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Reading the title, this seems like an awesome proposal, but paying attention to the details... > tax the appreciation of assets owned by the very wealthy as in

by tomp 8y ago

Reading the title, this seems like an awesome proposal, but paying attention to the details... > tax the appreciation of assets owned by the very wealthy as income each year, an approach known as mark-to-market taxation > the proposal would be structured to affect only the richest 0.1 percent of Americans Yeah, it's almost certainly a terrible idea. (1) Mark-to-market is terrible, unrealistic, and arbitrary. Imagine a 70 year old grandma owning a house in SF... it's price rises 20% in a year, what is she to do? She has no money... the only thing she can do is sell the house! Even worse, what happens when there's a crisis, and house prices fall 20%? You lost more than you gained, and you still owe last year's tax! (2) only top 0.1% and like ordinary income is fundamentally incompatible - I agree that capital gains should be taxed like income (and with the tax / offshore assets reforms that the US has done in the past few years, it's uniquely positioned among countries to actually implement such tax), but I see no reason why it shouldn't apply to everybody (same as income tax).

asdf333 8y ago
i understand your sentiment on the first but that’s what originally led to proposition 13 and is responsible for a lot of housing and budget issues in CA. i am not saying mark to market makes sense but for this rule, if the grandma is in the .1% her net worth is well north of 10m i’m sure she will be able to afford the 20% increase i’m not saying mark to market makes sense but your grandma example is not a good counter example
- ianai 8y ago
  It’d be pretty easy to carve out for people without resources to pay such taxes.
  - joeyrideout 8y ago
    They will leave the country immediately.
    - gumby 8y ago
      It turns out most people don't organize their lives around tax policy. And in the case of US persons (citizens and GC holders) leaving the country doesn't remove the obligation to file and pay taxes.
    - ianai 8y ago
      Doubtful. Maybe they’ll move somewhere else in the US. Ie dispersing throughout the rest of the US. They’d increase demand for goods/services elsewhere and maybe real estate becomes cheaper where they left.
- gumby 8y ago
  Prop 13 caused lots of problems and also provided structural social benefits, allowing people to stay in their homes. Removing prop 13 from commercial buildings (nobody lives there) and removing the socially corrosive ability to give it to your kids tax free would fix most of the financial and social problems and preserve the best part.
  - sologoub 8y ago
    Or better yet, remove corporations from being eligible to enjoy prop. 13 all together - whether commercial, industrial, farm or residential. This would keep grandma in her home or farmstead, but prevent corps from selling, but doing tax free exchanges and preserving the low tax base forever. PS, mark-to-market is a terrible idea and these gains are not income for most people until sold. We already have property taxes, we just need them to work.
  - amluto 8y ago
    I think it should be removed from everything except an owner-occupied primary residence. I see no social benefit to giving a tax advantage to long time landlords.
KirinDave 8y ago
> Imagine a 70 year old grandma owning a house in SF... it's price rises 20% in a year, what is she to do? She has no money... the only thing she can do is sell the house! Even worse, what happens when there's a crisis, and house prices fall 20%? You lost more than you gained, and you still owe last year's tax! I'm... not sure this is right. But! Let's take it at face value for a moment. A major problem in SF is that folks who are entirely concentrated in housing investments are likely to stymie the building of necessary services and density increases because meeting housing demand tends to make their house cheaper, and investment and essential services might negatively impact property values. We see these forces at play all over the city. And while it's easy to say, "Oh yeah we totally wanna keep those Mission Grannies in their homes," the reality in SF is that nearly all the homes owned are rented out to said grannies. > only top 0.1% and like ordinary income is fundamentally incompatible - I agree that capital gains should be taxed like income (and with the tax / offshore assets reforms that the US has done in the past few years, it's uniquely positioned among countries to actually implement such tax), but I see no reason why it shouldn't apply to everybody (same as income tax). Given that taxation is fundamentally different in its impact between the rich and the poor, it seems like it's reasonable to have the rules differ to be sensitive to it. Even if that is only a transient condition, it is not like we're in a world where the US tax code isn't complicated and this will be the proverbial straw.
joeyrideout 8y ago
100% agree. This is more of a wealth tax than a (realized) capital gains tax. Imagine holding a growth asset like a small tech company and its value goes up 10x before the end of the tax year, prompting a very large taxation. Then shortly after, it crashes down to 2x. You've probably lost money still. This would have serious implications for private equity firms and other risk-takers.
- sologoub 8y ago
  Firms usually have diversified holdings and will use the event like this to write-down losses and optimise taxation for the next year. Where this is a problem is for people with undiversified holdings, such as early employees exercising stock options. Under current system, they are on the hook for the tax bill, but if the stock crashes next year, they’d lose out and likely not having any offsetting gain where the loss could be a shield. Unlike the said firms.

by tomp 8y ago

asdf333 8y ago

i understand your sentiment on the first but that’s what originally led to proposition 13 and is responsible for a lot of housing and budget issues in CA. i am not saying mark to market makes sense but for this rule, if the grandma is in the .1% her net worth is well north of 10m i’m sure she will be able to afford the 20% increase i’m not saying mark to market makes sense but your grandma example is not a good counter example

ianai 8y ago
It’d be pretty easy to carve out for people without resources to pay such taxes.
- joeyrideout 8y ago
  They will leave the country immediately.
  - gumby 8y ago
    It turns out most people don't organize their lives around tax policy. And in the case of US persons (citizens and GC holders) leaving the country doesn't remove the obligation to file and pay taxes.
  - ianai 8y ago
    Doubtful. Maybe they’ll move somewhere else in the US. Ie dispersing throughout the rest of the US. They’d increase demand for goods/services elsewhere and maybe real estate becomes cheaper where they left.
gumby 8y ago
Prop 13 caused lots of problems and also provided structural social benefits, allowing people to stay in their homes. Removing prop 13 from commercial buildings (nobody lives there) and removing the socially corrosive ability to give it to your kids tax free would fix most of the financial and social problems and preserve the best part.
- sologoub 8y ago
  Or better yet, remove corporations from being eligible to enjoy prop. 13 all together - whether commercial, industrial, farm or residential. This would keep grandma in her home or farmstead, but prevent corps from selling, but doing tax free exchanges and preserving the low tax base forever. PS, mark-to-market is a terrible idea and these gains are not income for most people until sold. We already have property taxes, we just need them to work.
- amluto 8y ago
  I think it should be removed from everything except an owner-occupied primary residence. I see no social benefit to giving a tax advantage to long time landlords.

KirinDave 8y ago

> Imagine a 70 year old grandma owning a house in SF... it's price rises 20% in a year, what is she to do? She has no money... the only thing she can do is sell the house! Even worse, what happens when there's a crisis, and house prices fall 20%? You lost more than you gained, and you still owe last year's tax! I'm... not sure this is right. But! Let's take it at face value for a moment. A major problem in SF is that folks who are entirely concentrated in housing investments are likely to stymie the building of necessary services and density increases because meeting housing demand tends to make their house cheaper, and investment and essential services might negatively impact property values. We see these forces at play all over the city. And while it's easy to say, "Oh yeah we totally wanna keep those Mission Grannies in their homes," the reality in SF is that nearly all the homes owned are rented out to said grannies. > only top 0.1% and like ordinary income is fundamentally incompatible - I agree that capital gains should be taxed like income (and with the tax / offshore assets reforms that the US has done in the past few years, it's uniquely positioned among countries to actually implement such tax), but I see no reason why it shouldn't apply to everybody (same as income tax). Given that taxation is fundamentally different in its impact between the rich and the poor, it seems like it's reasonable to have the rules differ to be sensitive to it. Even if that is only a transient condition, it is not like we're in a world where the US tax code isn't complicated and this will be the proverbial straw.

joeyrideout 8y ago

100% agree. This is more of a wealth tax than a (realized) capital gains tax. Imagine holding a growth asset like a small tech company and its value goes up 10x before the end of the tax year, prompting a very large taxation. Then shortly after, it crashes down to 2x. You've probably lost money still. This would have serious implications for private equity firms and other risk-takers.

sologoub 8y ago
Firms usually have diversified holdings and will use the event like this to write-down losses and optimise taxation for the next year. Where this is a problem is for people with undiversified holdings, such as early employees exercising stock options. Under current system, they are on the hook for the tax bill, but if the stock crashes next year, they’d lose out and likely not having any offsetting gain where the loss could be a shield. Unlike the said firms.