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Nobody is happy to pay taxes, but yes. Year 1: pay taxes on $10K in savings, $100K house. Year 2: pay taxes on $10K in stocks, $80K house. Year 3:

by mLuby 7y ago

Nobody is happy to pay taxes, but yes. Year 1: pay taxes on $10K in savings, $100K house. Year 2: pay taxes on $10K in stocks, $80K house. Year 3: pay taxes on $20K in stocks, $120K house. Year 4: pay taxes on $0 in stocks, $100K house.

troupe 7y ago
So year 4 your stock goes back down to $10k or even goes to $0 and you'd be fine with having paid taxes the wealth you had even though it wasn't actually realized as money?
- mLuby 7y ago
  Yes. Not sure why that's a strange concept… Taxing assets instead of income doesn't magically make investments worthless.
  - troupe 7y ago
    It doesn't make it worthless, but right now you only pay income tax on assets with volatile valuations when you actually realize the gain because any gain on paper may not actually be realized. Let's say you invest $1000 in a highly risky stock. It does very well and goes up to $10,000. You haven't sold it, but the government taxes you a wealth tax of 20% so you pay $2,000. The next year it goes down to $1,000 again and you sell it. In terms of actual profit/loss you haven't made or lost any money. However, you've paid twice as much in tax as you originally invested. (Pick any percentage you want as a wealth tax and you run into the same issue.)
    - mLuby 7y ago
      Agreed that's how taxing income currently works. But we're talking about taxing wealth. What you're describing is this: Buy at 1K Sell at 10K Taxed on 10K Buy at 10K Sell at 1K I understand your concern about volatile assets, but aren't all assets (even currency and gold) risky over a long enough time period?
      - kbutler 7y ago
        The point is: Buy at 1K Hold while value goes up to 10K Tax on wealth at 10K (Next year) Tax on wealth at 20K ... (N years later) Sell at 1K With a liquid asset like stocks, it is at least possible to pay the tax by selling part of the stock, and you could get a credit in future years for capital losses. But what if the wealth is your elderly mother's home? Or the family farm or small business? It's really hard to sell part of those things to pay a "wealth tax" every year.

by mLuby 7y ago

troupe 7y ago

So year 4 your stock goes back down to $10k or even goes to $0 and you'd be fine with having paid taxes the wealth you had even though it wasn't actually realized as money?

mLuby 7y ago
Yes. Not sure why that's a strange concept… Taxing assets instead of income doesn't magically make investments worthless.
- troupe 7y ago
  It doesn't make it worthless, but right now you only pay income tax on assets with volatile valuations when you actually realize the gain because any gain on paper may not actually be realized. Let's say you invest $1000 in a highly risky stock. It does very well and goes up to $10,000. You haven't sold it, but the government taxes you a wealth tax of 20% so you pay $2,000. The next year it goes down to $1,000 again and you sell it. In terms of actual profit/loss you haven't made or lost any money. However, you've paid twice as much in tax as you originally invested. (Pick any percentage you want as a wealth tax and you run into the same issue.)
  - mLuby 7y ago
    Agreed that's how taxing income currently works. But we're talking about taxing wealth. What you're describing is this: Buy at 1K Sell at 10K Taxed on 10K Buy at 10K Sell at 1K I understand your concern about volatile assets, but aren't all assets (even currency and gold) risky over a long enough time period?
    - kbutler 7y ago
      The point is: Buy at 1K Hold while value goes up to 10K Tax on wealth at 10K (Next year) Tax on wealth at 20K ... (N years later) Sell at 1K With a liquid asset like stocks, it is at least possible to pay the tax by selling part of the stock, and you could get a credit in future years for capital losses. But what if the wealth is your elderly mother's home? Or the family farm or small business? It's really hard to sell part of those things to pay a "wealth tax" every year.