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> Stock has no inherent value until it's sold at whatever price the market is willing to pay. > Claiming that I've acquired "wealth" simply because of an incre

> Stock has no inherent value until it's sold at whatever price the market is willing to pay. > Claiming that I've acquired "wealth" simply because of an increase in the current market price is an extreme stretch. You’re aware that the market price is what someone is willing to pay, right? It’s not theoretical, it’s backed up by someone willing to buy shares (a lot of them for Amazon) at the quoted price.

teakettle42 5y ago
> You’re aware that the market price is what someone is willing to pay, right? Until I actually sell, it's merely a datapoint for very loosely estimating what the sale price will likely eventually be.
- chalst 5y ago
  No, it's wealth. There's a real issue here: asset prices can be volatile; someone can own a valuable house and not have enough to pay their groceries. But asset prices are not fictional. Typically, corporations report the value of their assets in their accounts.
  - teakettle42 5y ago
    > No, it's wealth. AAPL is up 0.67% over yesterday. Let's pretend it's January 1st, and my net worth is tied up entirely in Apple stock. Should I pay taxes on that unrealized gain? > Typically, corporations report the value of their assets in their accounts. With the notable exception of feudal property taxes, we generally don't tax the mere possession of assets.
    - chalst 5y ago
      > Should I pay taxes on that unrealized gain? Did you read the whole of my comment? Yes, there is a real issue here. Nobody should be put in the position of having a tax obligation they can't afford. Equally, nothing good is achieved by closely tracking the day-to-day volatility of stocks. But in general I don't think there is a fact of the matter about the kind of "ought" question you are asking in isolation: a tax regime is a system that should be judged as a whole. > we generally don't tax the mere possession of assets. Who is "we"? Many countries have wealth taxes.
      - ameister14 5y ago
        >Who is "we"? Many countries have wealth taxes. Many meaning 7, right? 7 countries have net wealth taxes. It used to be many - dozens of countries did it. They stopped doing it.
        ashtonkem 5y ago
        Any country with a property tax has a form of a wealth tax. Most just don’t have one for total wealth.
        ameister14 5y ago
        Sure, but that's not what people talk about when they talk about 'wealth tax;' the accepted definition is net, not property. As proof, if we already had a wealth tax and people referred to it that way, the past year and a half wouldn't have had people arguing over whether or not we should introduce a wealth tax. It would be whether we should expand the wealth tax to cover new assets.
        makomk 5y ago
        Also, I think it's quite common outside of the USA for property taxes not to be based on the current market price of the property and also not to be charged at a fixed percentage of the value, both of which make them rather different from any proposed wealth tax.
    - yourapostasy 5y ago
      > Should I pay taxes on that unrealized gain? People sure do pay taxes on "unrealized gain" of the houses they live in when the real estate market heats up in their neighborhood, and the property tax assessor gleefully changes their assessment that year. "But equities can go to zero!" Sure, just as a house can go to zero (fire, acts of God-level insurance incidents). "But those are covered by insurance!" Sure, just as you are free to buy options to insure the equities. I'm not really seeing strong arguments based upon some intrinsic property of financial instruments used at scale granting them capital gains treatment against taxing financial instruments like any other property / real asset. There is the whole "hold Grandma's retirement hostage" policy aspect that can be mitigated by a generous cliff and age means test perhaps, I haven't thought about that mitigation much, as well as capital gains at different scales. But at the policy level, capital gains treatment being so non-linearly favorable at scale compared to income tax treatment seems a reasonable topic to explore in public discourse. I'm not averse to capital gains continuing at smaller scales, even at millionaire scales, but I am curious what the economic rationale is to continue that treatment at the billionaire scales when it seems much like income on a more complex level.
      - TheOtherHobbes 5y ago
        There are also second order effects. Higher wealth taxation combined with clamp-downs on tax evasion, money laundering, and other illegal and semi-legal-for-now activities would stabilise money markets and keep Grandma's money safer. Extreme losses are caused by the manic-depressive boom-bust cycle which is in turn caused by plentiful money chasing fraudulent opportunities that don't really exist. (See also, S&L crisis, securitisation failures, and many many more.) Damping that cycle and turning it into an engine for national profit sharing would raise collective prosperity, increase social mobility, and create new opportunities.
    - ashtonkem 5y ago
      > AAPL is up 0.67% over yesterday. Let's pretend it's January 1st, and my net worth is tied up entirely in Apple stock. Should I pay taxes on that unrealized gain? This isn’t actually an argument against the idea that you’re wealthier, you’re just arguing that society shouldn’t tax you yet. These arguments are orthogonal, one can admit that paper gains are real wealth while also maintaining that we should only tax realized gains for policy reasons. Similarly, if my house doubles in value, then I’m richer. It might not be liquid yet, but the bank, the local property tax authority, and my account would absolutely treat me as significantly richer than before. The issue in the above article isn’t that gains aren’t taxed until after the sale. The issue is that for the ultra wealthy they basically never sell. Instead their stock holdings are used as collateral for low interest debt that finances the lifestyle of these executives. In this case it sure seems like the gains are realized in every way other than for the IRS. Personally, I’d tax the bejeesus out of this scheme, preferably by counting it as straight up income subject to normal tax rates. Take a salary or sell the stock and pay the gains tax, no other choices.
- rndmize 5y ago
  Man, I wish I could sell that logic to the county assessor.
  - teakettle42 5y ago
    So do I. Yearly property tax assessments are an injustice.
InTheArena 5y ago
In elons case - the vast majority of his wealth is stock options that he can’t physically use yet, under the terms of his reimbursement plan at Tesla. That kind of illiquidity is not taken into account In this argument.
- phonon 5y ago
  https://www.tesmanian.com/blogs/tesmanian-blog/elon-musk-owns-22-4-of-tesla-shares https://www.tesmanian.com/blogs/tesmanian-blog/elon-musk-own... (a) Amount beneficially owned: 227,131,935 shares which includes (i) 170,492,985 shares of Common Stock held by the Elon Musk Revocable Trust dated July 22, 2003 and (ii) options to purchase 56,638,950 shares of Common Stock that are exercisable within 60 days of December 31, 2020. On August 28, 2020, the Issuer effected a five-for-one stock split of its Common Stock (the “Stock Split”). The share numbers reported on this Schedule 13G / A reflects the Stock Split. (b) Percent of class: 22.4% (percentage ownership is calculated based on 959,552,475 shares of Common Stock outstanding as of December 31, 2020 and assumes that the shares of Common Stock underlying the stock options are deemed outstanding pursuant to SEC Rule 13d-3 (d) (1) (i)).
- fassssst 5y ago
  One might ask why the vast majority of his wealth is stock options.
  - ashtonkem 5y ago
    And why we allow stock options to be used as a vehicle for tax avoidance.
simondotau 5y ago
> the market price is what someone is willing to pay, right? Roughly speaking it's the price someone is willing to pay for one share. That doesn't say much about how much money Elon would receive if he liquidated his entire portfolio tomorrow. You can't just put 100+ BILLION dollars worth of anything on the market and expect there to be a buyer for all of it at yesterday's price. And furthermore, what is Tesla going to be worth when its chairman and CEO is seen to be dumping their shares? I doubt Elon could even realise one quarter of his "net worth" if he needed it converted to US Dollars next week.
- lapinot 5y ago
  Thing is, you don't need to actually convert if you want to pay, you can actually use the shares as a currency, a vehicule for value. Just like contemporary art. Not being spit dollars out is a problem for buying food, much less for making deals among high-level capitalists.
throwaway210222 5y ago
Is you are willing to tax wealth on the current value of an often illiquid asset, are you equally willing for the government to refund the owner if the value of an asset drops below the purchase price in the same tax year? If not, why not?
- TheOtherHobbes 5y ago
  You should ask governments why they so consistently choose the opposite - bailouts for "too big to fail", and an ever-increasing round of tax breaks the rest of the time. It may also have something to do with the fact that billionaires can buy significant political control of policy in our supposed democracies, while poor people organising to promote their interests are bullied and sneered at.
- ashtonkem 5y ago
  You already can mark down and carry losses forward into future tax years. Extremely wealthy people do this to get their taxes down to $0 regularly, including Trump. Also, if I’m underwater on my house, I don’t get a break on my property insurance. I still have to pay the assessed rate. This “no taxes if I take a loss” is an extremely selectively applied principle in the US legal code.

teakettle42 5y ago

> You’re aware that the market price is what someone is willing to pay, right? Until I actually sell, it's merely a datapoint for very loosely estimating what the sale price will likely eventually be.

chalst 5y ago
No, it's wealth. There's a real issue here: asset prices can be volatile; someone can own a valuable house and not have enough to pay their groceries. But asset prices are not fictional. Typically, corporations report the value of their assets in their accounts.
- teakettle42 5y ago
  > No, it's wealth. AAPL is up 0.67% over yesterday. Let's pretend it's January 1st, and my net worth is tied up entirely in Apple stock. Should I pay taxes on that unrealized gain? > Typically, corporations report the value of their assets in their accounts. With the notable exception of feudal property taxes, we generally don't tax the mere possession of assets.
  - chalst 5y ago
    > Should I pay taxes on that unrealized gain? Did you read the whole of my comment? Yes, there is a real issue here. Nobody should be put in the position of having a tax obligation they can't afford. Equally, nothing good is achieved by closely tracking the day-to-day volatility of stocks. But in general I don't think there is a fact of the matter about the kind of "ought" question you are asking in isolation: a tax regime is a system that should be judged as a whole. > we generally don't tax the mere possession of assets. Who is "we"? Many countries have wealth taxes.
    - ameister14 5y ago
      >Who is "we"? Many countries have wealth taxes. Many meaning 7, right? 7 countries have net wealth taxes. It used to be many - dozens of countries did it. They stopped doing it.
      - ashtonkem 5y ago
        Any country with a property tax has a form of a wealth tax. Most just don’t have one for total wealth.
        ameister14 5y ago
        Sure, but that's not what people talk about when they talk about 'wealth tax;' the accepted definition is net, not property. As proof, if we already had a wealth tax and people referred to it that way, the past year and a half wouldn't have had people arguing over whether or not we should introduce a wealth tax. It would be whether we should expand the wealth tax to cover new assets.
        makomk 5y ago
        Also, I think it's quite common outside of the USA for property taxes not to be based on the current market price of the property and also not to be charged at a fixed percentage of the value, both of which make them rather different from any proposed wealth tax.
  - yourapostasy 5y ago
    > Should I pay taxes on that unrealized gain? People sure do pay taxes on "unrealized gain" of the houses they live in when the real estate market heats up in their neighborhood, and the property tax assessor gleefully changes their assessment that year. "But equities can go to zero!" Sure, just as a house can go to zero (fire, acts of God-level insurance incidents). "But those are covered by insurance!" Sure, just as you are free to buy options to insure the equities. I'm not really seeing strong arguments based upon some intrinsic property of financial instruments used at scale granting them capital gains treatment against taxing financial instruments like any other property / real asset. There is the whole "hold Grandma's retirement hostage" policy aspect that can be mitigated by a generous cliff and age means test perhaps, I haven't thought about that mitigation much, as well as capital gains at different scales. But at the policy level, capital gains treatment being so non-linearly favorable at scale compared to income tax treatment seems a reasonable topic to explore in public discourse. I'm not averse to capital gains continuing at smaller scales, even at millionaire scales, but I am curious what the economic rationale is to continue that treatment at the billionaire scales when it seems much like income on a more complex level.
    - TheOtherHobbes 5y ago
      There are also second order effects. Higher wealth taxation combined with clamp-downs on tax evasion, money laundering, and other illegal and semi-legal-for-now activities would stabilise money markets and keep Grandma's money safer. Extreme losses are caused by the manic-depressive boom-bust cycle which is in turn caused by plentiful money chasing fraudulent opportunities that don't really exist. (See also, S&L crisis, securitisation failures, and many many more.) Damping that cycle and turning it into an engine for national profit sharing would raise collective prosperity, increase social mobility, and create new opportunities.
  - ashtonkem 5y ago
    > AAPL is up 0.67% over yesterday. Let's pretend it's January 1st, and my net worth is tied up entirely in Apple stock. Should I pay taxes on that unrealized gain? This isn’t actually an argument against the idea that you’re wealthier, you’re just arguing that society shouldn’t tax you yet. These arguments are orthogonal, one can admit that paper gains are real wealth while also maintaining that we should only tax realized gains for policy reasons. Similarly, if my house doubles in value, then I’m richer. It might not be liquid yet, but the bank, the local property tax authority, and my account would absolutely treat me as significantly richer than before. The issue in the above article isn’t that gains aren’t taxed until after the sale. The issue is that for the ultra wealthy they basically never sell. Instead their stock holdings are used as collateral for low interest debt that finances the lifestyle of these executives. In this case it sure seems like the gains are realized in every way other than for the IRS. Personally, I’d tax the bejeesus out of this scheme, preferably by counting it as straight up income subject to normal tax rates. Take a salary or sell the stock and pay the gains tax, no other choices.
rndmize 5y ago
Man, I wish I could sell that logic to the county assessor.
- teakettle42 5y ago
  So do I. Yearly property tax assessments are an injustice.

InTheArena 5y ago

In elons case - the vast majority of his wealth is stock options that he can’t physically use yet, under the terms of his reimbursement plan at Tesla. That kind of illiquidity is not taken into account In this argument.

phonon 5y ago
https://www.tesmanian.com/blogs/tesmanian-blog/elon-musk-owns-22-4-of-tesla-shares https://www.tesmanian.com/blogs/tesmanian-blog/elon-musk-own... (a) Amount beneficially owned: 227,131,935 shares which includes (i) 170,492,985 shares of Common Stock held by the Elon Musk Revocable Trust dated July 22, 2003 and (ii) options to purchase 56,638,950 shares of Common Stock that are exercisable within 60 days of December 31, 2020. On August 28, 2020, the Issuer effected a five-for-one stock split of its Common Stock (the “Stock Split”). The share numbers reported on this Schedule 13G / A reflects the Stock Split. (b) Percent of class: 22.4% (percentage ownership is calculated based on 959,552,475 shares of Common Stock outstanding as of December 31, 2020 and assumes that the shares of Common Stock underlying the stock options are deemed outstanding pursuant to SEC Rule 13d-3 (d) (1) (i)).
fassssst 5y ago
One might ask why the vast majority of his wealth is stock options.
- ashtonkem 5y ago
  And why we allow stock options to be used as a vehicle for tax avoidance.

simondotau 5y ago

> the market price is what someone is willing to pay, right? Roughly speaking it's the price someone is willing to pay for one share. That doesn't say much about how much money Elon would receive if he liquidated his entire portfolio tomorrow. You can't just put 100+ BILLION dollars worth of anything on the market and expect there to be a buyer for all of it at yesterday's price. And furthermore, what is Tesla going to be worth when its chairman and CEO is seen to be dumping their shares? I doubt Elon could even realise one quarter of his "net worth" if he needed it converted to US Dollars next week.

lapinot 5y ago
Thing is, you don't need to actually convert if you want to pay, you can actually use the shares as a currency, a vehicule for value. Just like contemporary art. Not being spit dollars out is a problem for buying food, much less for making deals among high-level capitalists.

throwaway210222 5y ago

Is you are willing to tax wealth on the current value of an often illiquid asset, are you equally willing for the government to refund the owner if the value of an asset drops below the purchase price in the same tax year? If not, why not?

TheOtherHobbes 5y ago
You should ask governments why they so consistently choose the opposite - bailouts for "too big to fail", and an ever-increasing round of tax breaks the rest of the time. It may also have something to do with the fact that billionaires can buy significant political control of policy in our supposed democracies, while poor people organising to promote their interests are bullied and sneered at.
ashtonkem 5y ago
You already can mark down and carry losses forward into future tax years. Extremely wealthy people do this to get their taxes down to $0 regularly, including Trump. Also, if I’m underwater on my house, I don’t get a break on my property insurance. I still have to pay the assessed rate. This “no taxes if I take a loss” is an extremely selectively applied principle in the US legal code.