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How about tax only on real terms, but on liquidation taxes are retroactively paid as though you bought and sold the asset each year. This means you don't get a
by reitzensteinm 7y ago
How about tax only on real terms, but on liquidation taxes are retroactively paid as though you bought and sold the asset each year.
This means you don't get an interest free loan from the government to continue to invest in an asset just because you haven't sold yet.
- AnthonyMouse 7y agoThe problem there is that you effectively force liquidation in order to pay the taxes, even if you wouldn't have sold the asset. Not such a problem for index funds, but a big deal for small business owners who would have to sell a stake in their business as soon as it starts doing well in order to pay the tax on its higher current market value, which includes the net present value of expected future profits that haven't yet been realized and so can't be used to pay the tax today. Having the government give people de facto interest free loans of their own money in order to continue to investing it is also optimal anyway, because the government borrows at an interest rate significantly lower than the average market rate of return. They actually come out ahead by lending the money to investors who are then collecting taxable interest on it, because the tax on the interest can be more than the rate the government pays to issue bonds in the meantime, not even counting the overall economic benefit of stimulating investment (i.e. more/better jobs for people who are themselves paying taxes).
- reitzensteinm 7y agoI'm saying that you do the calculations retroactively on sale. No taxes are due until then. Even if the asset spikes, no taxes are due if ultimately sold at a loss.