13 ms·

But what's the alternative? Forcing people to sell? Forcing people to mark-to-market? There's no way to (fairly) tax capital gains except at the time of sale

by finnh 5y ago

But what's the alternative? Forcing people to sell? Forcing people to mark-to-market? There's no way to (fairly) tax capital gains except at the time of sale.

jermaustin1 5y ago
Except the uber wealthy who can afford to lose money to pay taxes for the infrastructure that has enabled their explosive asset growth. I agree that you and me, and even my paper-millionaire neighbors and friends cannot afford to be taxed on their assets, but a billionaire can, even a paper billionaire can drum up the cash or debt when needed to pay taxes. They do it every day for their large purchases.
- greenwich26 5y ago
  Sounds pretty authoritarian. > Except the uber wealthy who can afford to lose money to pay taxes for the infrastructure that has enabled their explosive asset growth. Federal income tax almost never gets used for infrastructure. Infrastructure is mostly built by state and local governments, which receive most of their income from sales tax and property tax, and other taxes, which are already almost entirely paid by businesses. So, they are already paying for the infrastructure that enabled their growth.
  - jessaustin 5y ago
    So you're not opposed to property tax? That's just what we're considering here, for securities rather than real property.
    - greenwich26 5y ago
      Various levels of local governments provide many services and benefits for my physical property located in their jurisdictions, so I do not oppose a reasonable property tax. But the federal government provides no services or benefits to the securities in my vault, so a general federal wealth tax on them is altogether different, and I oppose it.
      - jessaustin 5y ago
        The federal government has spent several trillion dollars fighting several disastrously stupid wars over the last several decades. Please don't try to pretend all that death and destruction wasn't good for the securities in your vault.
        simondotau 5y ago
        Or if that’s too abstract for you, think about how the securities in your vault would fair in the absence of government maintaining basic law and order; honouring and enforcing otherwise fictional property such as copyright, trademarks and patents; some degree of redress in a court system; and some degree of stability of regulation of markets. So much of the wealth on this planet relies on Governments for it to exist and to persist.
        greenwich26 5y ago
        These sort of administrative and bureaucratic activities are less than 1% of federal spending though. So your argument makes no sense.
        cableshaft 5y ago
        Military spending is 54% of the federal discretionary budget, though (the discretionary budget is about 1/3rd of the total budget). That all contributes to its security, if not all directly.
        greenwich26 5y ago
        According to the 2020 figures, national defense was 11% of federal spending. Discretionary vs. mandatory seems irrelevant here. We might as well say military spending is 100% of military spending. It's just dividing it by something to make it sound higher, usually for propaganda purposes. Nevertheless I totally agree some part of that 11% will benefit business and commerce. But it is still a terrible deal. In any other context no one would ever buy something with a 90% "commission".
  - sokoloff 5y ago
    A great many state projects are 50-90% funded by federal grants. Interstate highway projects and airport projects in particular are often 90% federal (and are self-evidently infrastructure).
- willcipriano 5y ago
  The problem really isn't people not paying tax. Americans have similar expenditures to Europeans on a per capita basis ($20,674 US vs $17,202 UK or $20,960 in France the highest taxed nation in terms of % of GDP) they just get considerably less for their money. https://en.m.wikipedia.org/wiki/List_of_countries_by_government_budget_per_capita https://en.m.wikipedia.org/wiki/List_of_countries_by_governm...
- pythonaut_16 5y ago
  That's an argument for a tax on those assets then. Corporate taxes for stocks, property taxes for real estate, etc.
bradleyjg 5y ago
Probably true in general, but if people are already monetizing assets through borrowing then likely: they have liquidity and b) the asset has a fairly concrete value. I’m not sure how you’d write a matching tax provision but there should be something. Maybe the answer is to rely more heavily on VATs as Europe does.
teachingassist 5y ago
> Forcing people to mark-to-market? The Netherlands manages to do exactly that. > There's no way to (fairly) tax capital gains The fair part is that it's taxed - otherwise, it's unfair on people who are unable to exploit this tax avoidance. We are talking about people with meaningful wealth. They can afford to be taxed without waiting for it to be perfectly 'fair'. Letting them pay $0 until its fair doesn't make sense. It makes more sense to pay the expected amount, at least until you have the receipts. Indeed, that's how my own labour income is already taxed. I first pay income tax for 2021 based on my income in 2020 - whenever it turns out to be too much, I can declare it later and will get a refund. But, I can't pay $0.
- gambiting 5y ago
  >>We are talking about people with meaningful wealth. They can afford to be taxed without waiting for it to be perfectly 'fair'. Letting them pay $0 until its fair doesn't make sense But....shares are useless until sold. Even if you have 1BN worth of shares it means nothing until you actually sell them/trade them? In fact, they could be worth nothing next week, how can you be taxing someone on a hypothetical sale value? >>Indeed, that's how my own labour income is already taxed. I first pay income tax for 2021 based on my income in 2020 - whenever it turns out to be too much, I can declare it later and will get a refund. But, I can't pay $0. That's literally insane. So you're basically giving your government a loan a year in advance? Why? Why not pay your income tax when you know - you get your income, like the rest of Europe does?
  - cycomanic 5y ago
    > That's literally insane. So you're basically giving your government a loan a year in advance? Why? Why not pay your income tax when you know - you get your income, like the rest of Europe does? I think you're misunderstanding. The tax rate they are paying is estimated based on the previous year income (we'll actually it's a combination of present income and previous years) because the tax office can't know your exact income (and deductions) until the end of the year. So when you do your tax return at the end of the year you either get a refund or need to pay some more. I'm pretty sure that's how it works in most of Europe (at least in most of the countries I'm aware of). So there is no loan to the government, they still pay the tax as a rate on when the income comes in.
jessaustin 5y ago
Real property is subject to tax every year. Every county in USA has an elaborate hierarchy of assessors and collectors devoted to this. There's no conceptual reason that securities couldn't also be subject to tax on a regular basis, and it could be made much simpler by only levying the tax on e.g. the top 1% of owners of securities.
- dboreham 5y ago
  Wouldn't they figure out a way to split their holdings into smaller delegate trusts, something like that, to come under the threshold?
  - jessaustin 5y ago
    That's certainly a concern, but the IRS works for us so if we choose for them to investigate tax evasion by the wealthy they should do that.
    - zentiggr 5y ago
      You think the IRS works for us... that's cute. Unless you are a large corporation / billionaire yourself, in which case I apologize, yes it works for you.
      - jessaustin 5y ago
        Well, obviously, I don't actually think that. USA as a system of representative government, if it ever actually existed, certainly doesn't exist now. There is no way for the polity as it exists to stop taking everything from the majority of citizens and giving it to the authoritarian rich. The eventual answer will be a breakup, with the wealthy Pacific states escaping first and various other regional subdivisions giving up on the dream until finally the DC vampires will have no more victims left. Some of these successors to USA will reproduce the same broken system, only at a mercifully smaller scale. Others, I hope, will reduce the harms that arbitrary authority inflicts on humanity. Since we'll all still be Americans, many of us will be able to move to e.g. western Iowa if they figure out the best way to live before the rest of us do. At least once bond-holders are no longer tempted to finance our horrible wars we won't menace the rest of the world with so many of them. However, when discussing the various symptoms of this fundamental malady, as we are ITT, it's often useful to take the marketing at its word. It would be nice if our IRS were created and operated in the interests of justice for the vast majority of Americans. Let's imagine how that might be, and see how far the actual falls short of the ideal. The quicker we see USA as it is rather than how it has been sold to us from birth, the quicker we'll figure out something else marginally less awful.
the-rc 5y ago
I agree that forcing people to sell has its issues, but perhaps you could have a tax on loans of a certain size and/or not being able to deduct as much for the interest paid. Then nobody would be forced to sell, unless they wanted very large amounts of cash. I'm sure someone could find loopholes for those ideas as well.
taneq 5y ago
I don't know. I suspect the true answer is "there is no fair way to tax people equally across multiple orders of magnitude of resource ownership and multiple wildly different types of resource," especially when dealing with individuals who are approaching the same economic ballpark as the governments that are attempting to tax them. I'm just pointing out that capital gains being taxed "eventually" isn't watertight. And it's not as if the current system is fair. You regularly see cases like that kid who won a trip to the ISS and had to give it up because it was valued at $X million dollars and to accept it he'd have to somehow pay hundreds of thousands of dollars in taxes. There's also the issues with stock options that come up here from time to time, where someone is owed millions in options that they can't actually use because they'd have to first pay a percentage of the value in taxes.
- jkhdigital 5y ago
  As someone who is currently undergoing a tax audit for a year in which I reported ~$20M in cryptocurrency trades but only realized about $10k in income from them, I can confirm that "fairness" does not appear to be a goal of the tax code. Cryptocurrency (and especially derivatives) really exposes some of the head-scratching aspects of the tax code around capital gains.
- mindcrime 5y ago
  You could have stopped at "there is no fair way to tax people".
ncallaway 5y ago
Don't these exact same arguments apply to property taxes? Yet property taxes are very common throughout the US. Would you make the same arguments to eliminate property taxes? If not, why are capital gains any different?
- finnh 5y ago
  (not sure why the downvotes, I just upvoted you - this is a solid question) I suppose because property values are considered to be more stable than, say, GameStock puts. But you raise a good point, that what we're talking about (really) is a "how we should tax _wealth_" vs "how should we tax _capital gains_".
  - ncallaway 5y ago
    I feel like "capital gains" occupy a strange middle-ground between income and wealth. Capital gains clearly represent a change in your wealth, and are somewhat "income-like". But they also are a persistent thing that you are in control of until the time of sale, and are somewhat "property-like". It seems plausible that we could come up with a reasonable-scheme for capital gains taxes that manages to accommodate both properties, but I think it'd take a fair amount of consideration to make sure that there aren't nasty edge cases, and the benefits outweigh the additional accounting.
    - TimPC 5y ago
      Capital gains aren't a strange middle ground. They are the best attempt to have an income system work: they allow the taxation of income from money. A system that taxes only income from labour is grossly unfair to the poor. A system that taxes all wealth is overly bureaucratic and deeply invasive.
- kbelder 5y ago
  I'm against wealth taxes, but you make a good point. You may have just solidified my opinion against property taxes :) Seriously, evaluating and setting values for property takes a lot of resources at the city/county level... it would take a massive increase to properly evaluate wealth for taxation, because so much of it is completely intangible and abstract.
RyanHamilton 5y ago
What if you ask them to declare the taxable value, however anyone is allowed to step in and purchase the asset listed at that value? If you want to list your business as losing money and worth no taxable value. Someone can pay what you say it's worth and take it over. Using greed to align incentives.
- nybble41 5y ago
  The problem with that (and all other forms of eminent domain) is that the value of a piece of property to the owner is often far higher than its value on the open market. Even if this is purely a business decision and not, say, related to an irreplaceable family heirloom, the risk of a forced sale at an inconvenient time would be far too disruptive. For example, let's say you own a car with an appraised value of $25,000—meaning that you could buy one similar to your for that price (more or less). So you declare the taxable value to be $25,000 and pay the corresponding tax, and then right before you leave for an extended road trip someone decides that they would rather have your vehicle than one from a dealer and makes you an offer for $25,000 which you cannot legally refuse. Now you're without a car and scrambling to buy a replacement and get it registered, insured, packed, and ready to leave on short notice. Your plans are disrupted and the new vehicle, while "equivalent" to the one you had before in terms of factory specs and general condition, just isn't the same as the one you had carefully maintained and customized to your liking. In practice people would need to over-declare the value of any property they didn't want to sell, which effectively makes this a tax on how attached people are to specific items and not a tax on their "fair" market value. The situation becomes even worse if the owner has enemies willing to over-pay for the item purely out of spite. One of the fundamental rights of ownership is the right to choose not to sell, no matter how much someone offers.
  - jellicle 5y ago
    Pretty trivial to declare your car at $26,000. The extra tax is minimal, and if someone buys it, the $1000 bonus will cushion your annoyance. If we think that "everyone" will have to "overdeclare" in such fashion, then obviously the government is collecting more revenue than it intended and will lower the tax rates to compensate, so in the end, you'll pay the same dollar amount in tax on your $26,000 car as you would have on your $25,000 car. So, such a system would work fine. Particularly for property taxes, which are currently the subject of much scamming (apartment buildings in NYC being valued at a few percent of their actual market value, for example).
Majromax 5y ago
> Forcing people to mark-to-market? For liquid investments that have a well-agreed-upon market value, that wouldn't be a problem above a moderate wealth threshold. In particular, it should be easy to obtain credit against these securities (if necessary/desired) to pay the tax bill. The loans would be very secure, since by definition they would have appreciated more than the taxes owing. And if the current offsetting-loss notions are retained (e.g. losses can be carried back to offset prior gains), if the securities fall in value then the taxes paid would be refunded, providing another way to repay the loan. In the meantime, you'd avoid a current inefficiency of the tax system that encourages people to hold on to subpar or undesirable investments to avoid realizing taxable gains. The entire cottage industry of deciding which investments are "tax efficient" and should be held in taxable versus tax-sheltered accounts should go away.
zhoujianfu 5y ago
What if the government purposely targeted relatively high inflation by printing money (and distributing it to all as a UBI). Inflation seems like a pretty efficient wealth tax… and if the money is distributed fairly as a UBI that would cancel out the benefits that the wealthy have vs regular people to protect against inflation.
- RyanHamilton 5y ago
  They would purchase inflation proof assets e.g. property. Then increase the rent every year in line with inflation.
TuringNYC 5y ago
Actually it is even worse -- 1. What happens if the MtM is negative (your have unrealized losses) -- does the government now owe you a refund? 2. Isnt this unfairly in favor knowledge businesses where there is tremendous value but no real MtM? So a private accounting firm with lots of clients gets no real MtM while a farm with physical assets gets a high MtM that is taxed.

by finnh 5y ago

But what's the alternative? Forcing people to sell? Forcing people to mark-to-market? There's no way to (fairly) tax capital gains except at the time of sale.

jermaustin1 5y ago

Except the uber wealthy who can afford to lose money to pay taxes for the infrastructure that has enabled their explosive asset growth. I agree that you and me, and even my paper-millionaire neighbors and friends cannot afford to be taxed on their assets, but a billionaire can, even a paper billionaire can drum up the cash or debt when needed to pay taxes. They do it every day for their large purchases.

greenwich26 5y ago
Sounds pretty authoritarian. > Except the uber wealthy who can afford to lose money to pay taxes for the infrastructure that has enabled their explosive asset growth. Federal income tax almost never gets used for infrastructure. Infrastructure is mostly built by state and local governments, which receive most of their income from sales tax and property tax, and other taxes, which are already almost entirely paid by businesses. So, they are already paying for the infrastructure that enabled their growth.
- jessaustin 5y ago
  So you're not opposed to property tax? That's just what we're considering here, for securities rather than real property.
  - greenwich26 5y ago
    Various levels of local governments provide many services and benefits for my physical property located in their jurisdictions, so I do not oppose a reasonable property tax. But the federal government provides no services or benefits to the securities in my vault, so a general federal wealth tax on them is altogether different, and I oppose it.
    - jessaustin 5y ago
      The federal government has spent several trillion dollars fighting several disastrously stupid wars over the last several decades. Please don't try to pretend all that death and destruction wasn't good for the securities in your vault.
      - simondotau 5y ago
        Or if that’s too abstract for you, think about how the securities in your vault would fair in the absence of government maintaining basic law and order; honouring and enforcing otherwise fictional property such as copyright, trademarks and patents; some degree of redress in a court system; and some degree of stability of regulation of markets. So much of the wealth on this planet relies on Governments for it to exist and to persist.
        greenwich26 5y ago
        These sort of administrative and bureaucratic activities are less than 1% of federal spending though. So your argument makes no sense.
        cableshaft 5y ago
        Military spending is 54% of the federal discretionary budget, though (the discretionary budget is about 1/3rd of the total budget). That all contributes to its security, if not all directly.
        greenwich26 5y ago
        According to the 2020 figures, national defense was 11% of federal spending. Discretionary vs. mandatory seems irrelevant here. We might as well say military spending is 100% of military spending. It's just dividing it by something to make it sound higher, usually for propaganda purposes. Nevertheless I totally agree some part of that 11% will benefit business and commerce. But it is still a terrible deal. In any other context no one would ever buy something with a 90% "commission".
- sokoloff 5y ago
  A great many state projects are 50-90% funded by federal grants. Interstate highway projects and airport projects in particular are often 90% federal (and are self-evidently infrastructure).
willcipriano 5y ago
The problem really isn't people not paying tax. Americans have similar expenditures to Europeans on a per capita basis ($20,674 US vs $17,202 UK or $20,960 in France the highest taxed nation in terms of % of GDP) they just get considerably less for their money. https://en.m.wikipedia.org/wiki/List_of_countries_by_government_budget_per_capita https://en.m.wikipedia.org/wiki/List_of_countries_by_governm...
pythonaut_16 5y ago
That's an argument for a tax on those assets then. Corporate taxes for stocks, property taxes for real estate, etc.

bradleyjg 5y ago

Probably true in general, but if people are already monetizing assets through borrowing then likely: they have liquidity and b) the asset has a fairly concrete value. I’m not sure how you’d write a matching tax provision but there should be something. Maybe the answer is to rely more heavily on VATs as Europe does.

teachingassist 5y ago

> Forcing people to mark-to-market? The Netherlands manages to do exactly that. > There's no way to (fairly) tax capital gains The fair part is that it's taxed - otherwise, it's unfair on people who are unable to exploit this tax avoidance. We are talking about people with meaningful wealth. They can afford to be taxed without waiting for it to be perfectly 'fair'. Letting them pay $0 until its fair doesn't make sense. It makes more sense to pay the expected amount, at least until you have the receipts. Indeed, that's how my own labour income is already taxed. I first pay income tax for 2021 based on my income in 2020 - whenever it turns out to be too much, I can declare it later and will get a refund. But, I can't pay $0.

gambiting 5y ago
>>We are talking about people with meaningful wealth. They can afford to be taxed without waiting for it to be perfectly 'fair'. Letting them pay $0 until its fair doesn't make sense But....shares are useless until sold. Even if you have 1BN worth of shares it means nothing until you actually sell them/trade them? In fact, they could be worth nothing next week, how can you be taxing someone on a hypothetical sale value? >>Indeed, that's how my own labour income is already taxed. I first pay income tax for 2021 based on my income in 2020 - whenever it turns out to be too much, I can declare it later and will get a refund. But, I can't pay $0. That's literally insane. So you're basically giving your government a loan a year in advance? Why? Why not pay your income tax when you know - you get your income, like the rest of Europe does?
- cycomanic 5y ago
  > That's literally insane. So you're basically giving your government a loan a year in advance? Why? Why not pay your income tax when you know - you get your income, like the rest of Europe does? I think you're misunderstanding. The tax rate they are paying is estimated based on the previous year income (we'll actually it's a combination of present income and previous years) because the tax office can't know your exact income (and deductions) until the end of the year. So when you do your tax return at the end of the year you either get a refund or need to pay some more. I'm pretty sure that's how it works in most of Europe (at least in most of the countries I'm aware of). So there is no loan to the government, they still pay the tax as a rate on when the income comes in.

jessaustin 5y ago

Real property is subject to tax every year. Every county in USA has an elaborate hierarchy of assessors and collectors devoted to this. There's no conceptual reason that securities couldn't also be subject to tax on a regular basis, and it could be made much simpler by only levying the tax on e.g. the top 1% of owners of securities.

dboreham 5y ago
Wouldn't they figure out a way to split their holdings into smaller delegate trusts, something like that, to come under the threshold?
- jessaustin 5y ago
  That's certainly a concern, but the IRS works for us so if we choose for them to investigate tax evasion by the wealthy they should do that.
  - zentiggr 5y ago
    You think the IRS works for us... that's cute. Unless you are a large corporation / billionaire yourself, in which case I apologize, yes it works for you.
    - jessaustin 5y ago
      Well, obviously, I don't actually think that. USA as a system of representative government, if it ever actually existed, certainly doesn't exist now. There is no way for the polity as it exists to stop taking everything from the majority of citizens and giving it to the authoritarian rich. The eventual answer will be a breakup, with the wealthy Pacific states escaping first and various other regional subdivisions giving up on the dream until finally the DC vampires will have no more victims left. Some of these successors to USA will reproduce the same broken system, only at a mercifully smaller scale. Others, I hope, will reduce the harms that arbitrary authority inflicts on humanity. Since we'll all still be Americans, many of us will be able to move to e.g. western Iowa if they figure out the best way to live before the rest of us do. At least once bond-holders are no longer tempted to finance our horrible wars we won't menace the rest of the world with so many of them. However, when discussing the various symptoms of this fundamental malady, as we are ITT, it's often useful to take the marketing at its word. It would be nice if our IRS were created and operated in the interests of justice for the vast majority of Americans. Let's imagine how that might be, and see how far the actual falls short of the ideal. The quicker we see USA as it is rather than how it has been sold to us from birth, the quicker we'll figure out something else marginally less awful.

the-rc 5y ago

I agree that forcing people to sell has its issues, but perhaps you could have a tax on loans of a certain size and/or not being able to deduct as much for the interest paid. Then nobody would be forced to sell, unless they wanted very large amounts of cash. I'm sure someone could find loopholes for those ideas as well.

taneq 5y ago

I don't know. I suspect the true answer is "there is no fair way to tax people equally across multiple orders of magnitude of resource ownership and multiple wildly different types of resource," especially when dealing with individuals who are approaching the same economic ballpark as the governments that are attempting to tax them. I'm just pointing out that capital gains being taxed "eventually" isn't watertight. And it's not as if the current system is fair. You regularly see cases like that kid who won a trip to the ISS and had to give it up because it was valued at $X million dollars and to accept it he'd have to somehow pay hundreds of thousands of dollars in taxes. There's also the issues with stock options that come up here from time to time, where someone is owed millions in options that they can't actually use because they'd have to first pay a percentage of the value in taxes.

jkhdigital 5y ago
As someone who is currently undergoing a tax audit for a year in which I reported ~$20M in cryptocurrency trades but only realized about $10k in income from them, I can confirm that "fairness" does not appear to be a goal of the tax code. Cryptocurrency (and especially derivatives) really exposes some of the head-scratching aspects of the tax code around capital gains.
mindcrime 5y ago
You could have stopped at "there is no fair way to tax people".

ncallaway 5y ago

Don't these exact same arguments apply to property taxes? Yet property taxes are very common throughout the US. Would you make the same arguments to eliminate property taxes? If not, why are capital gains any different?

finnh 5y ago
(not sure why the downvotes, I just upvoted you - this is a solid question) I suppose because property values are considered to be more stable than, say, GameStock puts. But you raise a good point, that what we're talking about (really) is a "how we should tax _wealth_" vs "how should we tax _capital gains_".
- ncallaway 5y ago
  I feel like "capital gains" occupy a strange middle-ground between income and wealth. Capital gains clearly represent a change in your wealth, and are somewhat "income-like". But they also are a persistent thing that you are in control of until the time of sale, and are somewhat "property-like". It seems plausible that we could come up with a reasonable-scheme for capital gains taxes that manages to accommodate both properties, but I think it'd take a fair amount of consideration to make sure that there aren't nasty edge cases, and the benefits outweigh the additional accounting.
  - TimPC 5y ago
    Capital gains aren't a strange middle ground. They are the best attempt to have an income system work: they allow the taxation of income from money. A system that taxes only income from labour is grossly unfair to the poor. A system that taxes all wealth is overly bureaucratic and deeply invasive.
kbelder 5y ago
I'm against wealth taxes, but you make a good point. You may have just solidified my opinion against property taxes :) Seriously, evaluating and setting values for property takes a lot of resources at the city/county level... it would take a massive increase to properly evaluate wealth for taxation, because so much of it is completely intangible and abstract.

RyanHamilton 5y ago

What if you ask them to declare the taxable value, however anyone is allowed to step in and purchase the asset listed at that value? If you want to list your business as losing money and worth no taxable value. Someone can pay what you say it's worth and take it over. Using greed to align incentives.

nybble41 5y ago
The problem with that (and all other forms of eminent domain) is that the value of a piece of property to the owner is often far higher than its value on the open market. Even if this is purely a business decision and not, say, related to an irreplaceable family heirloom, the risk of a forced sale at an inconvenient time would be far too disruptive. For example, let's say you own a car with an appraised value of $25,000—meaning that you could buy one similar to your for that price (more or less). So you declare the taxable value to be $25,000 and pay the corresponding tax, and then right before you leave for an extended road trip someone decides that they would rather have your vehicle than one from a dealer and makes you an offer for $25,000 which you cannot legally refuse. Now you're without a car and scrambling to buy a replacement and get it registered, insured, packed, and ready to leave on short notice. Your plans are disrupted and the new vehicle, while "equivalent" to the one you had before in terms of factory specs and general condition, just isn't the same as the one you had carefully maintained and customized to your liking. In practice people would need to over-declare the value of any property they didn't want to sell, which effectively makes this a tax on how attached people are to specific items and not a tax on their "fair" market value. The situation becomes even worse if the owner has enemies willing to over-pay for the item purely out of spite. One of the fundamental rights of ownership is the right to choose not to sell, no matter how much someone offers.
- jellicle 5y ago
  Pretty trivial to declare your car at $26,000. The extra tax is minimal, and if someone buys it, the $1000 bonus will cushion your annoyance. If we think that "everyone" will have to "overdeclare" in such fashion, then obviously the government is collecting more revenue than it intended and will lower the tax rates to compensate, so in the end, you'll pay the same dollar amount in tax on your $26,000 car as you would have on your $25,000 car. So, such a system would work fine. Particularly for property taxes, which are currently the subject of much scamming (apartment buildings in NYC being valued at a few percent of their actual market value, for example).

Majromax 5y ago

> Forcing people to mark-to-market? For liquid investments that have a well-agreed-upon market value, that wouldn't be a problem above a moderate wealth threshold. In particular, it should be easy to obtain credit against these securities (if necessary/desired) to pay the tax bill. The loans would be very secure, since by definition they would have appreciated more than the taxes owing. And if the current offsetting-loss notions are retained (e.g. losses can be carried back to offset prior gains), if the securities fall in value then the taxes paid would be refunded, providing another way to repay the loan. In the meantime, you'd avoid a current inefficiency of the tax system that encourages people to hold on to subpar or undesirable investments to avoid realizing taxable gains. The entire cottage industry of deciding which investments are "tax efficient" and should be held in taxable versus tax-sheltered accounts should go away.

zhoujianfu 5y ago

What if the government purposely targeted relatively high inflation by printing money (and distributing it to all as a UBI). Inflation seems like a pretty efficient wealth tax… and if the money is distributed fairly as a UBI that would cancel out the benefits that the wealthy have vs regular people to protect against inflation.

RyanHamilton 5y ago
They would purchase inflation proof assets e.g. property. Then increase the rent every year in line with inflation.

TuringNYC 5y ago

Actually it is even worse -- 1. What happens if the MtM is negative (your have unrealized losses) -- does the government now owe you a refund? 2. Isnt this unfairly in favor knowledge businesses where there is tremendous value but no real MtM? So a private accounting firm with lots of clients gets no real MtM while a farm with physical assets gets a high MtM that is taxed.