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But we're talking about a tax on unrealized capital gains. This isn't new ground that nobody has thought of before. A number of countries already have wealth t

But we're talking about a tax on unrealized capital gains. This isn't new ground that nobody has thought of before. A number of countries already have wealth taxes. Unrealized capital gains are wealth, not income. They would be subject to a wealth tax until realized, and only subject to a capital gains tax when realized. This is why wealth tax rates are so low. there are major asset categories with no objective way to value them, so how do you even calculate it in the absence of a sale, or prevent those assets from being used as a tax shelter? Your paragraph assumes something that isn't true. The problem of how to value assets for taxation is older than electronic computers, and decades ago tax authorities set forth rules/guidelines for valuing difficult-to-value assets. In a nutshell: there are a variety of ways to value such assets, and as long as the valuation of an asset is reasonable within the rules of the governing jurisdiction, the tax authority will accept it (or be forced to accept the valuation by a court). If you use 0.5% against typical assets with a 10% annual return, it's equivalent to an income tax rate of only 5%, but you're still incurring all of the administrative complexity and still have non-trivial perverse incentives. But if you raise the rate to the level that "pay their fare share" normally implies, the perverse incentives become exponentially worse. This also isn't true. Again...wealth taxes already exist, and they're administratively easier to implement then income taxes. They're also not intended to replace income taxes; they're intended to supplement income taxes by taxing the people who are wealthy enough that they don't need to earn income. applying the tax to everyone's retirement account and not just "billionaires" and have given domestic businesses a competitive disadvantage in attracting foreign investment. Yes, if you choose to implement a wealth tax on everything that would be true. It's a good thing that policymakers in the countries where wealth taxes already exist used their brains and decided to have minimum wealth thresholds for their wealth taxes.

AnthonyMouse 2y ago
> Unrealized capital gains are wealth, not income. There have been proposals to tax unrealized capital gains as income. Those proposals are what the comment you replied to is arguing against. > The problem of how to value assets for taxation is older than electronic computers, and decades ago tax authorities set forth rules/guidelines for valuing difficult-to-value assets. "The places that attempt this have rules" is not actually a solution. The typical solution is to only apply such taxes to asset classes that are relatively easy to value, like real estate. But that in itself creates a lot of nasty distortions, like exacerbating the housing crisis. Local government gets tax revenue from real estate, so they get more if real estate is expensive, so they're on board with raising the cost of construction to drive up scarcity. The higher taxes reduce investment (i.e. construction) until rents increase to cover the new higher construction costs in addition to the taxes, and now people are homeless and unable to afford housing. Meanwhile capital moves from local real estate construction and other local businesses that would have to pay the higher real estate costs into global capital markets, reducing local jobs. And it still doesn't answer the question. How do you value a closely held startup that may grow or fail? How do you value bespoke art? How do you value a contract to pay $100,000 from a foreign company at risk of default? If it's subjective then it's a tax shelter. "Have the courts decide" doesn't explain how you expect them to make their decision. > wealth taxes already exist, and they're administratively easier to implement then income taxes. That's not saying much, income taxes are some of the most administratively expensive taxes to implement, and your argument is to use them in addition to rather than instead of income taxes, so the costs are cumulative. > It's a good thing that policymakers in the countries where wealth taxes already exist used their brains and decided to have minimum wealth thresholds for their wealth taxes. Your claim was that it would be paid by investment funds. Investment funds easily have enough assets to meet any plausible threshold, but they're owned by middle income people, so are you taxing them or not? How is "progressive wealth tax" supposed to work for corporate entities? If a massive foreign conglomerate owns a minority of the shares of a tiny foreign company which owns shares of a domestic company, is the tiny entity subject to the tax? What if the foreign country doesn't make ownership structures public? What if the conglomerate doesn't own any part the tiny entity or the entity is a human but the conglomerate has a long-term options contract to buy the shares for a fixed price? "There are rules for what to do" isn't an explanation. If the rules create tax shelters, you have problems. If the rules create perverse incentives in order to prevent tax shelters, you have different problems. There doesn't appear to be a sensible implementation.
- gamblor956 2y ago
  I think the fundamental misunderstanding here is that your assumptions are based on not understanding how policy works in the real world. All of your strawmen problems have already been addressed and they're not serious issues. What you've suggested for getting around the wealth tax amounts to various forms of tax fraud. That's a crime punishable by many years in jail on top of having to pay the tax avoided, plus penalties, plus interest. Most people aren't Wesley Snipes, and they're not going to risk their freedom to pay taxes. If they really don't want to pay taxes, they'll do what a number of French people did when the wealth tax was first introduced: they'll move to a country without a wealth tax. (Also: courts can issue withholding orders, stop payments, etc., to domestic counterparties under their jurisdiction. This is a tried and true remedy that's been around longer than either of us has been alive.)

AnthonyMouse 2y ago

> Unrealized capital gains are wealth, not income. There have been proposals to tax unrealized capital gains as income. Those proposals are what the comment you replied to is arguing against. > The problem of how to value assets for taxation is older than electronic computers, and decades ago tax authorities set forth rules/guidelines for valuing difficult-to-value assets. "The places that attempt this have rules" is not actually a solution. The typical solution is to only apply such taxes to asset classes that are relatively easy to value, like real estate. But that in itself creates a lot of nasty distortions, like exacerbating the housing crisis. Local government gets tax revenue from real estate, so they get more if real estate is expensive, so they're on board with raising the cost of construction to drive up scarcity. The higher taxes reduce investment (i.e. construction) until rents increase to cover the new higher construction costs in addition to the taxes, and now people are homeless and unable to afford housing. Meanwhile capital moves from local real estate construction and other local businesses that would have to pay the higher real estate costs into global capital markets, reducing local jobs. And it still doesn't answer the question. How do you value a closely held startup that may grow or fail? How do you value bespoke art? How do you value a contract to pay $100,000 from a foreign company at risk of default? If it's subjective then it's a tax shelter. "Have the courts decide" doesn't explain how you expect them to make their decision. > wealth taxes already exist, and they're administratively easier to implement then income taxes. That's not saying much, income taxes are some of the most administratively expensive taxes to implement, and your argument is to use them in addition to rather than instead of income taxes, so the costs are cumulative. > It's a good thing that policymakers in the countries where wealth taxes already exist used their brains and decided to have minimum wealth thresholds for their wealth taxes. Your claim was that it would be paid by investment funds. Investment funds easily have enough assets to meet any plausible threshold, but they're owned by middle income people, so are you taxing them or not? How is "progressive wealth tax" supposed to work for corporate entities? If a massive foreign conglomerate owns a minority of the shares of a tiny foreign company which owns shares of a domestic company, is the tiny entity subject to the tax? What if the foreign country doesn't make ownership structures public? What if the conglomerate doesn't own any part the tiny entity or the entity is a human but the conglomerate has a long-term options contract to buy the shares for a fixed price? "There are rules for what to do" isn't an explanation. If the rules create tax shelters, you have problems. If the rules create perverse incentives in order to prevent tax shelters, you have different problems. There doesn't appear to be a sensible implementation.

gamblor956 2y ago
I think the fundamental misunderstanding here is that your assumptions are based on not understanding how policy works in the real world. All of your strawmen problems have already been addressed and they're not serious issues. What you've suggested for getting around the wealth tax amounts to various forms of tax fraud. That's a crime punishable by many years in jail on top of having to pay the tax avoided, plus penalties, plus interest. Most people aren't Wesley Snipes, and they're not going to risk their freedom to pay taxes. If they really don't want to pay taxes, they'll do what a number of French people did when the wealth tax was first introduced: they'll move to a country without a wealth tax. (Also: courts can issue withholding orders, stop payments, etc., to domestic counterparties under their jurisdiction. This is a tried and true remedy that's been around longer than either of us has been alive.)