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But borrowing is not equivalent to selling, tax wise or any otherwise. When you get a mortgage to buy a $750k house, do you want to be taxed as though you had

by imgabe 5y ago

But borrowing is not equivalent to selling, tax wise or any otherwise. When you get a mortgage to buy a $750k house, do you want to be taxed as though you had $750k income that year? You’re just borrowing against the value of an asset after all.

deleted 5y ago
[deleted]
robryan 5y ago
It should be possible to target this. Have it kick in say over $10 million or when a loan is backed by existing rather than new assets purchased with the loan.
knodi123 5y ago
Yes, but the difference is that borrowing against your unrealized investments is a way of dodging taxes. I think the tax code can handle that level of subtlety without paying attention to your flippant reductio ad absurdum.
- imgabe 5y ago
  Sure and borrowing $750k to buy a house is a nifty way for me to get $750k without having to pay income taxes on $750k worth of income. What an amazing loophole that gives me completely free money and no taxes! What the government could do is stop loaning out money at 0% (i.e. printing free money which inflates assets, like stocks held by wealthy people). If the prime rate increased, the rate banks would charge on asset-backed loans would also increase, which would make it less attractive than just selling the asset and paying the capital gains tax.
  - knodi123 5y ago
    > Sure and borrowing $750k to buy a house is a nifty way for me to get $750k without having to pay income taxes on $750k worth of income. That's now how borrowing money to buy a house works.
    - imgabe 5y ago
      Yeah and “free money you never pay taxes on” is not how borrowing against stocks works either
alkonaut 5y ago
Taxes on real estate work that way and are a favorite among economists. I borrow say $500k to buy a house. Then I’m taxed some % of the property value each year e.g 1%.
- imgabe 5y ago
  Real Estate is not the same thing as stock. There is a finite amount of land. You didn't make it. Ultimately it is a shared resource and we pay a fee to society while we are permitted the exclusive use (with some restrictions) of a small part of the planet we all share. Anyone can start a company tomorrow and declare that they have a billion shares of stock in that company. They only become worth something because the person that started the company uses their own effort and ingenuity to make the company do something that is valuable to everyone else.
  - alkonaut 5y ago
    Yes property taxes have another dimension of “fairness” to them, but that’s not why economists favor them: it’s because they can’t easily be dodged and are easy to extract (knowledge of property ownership is pretty reliable). Taxation isn’t necessarily based on what’s fair or rational, it’s a way of financing public expenses. It might be more logical from the perspective of the people as a whole to tax wealth more and income less (for example) even though wealth is less logical and “fair” to tax than income or consumption.
- paulpauper 5y ago
  but that is only 1% and real estate is generally considered less volatile than stocks

by imgabe 5y ago

deleted 5y ago

[deleted]

robryan 5y ago

It should be possible to target this. Have it kick in say over $10 million or when a loan is backed by existing rather than new assets purchased with the loan.

knodi123 5y ago

Yes, but the difference is that borrowing against your unrealized investments is a way of dodging taxes. I think the tax code can handle that level of subtlety without paying attention to your flippant reductio ad absurdum.

imgabe 5y ago
Sure and borrowing $750k to buy a house is a nifty way for me to get $750k without having to pay income taxes on $750k worth of income. What an amazing loophole that gives me completely free money and no taxes! What the government could do is stop loaning out money at 0% (i.e. printing free money which inflates assets, like stocks held by wealthy people). If the prime rate increased, the rate banks would charge on asset-backed loans would also increase, which would make it less attractive than just selling the asset and paying the capital gains tax.
- knodi123 5y ago
  > Sure and borrowing $750k to buy a house is a nifty way for me to get $750k without having to pay income taxes on $750k worth of income. That's now how borrowing money to buy a house works.
  - imgabe 5y ago
    Yeah and “free money you never pay taxes on” is not how borrowing against stocks works either

alkonaut 5y ago

Taxes on real estate work that way and are a favorite among economists. I borrow say $500k to buy a house. Then I’m taxed some % of the property value each year e.g 1%.

imgabe 5y ago
Real Estate is not the same thing as stock. There is a finite amount of land. You didn't make it. Ultimately it is a shared resource and we pay a fee to society while we are permitted the exclusive use (with some restrictions) of a small part of the planet we all share. Anyone can start a company tomorrow and declare that they have a billion shares of stock in that company. They only become worth something because the person that started the company uses their own effort and ingenuity to make the company do something that is valuable to everyone else.
- alkonaut 5y ago
  Yes property taxes have another dimension of “fairness” to them, but that’s not why economists favor them: it’s because they can’t easily be dodged and are easy to extract (knowledge of property ownership is pretty reliable). Taxation isn’t necessarily based on what’s fair or rational, it’s a way of financing public expenses. It might be more logical from the perspective of the people as a whole to tax wealth more and income less (for example) even though wealth is less logical and “fair” to tax than income or consumption.
paulpauper 5y ago
but that is only 1% and real estate is generally considered less volatile than stocks