5 ms·
> 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 in
by 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 agoYou'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 agoThat'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 agoDid 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.