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The main counterargument: You buy 1 BTC at $60k in 2024. In 2025 it’s valued at $100k, so you pay taxes on $40k gain. Now it’s 2026 and you finally decide to

by cj 8mo ago

The main counterargument: You buy 1 BTC at $60k in 2024. In 2025 it’s valued at $100k, so you pay taxes on $40k gain. Now it’s 2026 and you finally decide to sell the BTC for the original price of $60k. Except you’ve paid taxes on $40k in paper gains that disappeared before you sold the asset. How do we solve that? (Replace “bitcoin” with “startup stock option” if you really want to illustrate the problem - imagine having to pay taxes on stock options you decide to never exercise)

cogman10 8mo ago
That's capital gains, which we currently recognize on realization events (selling the asset or trading it). With current capital gains, if you sold in 2025 you'd pay the taxes on 40k at ~15% (depending) so 6k. If you repurchased it at $100k and then sold at $60k, you can claim the losses. People advocating for a wealth tax aren't pushing for a tax on gains and losses but rather the total asset value. I've seen 1% and 2% bandied about. So in 2024, you'd pay $1.2k in taxes (at 2%). In 2025, you'd pay $2k. And in 2026 you'd pay $1.2k Though, usually, there's also a minimum wealth paired with the tax. Again, I usually only see it for things like individuals with over $100M in assets. For options, it'd still be the same thing. If the strike price is $1 and the actual price is $60 and the option is vested then you'd be taxed on the $59 per option you hold. This only gets difficult if you are talking about options in a privately held company. But, again, that's not really the case for a lot of the most wealthy who the wealth tax is targeting.
- cj 8mo ago
  okay, another example: You hold Enron stock. You’ve been taxed 5% annually on the holdings for the past 5 years. To pay the tax, you decided to take out a loan instead of selling shares to pay the tax (you want to stay invested). Someone discovers Enron is a fraud, the stock goes to $0 and you go bankrupt because you can’t repay the loans you took out to pay the tax on a (now worthless) asset.
  - cogman10 8mo ago
    Were you smart, you'd have used your enron stock as the collateral in which case both you and the bank get screwed if the value goes to 0. You default on the loan, you don't have to go bankrupt in this case. Your credit takes a hit for 7 years. But yeah, if you take out a loan against your home and the housing market collapses and you lose your job (ala 2008) you can end up destitute. The stock market is always a gamble and this doesn't make that better or worse.
  - Dylan16807 8mo ago
    The situation you're describing is equivalent to paying your 5% in asset tax the normal way (by giving up 5% of the asset) and then saying "I love enron, let me take out a loan to buy stock with!" Buying stock with a loan is an obviously stupid move, and wanting to "stay invested" is nothing more than a rationalization. Keeping the same percentage of your wealth in the stock is already staying invested. Increasing the percentage for the sole purpose of keeping the same number of shares is a bad idea. And this hypothetical me, having to pay a wealth tax, is way way over the line of needing a financial advisor, so that advisor will be telling me it's a bad idea to take out loans to buy stock.
  - int_19h 8mo ago
    Don't buy Enron stock?
jhasse 8mo ago
A wealth tax would be like 5% of the $100k, nothing to do with the gains.
- cj 8mo ago
  Yikes. So even if I store my wealth in cash, you want it to deflate by 5% annually? How do you handle your neighbor who discovers he has a $2m Pokémon card in his closet? Is he forced to sell it to pay the 5% if he doesn’t have the cash on hand to pay the tax? It’s a messy proposition. I’ve yet to hear a clear proposal that doesn’t have sticky edge cases.
  - iso1631 8mo ago
    Switzerland has a wealth tax while people like you wring their hands and the wealthiest see their wealth increase far beyond anyone elses. In From 1965 to 1995 the richest man in the world had about $30-40b in today's money. This was more than the 1945-1965 era, but way less than the mess pre-war thanks to aggressive action to limit wealth. Today the richest man in the world has $300b, Rockefeller levels before the 1929 crash.
    - IcyWindows 8mo ago
      We don't know how much money the richest person has because many assets are not publicly traded or disclosed.
      - rootusrootus 8mo ago
        Even if you go only by Elon's TSLA shares, he has north of 200B net worth.
    - deleted 8mo ago
      [deleted]
    - rootusrootus 8mo ago
      > Today the richest man in the world has $300b, Rockefeller levels before the 1929 crash. I think it's more like 800B right now.
Kon5ole 8mo ago
>You buy 1 BTC at $60k in 2024. In 2025 it’s valued at $100k, so you pay taxes on $40k gain. Right, and at this point in the argument it’s also worth asking ”pay taxes with what?” which also quickly makes the idea of taxing valuations obviously absurd. It would force any value creator to sell his creation, which basically destroys the mechanism from which all welfare for anyone in our societies currently originates.
Scoundreller 8mo ago
In Canada you can carry back capital losses up to (I think) 3 years. Of course you lose the time-value of that loss. Can carry forward losses too. Similar things happen with (on the way to) "bankrupt" corporations that have large tax losses that can be applied to future profits.

by cj 8mo ago

cogman10 8mo ago

That's capital gains, which we currently recognize on realization events (selling the asset or trading it). With current capital gains, if you sold in 2025 you'd pay the taxes on 40k at ~15% (depending) so 6k. If you repurchased it at $100k and then sold at $60k, you can claim the losses. People advocating for a wealth tax aren't pushing for a tax on gains and losses but rather the total asset value. I've seen 1% and 2% bandied about. So in 2024, you'd pay $1.2k in taxes (at 2%). In 2025, you'd pay $2k. And in 2026 you'd pay $1.2k Though, usually, there's also a minimum wealth paired with the tax. Again, I usually only see it for things like individuals with over $100M in assets. For options, it'd still be the same thing. If the strike price is $1 and the actual price is $60 and the option is vested then you'd be taxed on the $59 per option you hold. This only gets difficult if you are talking about options in a privately held company. But, again, that's not really the case for a lot of the most wealthy who the wealth tax is targeting.

cj 8mo ago
okay, another example: You hold Enron stock. You’ve been taxed 5% annually on the holdings for the past 5 years. To pay the tax, you decided to take out a loan instead of selling shares to pay the tax (you want to stay invested). Someone discovers Enron is a fraud, the stock goes to $0 and you go bankrupt because you can’t repay the loans you took out to pay the tax on a (now worthless) asset.
- cogman10 8mo ago
  Were you smart, you'd have used your enron stock as the collateral in which case both you and the bank get screwed if the value goes to 0. You default on the loan, you don't have to go bankrupt in this case. Your credit takes a hit for 7 years. But yeah, if you take out a loan against your home and the housing market collapses and you lose your job (ala 2008) you can end up destitute. The stock market is always a gamble and this doesn't make that better or worse.
- Dylan16807 8mo ago
  The situation you're describing is equivalent to paying your 5% in asset tax the normal way (by giving up 5% of the asset) and then saying "I love enron, let me take out a loan to buy stock with!" Buying stock with a loan is an obviously stupid move, and wanting to "stay invested" is nothing more than a rationalization. Keeping the same percentage of your wealth in the stock is already staying invested. Increasing the percentage for the sole purpose of keeping the same number of shares is a bad idea. And this hypothetical me, having to pay a wealth tax, is way way over the line of needing a financial advisor, so that advisor will be telling me it's a bad idea to take out loans to buy stock.
- int_19h 8mo ago
  Don't buy Enron stock?

jhasse 8mo ago

A wealth tax would be like 5% of the $100k, nothing to do with the gains.

cj 8mo ago
Yikes. So even if I store my wealth in cash, you want it to deflate by 5% annually? How do you handle your neighbor who discovers he has a $2m Pokémon card in his closet? Is he forced to sell it to pay the 5% if he doesn’t have the cash on hand to pay the tax? It’s a messy proposition. I’ve yet to hear a clear proposal that doesn’t have sticky edge cases.
- iso1631 8mo ago
  Switzerland has a wealth tax while people like you wring their hands and the wealthiest see their wealth increase far beyond anyone elses. In From 1965 to 1995 the richest man in the world had about $30-40b in today's money. This was more than the 1945-1965 era, but way less than the mess pre-war thanks to aggressive action to limit wealth. Today the richest man in the world has $300b, Rockefeller levels before the 1929 crash.
  - IcyWindows 8mo ago
    We don't know how much money the richest person has because many assets are not publicly traded or disclosed.
    - rootusrootus 8mo ago
      Even if you go only by Elon's TSLA shares, he has north of 200B net worth.
  - deleted 8mo ago
    [deleted]
  - rootusrootus 8mo ago
    > Today the richest man in the world has $300b, Rockefeller levels before the 1929 crash. I think it's more like 800B right now.

Kon5ole 8mo ago

>You buy 1 BTC at $60k in 2024. In 2025 it’s valued at $100k, so you pay taxes on $40k gain. Right, and at this point in the argument it’s also worth asking ”pay taxes with what?” which also quickly makes the idea of taxing valuations obviously absurd. It would force any value creator to sell his creation, which basically destroys the mechanism from which all welfare for anyone in our societies currently originates.

Scoundreller 8mo ago

In Canada you can carry back capital losses up to (I think) 3 years. Of course you lose the time-value of that loss. Can carry forward losses too. Similar things happen with (on the way to) "bankrupt" corporations that have large tax losses that can be applied to future profits.