4 ms·

Fair enough - however, what would the equivalent of this look like for invested assets? We are basically forced to sell to cover every year to pay taxes on accr

Fair enough - however, what would the equivalent of this look like for invested assets? We are basically forced to sell to cover every year to pay taxes on accrued value?

germinalphrase 5y ago
Personally? I pay my wealth taxes out of my post-tax income.
japanuspus 5y ago
Eh - yes? What would be the problem with this? On a practical level, if this was implemented, I am sure the market would quickly create funds that payed out at exactly the right level to fund this. Here in Denmark, ETF's are always taxed this way and any losses can be carried forward. The one area where this can get problematic is things like a a big family business that is not providing enough profit to pay the tax. Such a business would end up getting liquidated, which makes sense from a free market perspective, but would make for some great "taxman killed family business"-headlines.
- jcadam 5y ago
  Governments just spent the last year killing small businesses to the benefit of large ones, so this would help them finish the job.
kingsuper20 5y ago
Additional fun occurs when a government official stops by every year to take an inventory of household items. Of course, there's always the problem that a lot of nominal asset appreciation is due to inflation.
noduerme 5y ago
So... imagine there's some fictional ETF that rises at exactly the rate of inflation. At the end of a year, your $100k investment is $102k. Still buys the same number of Big Macs, potatoes, whatever. You then have to pay tax on the $2k gain. You've lost purchasing power. Let's say your balance is now $101,800. If you looked at this as monetary policy (rather than tax policy), wouldn't this essentially be a negative interest rate? Over time, wouldn't inflation rise exponentially? Now, suppose the ETF tries to pace inflation + tax. Where does this extra money come from? Debt? Thus more inflation. I find it interesting that the poster from Denmark considers it no big deal; Denmark has had negative interest rates for several years. That may make sense in a small, aging country that needs to stave off deflation, but the US currently has the opposite problem - inflation. Wouldn't a tax on inflationary "gains" send it into hyperdrive?

Fair enough - however, what would the equivalent of this look like for invested assets? We are basically forced to sell to cover every year to pay taxes on accrued value?

germinalphrase 5y ago

Personally? I pay my wealth taxes out of my post-tax income.

japanuspus 5y ago

Eh - yes? What would be the problem with this? On a practical level, if this was implemented, I am sure the market would quickly create funds that payed out at exactly the right level to fund this. Here in Denmark, ETF's are always taxed this way and any losses can be carried forward. The one area where this can get problematic is things like a a big family business that is not providing enough profit to pay the tax. Such a business would end up getting liquidated, which makes sense from a free market perspective, but would make for some great "taxman killed family business"-headlines.

jcadam 5y ago
Governments just spent the last year killing small businesses to the benefit of large ones, so this would help them finish the job.

kingsuper20 5y ago

Additional fun occurs when a government official stops by every year to take an inventory of household items. Of course, there's always the problem that a lot of nominal asset appreciation is due to inflation.

noduerme 5y ago

So... imagine there's some fictional ETF that rises at exactly the rate of inflation. At the end of a year, your $100k investment is $102k. Still buys the same number of Big Macs, potatoes, whatever. You then have to pay tax on the $2k gain. You've lost purchasing power. Let's say your balance is now $101,800. If you looked at this as monetary policy (rather than tax policy), wouldn't this essentially be a negative interest rate? Over time, wouldn't inflation rise exponentially? Now, suppose the ETF tries to pace inflation + tax. Where does this extra money come from? Debt? Thus more inflation. I find it interesting that the poster from Denmark considers it no big deal; Denmark has had negative interest rates for several years. That may make sense in a small, aging country that needs to stave off deflation, but the US currently has the opposite problem - inflation. Wouldn't a tax on inflationary "gains" send it into hyperdrive?