.61 million per individual, is scheduled to “sunset” at the end of 2025 and revert to pre-TCJA levels, which is an estimated $7 million per individual (adjusted for inflation)

            14 votes
            1. [2]
              Eji1700
              Link Parent
              This is correct, however there's a large discussion about how it's going to "reset" to around 7 million in 2026. Personally, I think that's low enough to really start kicking smaller businesses in...

              This is correct, however there's a large discussion about how it's going to "reset" to around 7 million in 2026.

              Personally, I think that's low enough to really start kicking smaller businesses in the teeth for success. A moderately decent restaurant with only a few locations could easily hit that and be hurt, badly.

              5 votes
              1. MimicSquid
                Link Parent
                As someone who's done business consulting for restaurants, I can say that the business wouldn't be hit by that for two reasons: Because the business isn't taxed, the inheritors are. Because the...

                As someone who's done business consulting for restaurants, I can say that the business wouldn't be hit by that for two reasons:

                • Because the business isn't taxed, the inheritors are.
                • Because the businesses that are held by a single individual are rarely valued at a price point where even 7 million is likely. A moderately decent restaurant with a few locations might have decent throughput/profit (maybe), but even combining the used kitchen gear and a small multiple of yearly business net revenues you're not likely to see any actual small business running up against that cap. Especially not without the key employee who just dropped dead.
                5 votes
          2. redwall_hp
            (edited )
            Link Parent
            Beyond that, it's an 18-40% progressive scale, reaching 40% on anything over a million dollars beyond the exemption threshold. https://en.wikipedia.org/wiki/Estate_tax_in_the_United_States The...

            The current individual exemption in 2024 is $13.61 million, or $27.22 million for a married couple.

            Beyond that, it's an 18-40% progressive scale, reaching 40% on anything over a million dollars beyond the exemption threshold.

            https://en.wikipedia.org/wiki/Estate_tax_in_the_United_States

            The best thing for the middle class would be fixing income the tax scale so they get nailed less, fixing our student loan/rent/homeownership situation that eats up most of the economic potential of the middle class and suppresses class mobility, and heavily reducing the exemption for the inheritance tax. Income is income.

            13 votes
          3. [12]
            Eji1700
            Link Parent
            Are you thinking of estate tax? Most US states don't have inheritance taxes.

            Are you thinking of estate tax? Most US states don't have inheritance taxes.

            6 votes
            1. [11]
              Greg
              Link Parent
              What distinguishes the two? (Genuine question from a non-American)

              What distinguishes the two? (Genuine question from a non-American)

              7 votes
              1. [10]
                Eji1700
                Link Parent
                Who pays. An estate tax is owed by the estate and exists at a federal level if the estate total is greater than 13m. An inheritance tax is owed by the person who inherited and only exists in a few...

                Who pays.

                An estate tax is owed by the estate and exists at a federal level if the estate total is greater than 13m.

                An inheritance tax is owed by the person who inherited and only exists in a few states.

                Sorta like the Oprah free car thing there’s ugly edge cases that screw people

                7 votes
                1. [9]
                  Greg
                  Link Parent
                  Oh, so possibilities like appraised value being higher than realistic resale value, or someone with no liquid cash being stuck with a high bill and a valuable but very illiquid asset?

                  Oh, so possibilities like appraised value being higher than realistic resale value, or someone with no liquid cash being stuck with a high bill and a valuable but very illiquid asset?

                  6 votes
                  1. [8]
                    Eji1700
                    Link Parent
                    Yep. Something like a boat or mobile home being one of the more common "This is technically valuable but actually worthless". But the bigger issues are just around the concept in general. Assuming...

                    Yep. Something like a boat or mobile home being one of the more common "This is technically valuable but actually worthless".

                    But the bigger issues are just around the concept in general.

                    Assuming a law abiding average citizen, they paid taxes already on all the money they earned, so why does the government get to come in and say "hey your parent just passed on their earned cash, so now you pay again"?

                    Obviously lots of people say the counterpoint is these hyper rich people who are avoiding taxes, which sure, we should do something about that, but this seems like another case where it's going to be the worst possible way.

                    Find the loopholes and close them, don't come up with "if you're over Y income" stuff because it's already a nightmare to assess, and also historically such rules don't ever scale with inflation and become a major problem down the line.

                    I feel like a lot of people just want "if you are worth over a 100m you can't make anymore" to be the law, which ok fine if that's your stance, fine (I think it's more destructive than people think, but I get it). Unfortunately because we all know that's not going to happen we instead wind up with these super awkward laws and decisions, when tax law ought to be something pretty simple.

                    Worse there's also a pretty lousy history of "well the people worth 700m+ can afford to shuffle this shit around and basically dodge the whole thing, but the people worth 20m get creamed by this, and since it's expensive as fuck to litigate, we'll just keep nailing the lower end".

                    I know both are "rich" but we're pretty bad at internalizing the difference between 10m in assets vs 100m vs 1b. Plenty of people seem to think that 10m in assets means you're tooling around on megayachts, but it's not that uncommon for a small business owner who hits moderate success to blow past that, but still have all their money tied up in their assets. They absolutely live comfortably, but they're far from the Muskian tiers of megawealth people envision, and are probably one bad economic swing/decision from losing a huge chunk of it (if not all of it as 08 showed)

                    6 votes
                    1. [5]
                      Weldawadyathink
                      Link Parent
                      We tax every time money changes hands. When someone dies and leaves an inheritance, money is changing hands. Inheritance tax is literally just a normal tax. The tax code would be less consistent...

                      We tax every time money changes hands. When someone dies and leaves an inheritance, money is changing hands. Inheritance tax is literally just a normal tax. The tax code would be less consistent if there wasn’t an inheritance tax. To be clear, the tax code doesn’t need to be consistent, but your point about double taxing the money just isn’t true. The money changes hands, the money gets taxed.

                      13 votes
                      1. [4]
                        Eji1700
                        Link Parent
                        We absolutely do not. We tax goods and services. Death is very clearly neither. I understand why people want an inheritance tax, and there are absolutely arguments for it, but this is not even a...

                        We tax every time money changes hands.

                        We absolutely do not. We tax goods and services. Death is very clearly neither.

                        I understand why people want an inheritance tax, and there are absolutely arguments for it, but this is not even a correct understanding of how and why we currently tax the way we do,

                        2 votes
                        1. [2]
                          Weldawadyathink
                          Link Parent
                          Uh, yeah we do. We tax goods and services as you say (sales tax, gas tax, capital gains, income tax, etc). We also tax gifts (gift tax, inheritance tax, estate tax, etc). This includes trading...

                          Uh, yeah we do. We tax goods and services as you say (sales tax, gas tax, capital gains, income tax, etc). We also tax gifts (gift tax, inheritance tax, estate tax, etc). This includes trading money for something and giving money away. I am pretty sure that covers every way money can change hands. You may dislike the gift tax just as much as you dislike the inheritance tax, but that is how we currently operate. Pretending we don’t tax all forms of money transfer is incorrect.

                          5 votes
                          1. skybrian
                            Link Parent
                            To clarify, for most people, most of the time, gifts are not taxed. At most you might need to file with the IRS. The "gift tax" is plugging a hole that would let people avoid inheritance tax by...

                            To clarify, for most people, most of the time, gifts are not taxed. At most you might need to file with the IRS. The "gift tax" is plugging a hole that would let people avoid inheritance tax by transferring money before they die. Here's an example:

                            https://www.nerdwallet.com/article/taxes/gift-tax-rate

                            If you give your brother $50,000 in 2024, you’ll use up your $18,000 annual exclusion. The bad news is that you’ll need to file a gift tax return in 2025, but the good news is that you probably won’t pay a gift tax. Why? Because the extra $32,000 ($50,000 - $18,000) simply counts against your lifetime exclusion. Next year, if you give your brother another $50,000, the same thing happens: you use up your annual exclusion and whittle away another portion of your lifetime exclusion.

                            So it's not true that the US taxes apply "every time money changes hands." There are lots of exclusions. But it's also not true that only "goods and services" are taxed.

                            2 votes
                        2. skybrian
                          Link Parent
                          I think we should distinguish between an inheritance tax and capital gains tax. Arguably, inheritance is a gift. But the tax basis is normally whatever you paid when you bought the property. It...

                          I think we should distinguish between an inheritance tax and capital gains tax. Arguably, inheritance is a gift. But the tax basis is normally whatever you paid when you bought the property. It would be logical for the tax basis for inherited property to be zero, just like anything else you got for free. If you sell it immediately, that's a lot of taxes to pay, but you also have the money to pay the taxes on your windfall, which, again, you got for free.

                          Depreciation expense is an especially weird one. Normally, depreciation is money you paid in a lump sum (when you bought the place or paid some other expense) that is spread out over the expected life of the property for tax purposes. For inherited property, the depreciation expense is entirely hypothetical - you're writing off a major expense that you never paid.

                          This results in landlords of inherited property getting tax-free cashflow, because their business is break-even or worse for tax purposes, due to an expense that's a legal fiction.

                          I generally expect accounting to have more logic to it, so was flabbergasted when I learned how it actually works.

                          1 vote
                    2. Grumble4681
                      Link Parent
                      I'm in agreement with much of what you said, except this one I'm not so sure about. I wonder if past a certain amount of wealth, it should be considered like property. I'm kind of just spitballing...

                      Assuming a law abiding average citizen, they paid taxes already on all the money they earned, so why does the government get to come in and say "hey your parent just passed on their earned cash, so now you pay again"?

                      I'm in agreement with much of what you said, except this one I'm not so sure about. I wonder if past a certain amount of wealth, it should be considered like property. I'm kind of just spitballing here rather than having any highly refined perspective on the matter, but trying to review the problem in a different light.

                      The reason property tax came to mind is because I think that the way the government should or does tax things is based on what value government provides, which is obviously sort of nebulous and difficult to define but some things are very apparent they just can't exist without a proper functioning government. There's also the case that government and our societies want to encourage some behaviors or actions and discourage others. Ideally one person wouldn't be able to just buy land and sit on it forever waiting for it to just keep growing in value, clearly we're not going to get anymore land anytime soon but demand for land has only continued to grow, whether because of population growth or other reasons. It does not benefit us collectively to let someone buy a bunch of land and do nothing with it, preventing it from being used for other purposes now. I'm not saying that never happens, but just speaking broadly about that subject.

                      The tax should be levied on things that would allow it to grow in accordance with the burden/responsibilities the government takes on. I view property tax as sort of a rightful tax in another way, which is that governments protect our land. Now the federal government doesn't do property taxes but I would not necessarily see it as unethical, because a government's responsibility grows with the more land it must protect. State and local governments generally are the ones doing property tax in the US, and they too also help protect the land domestically with police forces and such. Many of them can get by just taxing income but my point is that within this lens I don't think property tax is necessarily wrong, but it can vary depending on its application.

                      In the same way, I think wealth can be treated like property because you can't build it without a proper functioning government, and that same government helps protect your wealth and people attacking/stealing it from you, and the responsibility of the government grows as your wealth does because the target on your back gets larger. Yes I realize people also pay on their own to protect their wealth in various ways, maybe it's living in a gated community, buying large safes, hiring security guards etc. but I think it would be quite a bit more costly without a lot of other aspects of what the government provides to society. Now the difference is that I think this type of 'property' doesn't need to be taxed at the same interval the typical property tax would be, but it's better to tax it when the original owner of the 'property' dies, meaning an estate tax.

                      This is the tricky thing about our societies now, most of which we have built is based upon a collective, very little of what we have is possible without the collective and working together, so on the one hand it's like saying nothing you do is really yours or belongs to you, which I think feels pretty shitty especially in our more individualistic culture, but I think we can try to shift those lines in ways that seem more reasonable since in the end, collectively we are just making them up.

                      I do think taxing unrealized gains is potentially full of complications so I don't know that I favor that, but there's other ways people are cashing in on their unrealized gains which in effect is realizing a gain, but those realizations aren't being taxed so it seems that rather than just taxing unrealized gains, we should be targeting the ways in which these people are realizing them in ways the current system doesn't account for.

                      4 votes
                    3. tauon
                      (edited )
                      Link Parent
                      Aside from state-philosophical questions (I think @Weldawadyathink put it great – all money is (more than) “doubly taxed” already), I wanted to chime in with an, I believe, rather practical...

                      Aside from state-philosophical questions (I think @Weldawadyathink put it great – all money is (more than) “doubly taxed” already), I wanted to chime in with an, I believe, rather practical viewpoint:

                      If there’s zero taxation on money/value inherited whatsoever, societies will have a class system ripe for civil unrest within a couple generations. I am not joking, I genuinely believe that amassing wealth unchecked and unhindered over generations is a recipe for disaster.

                      If you let this scenario play out for a couple decades or centuries, it will end up worse than 19th century Britain, where “free” people are forced into slave-like working conditions because what are they supposed to do without any political body lobbying for them?

                      Please do share any points that might counter this, because I haven’t found any good/obvious ones so far.

                      Edit: I’ve read of a federal-level threshold for estate tax exemption until $13 MM. That is in stark contrast to the German inheritance tax law here which I’m roughly familiar with – for one, the threshold is much, much lower, but the allowed exempted amount “resets” every 10 or so years (also decreases the less you’re related to the person).

                      3 votes
    2. [2]
      Xyst
      Link Parent
      Mark to market accounting has been around in finance for quite some time now, so the complexity isn't that insurmountable. Having a material threshold keeps the "efficiency at scale" discussion to...

      Mark to market accounting has been around in finance for quite some time now, so the complexity isn't that insurmountable. Having a material threshold keeps the "efficiency at scale" discussion to a minimum, but most of the headlines have people clutching the Robinhood accounts instead of recognizing who this really targets.

      1 vote
      1. gary
        Link Parent
        It's not the accounting part that's hard, it's the having to sell part that is. Buffett complains about the changes to GAAP that requires him to include unrealized gains/losses, but as far as I...

        It's not the accounting part that's hard, it's the having to sell part that is. Buffett complains about the changes to GAAP that requires him to include unrealized gains/losses, but as far as I remember, companies are not actually taxed on those unrealized gains, are they? If not, then it serves to illustrate what a large change this is. That a change that large to GAAP still didn't go as far as actually realizing gains in order to pay unrealized gains. It could even warp markets, unless you target it very finely. The joke proposals to just codify into law the specific individuals we'd like to tax more are funny because they're kind of true.

        1 vote
  2. [5]
    Eji1700
    Link
    I really despise plans like this. I get what they want to do, and it's something that should be done(closing the stock/loan loophole), but I sincerely doubt this is actually the way to do it. The...
    • Exemplary

    I really despise plans like this. I get what they want to do, and it's something that should be done(closing the stock/loan loophole), but I sincerely doubt this is actually the way to do it.

    The entire approach is so arbitrary and arcane, and leads to all sorts of nasty edge cases. Yes it's only going to affect people with a net worth of 100m +, which i am ALLLLL for having them be the test dummies for this kind of thing, but I think it's going to be, at best, an unenforceable nightmare.

    The article does mention the problematic loophole:

    Because taxes are imposed only when stocks are sold, the wealthy have deployed a strategy popularly called "buy, borrow, die," which involves buying assets and borrowing against the value of those assets to buy even more assets. This a tax-free action, which allows for the assets to be passed on to heirs, who end up paying no taxes on the assets. Ultimately, over the lifetime of the ownership of a given asset, no tax is paid.

    but to me the much more sane solution to this is to screw with part where they borrow against the value of the asset. If you're borrowing against your house or your car or your real estate, fine, normal rules apply. If you're putting up more than X in collateral as stock, then you get to pay taxes as if it's realized gains right there.

    This pegs a SANE price to the whole thing because the banks, at the moment of creating the loan, have already estimated the value of the stock. We know the price at that point and time, and can work with it.

    Just trying to tax it at some point in time means we're going to, at best, see CRAZY stock fluctuations at tax season.

    Further, will the government give money back when they overtax on this? I know this is only for the super wealthy but i'm going to keep it small values to keep the math easy.

    I have $10 in stock on Jan 1st, so the government says I owe them $1.
    By Jan 1st next year, the stock has crashed to $2 and I cash it out, paying my capital gains of $0.20.
    Does the government, at any point, owe me a refund for the tax they took on something that turned out to be overvalued? I know they want to assess it over 5 years (maybe) but even then you've still got that problem.

    This is a serious question that really needs a solid answer, because it's absolutely going to be the thing that everyone will be adjusting their behavior around. And I don't get why we need to try and play with fire around this, when the very obvious point of taxation should occur at the moment the bank gives the loan.

    If the bank is willing to take the risk that the stock will tank lower than the value of the loan should have been, the government, and hell even the person taking the loan, would probably be fine being hit with a tax at that point. Depending on how bad the tax is it could encourage them to just cash out their stock and pay the capital gains, or if you want to make sure you don't trigger stock selloff panic, you can still allow this to be "less" than flat out capital gains but more than the literal nothing (hell actually negative) it currently is.

    This doesn't even get into ugly scenarios where you get into some death spiral stock selloff to pay your taxes. You often legally cannot sell all your stock in one go, so you're forced to do multiple selloffs, which everyone will know is because of your taxes, so it tanks the stock further, and you essentially wind up having your asset assessed at X, but selling all of it will absolutely not get you X, and in extreme cases might get you less than the tax itself.

    Like I get it, i'm not going to cry myself to sleep over some 100m+ rich person finally having a loophole closed, but these things can have serious repercussions all over the place, and bluntly I don't love the idea that eventually such nonsense could be further applied. It just strikes me as such a jaw droppingly bad idea designed to pander.

    29 votes
    1. [4]
      F13
      Link Parent
      It didn't "turn out to be overvalued". It was valued fairly at the time. Just because you decide to hold it longer doesn't mean you get a break on taxes. The government taxes me on the current...

      It didn't "turn out to be overvalued". It was valued fairly at the time. Just because you decide to hold it longer doesn't mean you get a break on taxes.

      The government taxes me on the current value of my home, regardless of if I choose to sell it.

      8 votes
      1. gary
        (edited )
        Link Parent
        There's no such thing as "fairly valued" at a single point in time when it comes to stocks, unless you believe the market is perfectly efficient. GME hit over $400 pre-split and I wasn't able to...
        • Exemplary

        There's no such thing as "fairly valued" at a single point in time when it comes to stocks, unless you believe the market is perfectly efficient. GME hit over $400 pre-split and I wasn't able to sell it fast enough. If that became the fair valuation the government used in calculating the price to tax at, then was it really fair if only a handful of people ever got to sell at that price?

        If they try to over complicate with doing an average of prices over X time then my gut says there'd be some weird arbitrage situations that would necessitate even more complexity to try to avoid. Instead of doing all that, we should just close the loophole of loans -> death -> taxes avoided. Who cares what a persons net worth is if they aren't accessing the wealth? Make the wealth useless until accessed (either directly or indirectly as assets for loans), at which point ensure taxes were collected.

        13 votes
      2. Eji1700
        Link Parent
        The government, in many cases, can easily wind up owing the tax payer taxes. It's why so many people get refunds. My friend pays taxes on what his hourly rate WOULD make him in a year, which with...

        The government, in many cases, can easily wind up owing the tax payer taxes. It's why so many people get refunds.

        My friend pays taxes on what his hourly rate WOULD make him in a year, which with double time and what not can get very very high. He is not guaranteed to work the entire year though, so come tax season he is often given a refund if his income for the year was less than the rate his hourly was taxed at.

        Assets, in general, are taxed at their assessed rate, but stocks are fucking mess when it comes to assessed rate. Both because there's 0 way you will actually GET what it's assessed, even if you sold that exact second (unlike a home which you will be in the ball park of), and because often the exact kind of person who you're going to be trying to tax on this, also owns the rest of the company.

        I don't understand why everyone is so gun ho on treating stocks like every other asset, from any side of this argument. They very very very clearly aren't (literally treated differently legally), and pretending they are is always going to cause issues.

        7 votes
      3. skybrian
        Link Parent
        There were some notorious cases in Silicon Valley where a stock IPO'd at a high price and tanked before employees were allowed to sell. They owed taxes on money they never had. Since then, Silicon...

        There were some notorious cases in Silicon Valley where a stock IPO'd at a high price and tanked before employees were allowed to sell. They owed taxes on money they never had.

        Since then, Silicon Valley firms got smarter about how they compensate employees, so I don't think it's an issue anymore? But I'm a bit wary of taxes using hypothetical prices that weren't actually available to the person being taxed. It's possible to screw people over, depending on the specific rules.

        6 votes
  3. [4]
    skybrian
    Link
    Applying only to tradable assets would certainly make it easier to administer. It would also be an incentive to invest in non-tradable assets like real estate. It might make it harder to control...

    Applying only to tradable assets would certainly make it easier to administer. It would also be an incentive to invest in non-tradable assets like real estate. It might make it harder to control companies via stock ownership, but only until someone figures out a workaround. (Spinning off subdivisions and taking them private?)

    There's not much point in speculating on how since it's it's just a proposal. If Congress passed a law, accountants would go to work looking for loopholes.

    7 votes
    1. [3]
      MimicSquid
      Link Parent
      Incentivizing people to invest in non-tradable assets would be fine, as those have existing taxation structures. Property taxes for real estate, income taxes for privately-held corporations. I...

      Incentivizing people to invest in non-tradable assets would be fine, as those have existing taxation structures. Property taxes for real estate, income taxes for privately-held corporations. I don't think it would make it harder to control companies via stock ownership unless the owner is so leveraged that they have no other assets with which to pay their taxes and are "forced" to sell stock just to cover their expenses.

      6 votes
      1. [2]
        skybrian
        Link Parent
        Yeah, I meant harder to control while avoiding the tax.

        Yeah, I meant harder to control while avoiding the tax.

        1 vote