Tax on Unrealized Capital Gains.

Do you know what the title phrase means?

Well, let me ask you --- would YOU mind paying tax on a THEORETICAL increase, on paper, in the value of some asset that you own, and are still holding onto -- like some stocks or a house or maybe even a nice old car -- EVEN THOUGH YOU HAVEN'T SOLD THAT PROPERTY OR GOTTEN ANY REAL MONEY FOR IT YET, AND MIGHT NOT REALLY SELL IT FOR YEARS?

I guess I could ask the question a different way: do you think it's FAIR to have to pay a tax on money you HAVEN'T yet actually made, and might not make for years, or maybe never make at all? Do you think it's FAIR to charge ANYBODY tax on money they haven't ACTUALLY made yet, and might NOT make for years, or even ever?

Or does "fairness" just not matter much in 2024.

And what if you DO pay the tax on that property, what if it ACTUALLY goes DOWN in value later, instead of up (since, believe it or not, that happens in the REAL world). Do you think you'll get the tax back? Will you get interest on the time you did without the money you paid, even if you do someday get it back?

I think the notion of charging tax on UNREALIZED capital gains (i.e. gains on things you haven't ACTUALLY sold yet) is, frankly:

moral and economic MADNESS.

I am flabbergasted that ANY accountant would ever think this is a good idea after training in accounting. But apparently a politician -- running for another government position -- can think this is, like, a great idea.

Indeed, ONE of the U.S. presidential candidates reportedly supports this KIND of tax. Do you know which one?

Astonishing.

Now, I suspect I know what the response of some, not necessarily all, might be: oh, Noflaps, like, they'll probably only do this to them rich fellers. And them folks have got lotsa lawyers, and accountants, you know? And what do WE care about being fair to them fellers who are already rich?

Well, okay, if fairness doesn't matter, does practical impact upon others who AREN'T rich fellers matter?

What if them rich fellers are FORCED to sell some of their stock holdings in order to raise the cash needed to pay the tax on money they HAVEN'T actually made yet?

Have you thought about what that might do to the stock market? Do you think a forced dumping of large amounts of stock (because them rich fellers probably have lotsa stocks, right?) by a lot of different rich fellers at about the same time, might do to stock market? Do you think it will encourage investment in stocks? Might it cause the stock market to go up?

Well, I suspect, based upon supply and demand (those unfashionable old notions), that it might instead cause the market to go down -- perhaps even crash, if there are enough large, forced sales. And, if so, what will we tell the pension funds for ordinary folks that invested in the stock market. Oops? Sorry? We didn't think this might happen?

And are you really sure that you aren't, or might not ever later be judged to be, sufficiently "rich" to have to figure out and pay such a tax each year? Have you saved for retirement? If not, might you someday do that? Could the definition of "rich enough" ever change, once this idea takes hold? Could you, too, someday need to hire accountants, appraisers, and maybe lawyers each year, to help you figure out and pay such a tax?

Maybe such worries and questions are all groundless and unjustifiable. I mean that sincerely. Maybe somebody can provide a good defense for this kind of tax. But I haven't heard one yet. That's the point of starting this topic.

It would be nice to hear an honest discussion to see how the candidate personally justifies what seems, to me, at least, to be an unfair and potentially harmful tax, in detail.

You know, the kind of discussion that comes during a timely series of real press conference, where skeptical, objective and knowledgeable journalists ask tough questions and get extended, real answers.

But, as I await, hopefully, to see that someday, maybe somebody else can realistically justify this. Or maybe I should just not think about this. And listen, instead, to all the singers and celebrities and just, you know, enjoy the "vibes" and touching stories.

Incidentally. unlike the two major American candidates, I DON'T want to see any tax cuts because I think ever-increasing, vast national debt is a serious problem that is too often just ignored in the interests of politics and pandering.

To the contrary, I'm all in favor of some tax increases, accompanied by a new adult, sober restraint on needless over-spending and freebies. But I want those tax increases to be fair and at least rational. And, for the moment, I think unrealized capital gains taxes are neither.

Someone should have given the Beatles a nod.

The Taxman.

First of all, when you think about it, the tax on unrealized capital gains is really no different than a property tax. Your same exact concerns could be applied there. What if some ultrarich people can't pay the property tax? What if it leads to a selloff of houses, a decline in the value of homes, resulting in negative equity for many homeowners, and then a strategic default on the part of those homeowners, since continued payments are not offset by the values of their homes anymore? Then you have a repeat of the 2008 housing crisis for different reasons.

Practically speaking, this scenario hasn't happened and likely won't happen. Of course you can apply some ridiculous tax burden to increase the chance, but that is unlikely. And what makes your scenario particularly outlandish is the fact that this tax only applies for people who have over 100 million dollars. The number of centi-millionaires in the US is quite small. And lastly, keep in mind that this is a tax on unrealized GAINS. I find it hard to believe that a person with over $100 million can't find a way to pay for a tax on their gains that wouldn't crash the economy. That just sounds ridiculous, I'm sorry. They are rich. They can find a way to pay lol. The level of concern you have for rich people being negatively affected seems a little excessive :P.

So basically we have a scenario where, people are taxed on their property, but for other assets - particularly financial assets (stocks, bonds, but also artwork) aren't taxed. This is probably not what was intended and seems contradictory.

This basically allows rich people to basically pool all their money into safe assets like blue chip stocks, bonds, and mortgage-backed securities, which constantly appreciate in value. They can accrue enormous wealth that way, and never pay a dime to the federal government. It also gives them insanely good leverage to borrow funds against, meaning they will usually have to pay very small interest on the loans. Besides that ,many of these securities will provide an income stream of their own - stocks with dividend payments, interest on bonds, or rental income from tenants. So once again, if you look at it as an analogy, its not too dissimilar from owning a property that constantly appreciates in value, gives you more and more income, but you pay no property tax on it.

So when you think about it, you're basically creating a situation where a rich person gets to live in your country, and in spite of the fact that they are making a fortune based on their assets alone, they don't have to pay any taxes. Meanwhile, they benefit from the taxes everyone else pays - into roads, schools, public utilities, and so on. That is where you are basically creating a system that is obscene and unfair, because the poor person has to pay an additional burden for the rich person's comfort, and in return, the rich person pays nothing. How is that fair?

Its not necessarily wrong that the rich person found a good way to make money, we allow investment and it should not be illegal. But they should at least be contributing to society with a small fraction of their enormous wealth that they are accruing, rather than letting it sit safely in government bonds (for example) and passing it on to their heirs when they die, so it can continue to grow in size.

So yeah. I think its a pretty simple and reasonable way to ensure that people pay their fair share. It won't affect virtually anyone except the ultrawealthy. And the idea it will crash the economy is essentially as far-fetched as suggesting that property taxes levied against the ultrarich will crash the housing market. The money gained through this proposal will do enormous good for the vast majority of the public who pay taxes themselves and create a society with less wealth inequality. Pretty much all of these are good things.

PS I have to work so may not be able to respond, but hopefully it gives you something to think about

I appreciate the good responses. Thank you. I read them, but so far I must respond as follows:

Being irrational and unfair, so long as it only hurts them rich fellers, is not okay. And remember, what constitutes a rich feller can always be changed. Law needs to be fair and rational for all.

Singling out a small group of people for an irrational, unfair burden seems distinctly un-American. This isn't Russia in 1917. Or Germany in the 1930s.

Boiling the frog by starting out at a low temperature and gradually heating things up is not much different from instituting and then applauding unfair, unnecessary policy merely because it hurts others and not ourselves.

And no, I'm not one of them rich fellers. Good thing, too, since so many others seem to hate them for succeeding.

Want to raise taxes in the higher brackets? FINE. Do that. Indeed, raise taxes in ALL income brackets. A surprisingly large percentage of lower-income earners pay no or little income tax, other than social security or self-employment tax. I disagree with BOTH parties about "tax cuts." America needs to start balancing its budget for a change. We need to stop running up debt to buy love and power for politicians.

But don't let this weird camel of a tax on unrealized income get its unfair, irrational nose under the tent. Instead, only use the income tax to tax ACTUAL income. As everybody else does. Don't just reflexively grin at every change, just because of party affiliation.

And before you compare this to the property tax on a house, please reflect on the much, much greater burden of evaluating your total net worth, which changes from day to day, compared to reading a real estate assessment that is determined at the GOVERNMENT'S expense and typically doesn't change that often.

Furthermore, even property taxes on homes can have a bad effect. If one county raises its property taxes too high, well-informed buyers can shy away from there, potentially holding down or even driving down home values, and people can even sell and move away. Similarly, an unrealized-gain tax on stocks could end up driving the market down, too, with a bad effect on the many pension funds that rely upon investment.

The only one besides the government that such a tax may help, instead of hurt, are lawyers, accountants and appaisers, as the demand for their services will rise, yet again. to enable people to figure out this tax. Is that efficient? People will have to pay not just the tax, but will have to pay LOTS of extra fees even to figure out the tax.

And by the way, if you dislike being bamboozled, you might wish to check the tax cuts that have been done in the recent past. Despite much contrary ranting, I think you'll discover that they cut the taxes of the middle class MORE, on a percentage basis, than they cut the taxes of the rich fellers. But seriously, don't believe me. Take out a calculator, find the brackets and their changes, and actually look.

Politicians LOVE to say that them rich fellers ain't payin' their fair share, to throw their constituents red meat. But that's not true. Look at the actual numbers. Don't be misled by unusual anecdotal reports of a billionaire paying more tax than his secretary. In truth, the least affluent pay very little and most of the load is being carried by the upper percentiles among earners.

Too much political demagoguing to gain power is going on. And too few seem to notice. Indeed, too many approve, perhaps because they hope for some of those nice freebies that America really can't afford.

@Noflaps I can tell by your mixture of small and capital letters, that you are really trying hard to hold back your anger.
Have you tried yoga?

No, @NaturalBornTraveller. As I have explained before, I use capital letters -- usually word by word -- only for emphasis.

I would use bold print or underlining, instead, if they were available, but they are not.

I am a lifelong meditator and have even experienced the first jhana (once). I am not at all angry, and rarely become so.

I remember, yet I still find it kind of intrusive. Which I think I mentioned before.
Because when someone highlight specific words or sentences, they tells people to focus on these words in particular, this is the manner of someone trying, not to educate or enrich people with knowledge, but someone who emphasizes on something particular to influence them.

For example, a line from #1
> moral and economic MADNESS
Does madness need to be highlighted?
Personally I think not.

Advertisement agencies uses this trick all the time.
And I know you hate advertisements, in all shapes and forms, just as much as I do.
Yet still, you use some same methods in your writing as they do.
No need to capitalize the word madness in the #1 to convey your meaning.
People who read #1, they know you think this is madness.

Sometimes you write, like you were writing a speech ment only to be spoken, and not words ment to be read.

I disagree, @NaturalBornTraveller. Most people find many paragraphs of small font rather difficult to read. Emphasis draws the eye and facilitates communication.

I'm sorry if you find it irritating. You certainly don't have to do it yourself.

But bold font and italics are used in the world. Here, I must get by with single word caps, for emphasis.

I am not capitalizing whole posts -- which I agree would look more like shouting. I am simply trying to make sure that meaning is transferred effectively from the writer to the reader.

Online posting occurs in a rather informal environment. It's akin to speech, but without that very helpful body language and those intonation and inflection changes that are available to speakers.

You were quite astute in observing that I write as if I were speaking. Indeed, I have done much public speaking, and it is often a much more effective way to communicate.

Telling me not to use one-word caps for emphasis is like insisting that I speak in a monotone, without any body language.

Ask the average Italian if that works better. I suspect many would insist that it would be unnatural and less effective.

Here, the only hand gestures available are the tap-tap-tapping of the keys.

@Noflaps said in #9:
> I disagree, @NaturalBornTraveller. Most people find many paragraphs of small font rather difficult to read.
Do they now?
I assume you speak related to your own professional experience, and not a in relation to any scientific study.

> Emphasis draws the eye and facilitates communication.
So your need to emphasize on a words meaning, in a four worked phrase, was just to insure people missed the last 25% of your sentence?

Come on.
Madness is a "trigger" word. No need to emphasize the meaning by using CAPITAL letters.
For example: Scientists say it is MADNESS, but this used car salesmans SOLUTION is AMAZING.