4 ms·

I'm not saying the tax system in the US is designed properly (I think it's obvious that it's not), but unless I'm missing something here, all this article shows

I'm not saying the tax system in the US is designed properly (I think it's obvious that it's not), but unless I'm missing something here, all this article shows is that: 1. Rich people got really rich because the value of their stocks (and probably property portfolios) increased a lot in the past 20 years. This is not surprising if you look follow the Fed policy of printing money and look at a simple graph of the S&P 500 over 20 years. 2. Rich people that have their money tied up in these things only get taxed when they sell them (in the form of long term capital gain). This is by design, and I'm very curious how a system could be re-designed to tax people when the value of something like a stock increases, but is not sold. This would effect literally everyone who owns property and/or stocks outside of their 401ks. What is honestly interesting about this ProPublica article? The only interesting thing (as far as I can tell) about it is someone in the IRS is leaking these people's filings, which is a felony.

joshka 5y ago
> I'm very curious how a system could be re-designed to tax people when the value of something like a stock increases, but is not sold. If banks can use the increase as collateral on a loan, it stands to reason that the same increase could be similarly used as a collateral tax lien. (Lay opinion - entirely possible this is wrong)
- Arnt 5y ago
  You're right, but think about the consequences. Taxes are mandatory. Both borrowing and selling is optional. That creates two large differences. I'll work through two scenarios: 1. When there's a price increase on something you own, you pay income tax that you can claim back if the price decreases later. In that case, owing something valuable (like your family farm, now on the outskirts of a city) lands you with a sizable tax bill as the city grows nearer and land prices grow. You have to sell the family farm, because you're taxed you on the income you would get from selling even if you never sell. (Strictly spealing you pay an advance and never get it back.) 2. Instead of paying with legal tender you could give a part of the saleable item as collateral. Great for people who are rich enough for financial acrobatics, because now they have more options for paying their tax with different assets at different past valuations.
  - joshka 5y ago
    That's kind of why I mentioned this as a lien rather than immediately owed tax. Another way to do the mental gymnastics might be a interest free loan from the IRS to pay those taxes owed secured by a portion of the farm. The issue specifically here is that tax that's tied up in unrealized gains can be used twice as leverage, once for the purpose of borrowing, and once for the purpose of avoiding a tax burden. I fully expect that the newish bitcoin borrowing against assets approach* will cause the US Gov / IRS perk up and reduce this "loophole" at least for low net worth indiviuals. *e.g. crypto.com - borrow against your crypto assets rather than selling them to avoid the taxes that come from selling.
    - Arnt 5y ago
      Did you know that you can "avoid" taxes by borrowing against your house instead of selling it? But the taxes are due when you sell, anyway. All the borrowing does is delay the tax, it avoids nothing. You take some risk and may earn something. If you do earn something, the amount taxable increases, too.
      - joshka 5y ago
        I'm a Millenial. What is House? :D
        Arnt 5y ago
        One of the large things you'll inherit, being the lone grandchild of four grandparents and lone child of two parents ;)
gremlinsinc 5y ago
> Rich people that have their money tied up in these things only get taxed when they sell them (in the form of long term capital gain). This is by design, and I'm very curious how a system could be re-designed to tax people when the value of something like a stock increases, but is not sold. This would effect literally everyone who owns property and/or stocks outside of their 401ks. Instead of income taxes, tax wealth. You simply file an affidavit showing your current "snapshot of wealth" at a specific date, say April 15th. If your wealth is less than 10 million, you pay 1% or your wealth. For 500k that's 5k, for 30k that's 300. Then have tiers like: 10-50 million: 2% 50-500 million: 3% 500-5billion: 4% 5billion+: 5% For bezos (assuming 100 billion) this would be 5 billion dollars per year. A shit ton for a normal person, a drop in a hat for him. This tax system could be modified to provide UBI to people, and have zero refunds, loopholes, etc. Everybody is required to pay whether your net worth is 300B, 300M, 300k or 300. The government then is incentivized to create more wealth, more distribution of wealth, and less on jobs/income. Perhaps schools could also be more focused on training good financial education so students know how to manage money after high school.
- misiti3780 5y ago
  It's a nice idea, but it's not so easy for really rich people to just make a "snapshot of wealth". A lot of assets are tied up in illiquid things like re-estate, publicly traded companies, etc I do like the idea though.
  - gremlinsinc 5y ago
    Maybe it doesn't have to be perfectly exact, or maybe there's part of the IRS that handles doing it "for" them. I mean shouldn't matter too much if it's 110 vs 100 billion, it's a lot better than taxing 0.
  - misiti3780 5y ago
    non-publicly*

joshka 5y ago

> I'm very curious how a system could be re-designed to tax people when the value of something like a stock increases, but is not sold. If banks can use the increase as collateral on a loan, it stands to reason that the same increase could be similarly used as a collateral tax lien. (Lay opinion - entirely possible this is wrong)

Arnt 5y ago
You're right, but think about the consequences. Taxes are mandatory. Both borrowing and selling is optional. That creates two large differences. I'll work through two scenarios: 1. When there's a price increase on something you own, you pay income tax that you can claim back if the price decreases later. In that case, owing something valuable (like your family farm, now on the outskirts of a city) lands you with a sizable tax bill as the city grows nearer and land prices grow. You have to sell the family farm, because you're taxed you on the income you would get from selling even if you never sell. (Strictly spealing you pay an advance and never get it back.) 2. Instead of paying with legal tender you could give a part of the saleable item as collateral. Great for people who are rich enough for financial acrobatics, because now they have more options for paying their tax with different assets at different past valuations.
- joshka 5y ago
  That's kind of why I mentioned this as a lien rather than immediately owed tax. Another way to do the mental gymnastics might be a interest free loan from the IRS to pay those taxes owed secured by a portion of the farm. The issue specifically here is that tax that's tied up in unrealized gains can be used twice as leverage, once for the purpose of borrowing, and once for the purpose of avoiding a tax burden. I fully expect that the newish bitcoin borrowing against assets approach* will cause the US Gov / IRS perk up and reduce this "loophole" at least for low net worth indiviuals. *e.g. crypto.com - borrow against your crypto assets rather than selling them to avoid the taxes that come from selling.
  - Arnt 5y ago
    Did you know that you can "avoid" taxes by borrowing against your house instead of selling it? But the taxes are due when you sell, anyway. All the borrowing does is delay the tax, it avoids nothing. You take some risk and may earn something. If you do earn something, the amount taxable increases, too.
    - joshka 5y ago
      I'm a Millenial. What is House? :D
      - Arnt 5y ago
        One of the large things you'll inherit, being the lone grandchild of four grandparents and lone child of two parents ;)

gremlinsinc 5y ago

> Rich people that have their money tied up in these things only get taxed when they sell them (in the form of long term capital gain). This is by design, and I'm very curious how a system could be re-designed to tax people when the value of something like a stock increases, but is not sold. This would effect literally everyone who owns property and/or stocks outside of their 401ks. Instead of income taxes, tax wealth. You simply file an affidavit showing your current "snapshot of wealth" at a specific date, say April 15th. If your wealth is less than 10 million, you pay 1% or your wealth. For 500k that's 5k, for 30k that's 300. Then have tiers like: 10-50 million: 2% 50-500 million: 3% 500-5billion: 4% 5billion+: 5% For bezos (assuming 100 billion) this would be 5 billion dollars per year. A shit ton for a normal person, a drop in a hat for him. This tax system could be modified to provide UBI to people, and have zero refunds, loopholes, etc. Everybody is required to pay whether your net worth is 300B, 300M, 300k or 300. The government then is incentivized to create more wealth, more distribution of wealth, and less on jobs/income. Perhaps schools could also be more focused on training good financial education so students know how to manage money after high school.

misiti3780 5y ago
It's a nice idea, but it's not so easy for really rich people to just make a "snapshot of wealth". A lot of assets are tied up in illiquid things like re-estate, publicly traded companies, etc I do like the idea though.
- gremlinsinc 5y ago
  Maybe it doesn't have to be perfectly exact, or maybe there's part of the IRS that handles doing it "for" them. I mean shouldn't matter too much if it's 110 vs 100 billion, it's a lot better than taxing 0.
- misiti3780 5y ago
  non-publicly*