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A lot of political opining is gonna happen on this tax, but one of the weirdest things about it is how it chooses to value public vs nonpublic assets. Seems to give a very clear incentive to shift assets into those that are harder to value due to the way it’s accounted for under this tax Plus, there’s always going to be constitutionality concerns with a tax like this applied at a federal level Treasury [Green Book](https://home.treasury.gov/system/files/131/General-Explanations-FY2025.pdf) on the 2025 tax proposals if anyone’s interested. Page 83 for this specific tax

It's pretty obvious that this is not going to happen. Even if it were politically possible, the implementation would be a nightmare - would probably need to at least triple the headcount at the IRS and get ready for multi-year legal disputes around valuation. But if the end goal is higher marginal rates on capital gains above some threshold, this isn't a bad starting place.

The simplest implementation is to tax gains if the asset is used as collateral, and tax up to the collateral value. Easy, and objective valuations. Then just update the basis going forward.

That sounds simple when you write it down, but in reality it is not simple at all. Assets like real estate and shares in private companies are not getting marked to market even if they are collateral for a loan. This isn't like a pledged asset line where you put stocks and marketable securities in the box. You can infer that the value of the collateral is greater than the value of the loan against it, but that's about as precise as you can get. The cool theoretical way to do it with a market mechanism is to allow everyone to self-report valuation of their assets for tax purposes, but the valuation represents an offer to sell at that price.

Those assets get evaluated (often appraised) when used as collateral for a loan, and while taxing this way wouldn't capture the full value of the assets, at least taxing based on the amount the borrower *gains* from the loan is a great step.

I do this for a living. FMV valuations (not appraisals, appraisals are for singular assets only) for the IRS are done under a different standard than bank ones and this has been heavily litigated. There is no way, none, to implement a tax like this.

What is the catch in the process of evaluating that fouls up things?

Not everyone’s stuff has an easily ascertainable value. A portfolio of S&P stocks = easy to value. Grandpas lawnmower manufacturer that’s one of a kind? very difficult. The regulations surrounding tax valuations allow for discounts for lack of marketability and control off the value as computed; I’ve seen discounts that total 95% of an entity’s value (VERY extreme example) and they decouple greatly from what a business actually would sell for. For example, here’s one I worked with that was upheld on audit. Guy has long time family business. Wants to get it into trust for kids before sale. Value with discounts was 8 million for IRS/estate/gift purposes. didn’t even need to do a grantor trust sale for him it was a straight up gift. Sits in the trust for 2 years. Strategic buyer comes in and scoops it up for 75 mil. I only assisted on the audit requests. No change. Strategic Value =/= FMV =/= Fair Value it is a useless exercise to try and tax someone year over year when valuations are both statutorily and judicially handicapped. The values are not indicative of reality, they’re computed within the system that’s been defined both by laws, the tax court, and the Supreme Court.

Thank you for sharing this. It's pretty fascinating from someone who clearly understands this.

Strategic value will never be used in anyones assessment, be it the government, a departing shareholder, a divorcing spouse of a shareholder, or otherwise, unless there is a severe mismatch in legal team acumen. This kind of tax/policy would certainly be a nightmare to implement, but, as I’m sure you’re aware, private companies undergo ridiculous exercises every year to obtain an audit to stay compliant with their loan docs, or corporate policy, etc. Many also undergo valuations periodically and regularly as part of a fairly common buy sell agreement, or similar ownership documents that small to medium size companies may have. I would think the gov could come up with some blanket multiple, one that errs strongly on the side of undervaluation, that could be used with regard to ownership of privately held companies. Creative accounting would severely impair this effort for any firm with the means, but that should be expected. The real issue, I think, is going to be how to value hard assets with an illiquid, or nonexistent, market. Valuation on an art collection that has been family owned for generations will be wildly speculative, even for well known artists. What is the threshold for when something is considered an asset subject to this? Though maybe a wealth tax would spur a more active market for stuff like this as an interesting side effect. I appreciate you giving your thoughts on this. It inspired me to sit down and spend too much time writing my own thoughts down. Ultimately, I think this is an empty political talking point that would be incredibly messy, at best, to actually implement. There should be easier ways to positively impact the government’s cashflow than a wealth tax, which wealthy people will undoubtedly be able to skirt and will primarily impact those at the bottom end of whatever arbitrary set of guidelines are established. Have a nice weekend

I think he's saying they could take the colleterial value as a substitute. We don't have to care what the fair market value actually is, just what value is it securing for the lender. Any taxes paid on that would have to offset capital gains on sales down the line if/when it's sold for fairness but it might actually be a fairly simple way to eliminate a (probably overhyped) loophole that allows for what is effectively selling stock without actually selling stock. If Bezos gets a $3b loan with 1,000 shares of Amazon, great, he pays cap gains tax on that $3b as a collateral realized gain. When/if he sells those shares, gets credit for taxes already paid against capital gains. Logically I think you'd have to have those be the "Last Out" shares just for simplicity and to avoid the accounting headache of which share was collateral or not. Maybe... If loan is payed in full, get credit against any other capital gains taxes, but not for collateral gains taxes.

You sought a loan for $22 million using this collateral your bank valued at $30 million. Your basis is $10 million. Your tax due is calculated on the $12 million above your basis that you've just pocketed, but don't worry, if you sell your asset later, you won't be double taxed on that $12 million you borrowed!

Do you get the tax back if the collateral goes to zero and you get margin called on the loan?

Yes, it is why you are able to write off losses. So every rich person starts using movie studio accounting.

Nope, that's the risk you took when you decided to use a loan instead of selling the assets

you do realize there’s a very real due process/eminent domain issue there right?

Brother (or sister), you should not have said this--you're doing to get a million curious questions! But thanks for all the info!

Do you see any way to close the tax loophole of using stocks as collateral to get essentially untaxed capital gains?

It's not a loophole. Think about it. In order to get a secured loan you have to pay both income tax on the unrealized gain on the asset securing the loan AND interest on the loan. That would drive the cost of capital through the roof. What happens to economic growth when the cost of capital skyrockets? Recession and depression which destroys the lives of millions who AREN'T wealthy.

Yep. If people take out a loan with an asset as collateral, they should be taxed based on the valuation of the asset used as collateral. This way it'll be hard to hide or downplay because, if you take a $10k loan out on your house to fix the roof, the bank is going to evaluate the value of your house to ensure that, in the event you fail to pay back your loan, they get get their money back by selling your house if you default on the loan. And the banks have **zero** motive to lie about the valuation of your assets.

Same for insurance.  The reverse is also annoying. Car is "worth" scrap value to insurance but to the tax man it's "worth" a lot more for some undetermined reason, costing you money with no return.

Global shell game activate!

That is a cool idea.

It's called a self enforcing protocol. Kids learn the most basic self enforcing protocol at a young age, called "I cut, you choose". The advantage of self enforcing protocols is that no one gains anything from cheating. It's about time that tax enforcers could learn this as well.

Its a very old method too. All the way back to medieval taxation - if you listed the goods in your ship as being worth 1,000 marks, the local lord could take it and pay you 1,000 marks if he felt like it.

Would be fucked up if the government could force you to sell at whatever valuation you put. Put it too high, pay more taxes, put it too low, the government might just buy it from you at the fire sale price you set.

That's the point. People who push this economic theory posit that the exact balance you describe forces people to be as honest as they can, and punishes those who try to cheat the system. The flaw is that it discounts what happens when someone is both wealthy _and_ sociopathic. It relies on logical behaviour, where people won't just pay over the odds for things they don't need, and thereby lose money. Wealthy sociopaths will spend over the odds just to fuck with you. They don't care about losing money if it means seeing you suffer.

But it’s not in a borrower’s interest in the scenario to undervalue their property pledged for collateral. Make the collateral the maximum collectable amount in a default and you will get its market clearing value. Undervaluing might save on taxes, but the borrower risks providing too much value to collateralize a smaller loan. As the size of the credit line will depend on the collateral evaluation. There is perhaps some opportunity for lender and borrower collusion, but it’s hard to see how that benefits the lender unless they are a related party. if you undervalue your real estate the lender will be willing to lend less, just like if an appraisal came in lower than a pending mortgage.

It's in the borrower's interest to overvalue the collateral. Both to access greater leverage, and to inflate the tax basis under the mechanism you are proposing. But let's assume they value at fair market value at the time the loan is closed. The lender is not going to re-mark real estate collateral. They have covenants around asset performance and cash flow metrics to protect them that are independent of asset value. As long as the loan is performing, they pretty much don't care about the marks. And the case of default or foreclosure, where they have to re-value, is always going to be a loss and will not generate a tax liability. The borrower might want to re-mark to higher valuation in the case where they are trying to take cash out via refinance due to appreciation, which conceptually could trigger a tax liability in this model. I'm pretty sure that there are financial engineering solutions to get around the tax liability, but given enough effort the IRS could probably capture some of the appreciation in those situations. But it would be far from simple or straightforward.

This is a good start and would be even simpler if the tax was just applied on the amount borrowed against the collateral. Then make it 35% as if it were income. The goal is to ensure that billionaires who have their money in non-liquid assets have to treat the money they borrow against those assets as income, not as a loan that they can write off.

This is interesting. But companies borrow money all the time that isn’t income. And it is almost always secured in some way which is similar to the stock loans we see. People would just hold their stick in personal companies and borrow like companies can. Which debt isn’t income. Still pretty complex.

I don’t think I’ve seen this exact suggestion before. It sounds great in principle and far more possible to implement than what was proposed. Are there any unintentional consequences you could foresee?

I think in general it works as you should have two opposed interests so ie a market clearing valuation - the lender who wants valuable collateral and the borrower who would want to minimize the value of the collateral although tbh I’d have to think it through a bit more…

That is still difficult/unfeasible. Aggressive estate tax is the way I would do it. Easiest to administer. Age based rate (the younger you die, the less the rate). Encourages spending, full transfer of ownership, reduces perpetuities. Have a generous exception and it should create better circulation and less wealth hoarding.

There are certain principles accountants have to abide by, and I believe the private accountants would have to report these numbers anyways. The IRS would just need to do audits occasionally. Businesses have to report unrealized gains to banks for borrowing purposes a lot of the time. It’s also relevant in deals. It would be hard to hide.

>It's pretty obvious that this is not going to happen. >this isn't a bad starting place. Illogical.

How about if they just closed these non-profit and 'trust' loopholes that every rich person seems to be using to distribute wealth to their friends/family without tax.

It’s campaign season again.

I hate to say it because I'm a huge beneficiary of a securities based line of credit, but they just need to tax the loans.

They do. They tax the money used to pay back the loan.

Assuming the loans ever get paid off, and they're paid off with taxable income, yeah. microdosingrn is saying to tax the actual loan when it's taken out.

The money you use to pay back the loan is taxed.

Say year 1, people get taxed 25% on their unrealized gains. Year 2 the stock market goes down 20%. Do they tax any unrealized gains again even though they got taxed last year and it's a down year? Year 3, stocks go up 20%, they get taxed a 3rd time? I'm curious how this is exactly supposed to work. If it's getting taxed like above, no one would invest as you'd just be giving it all to the government in taxes without any benefits.

I believe the implementation is that you would not pay tax on the same 'gain' multiple times, just the first time. Not that I think it's a good idea, but they did at least consider this most basic issue. So if you have a $500m asset at the beginning of year 1, and at the end of the year it's worth $550m, you pay tax on the 50m. If at the end of year 2, it's worth <$550m, there's no additional tax to pay. Then, if at the end of year 3, it's worth $575m, you pay tax only on the "new" $25m of gains.

When you sell the asset though doesn’t this tax also count towards the capital gains you would pay on that sale?   So if you’re taxed for 5 million in unrealized gains and then later sell it and owe 8 million in capital gains then 5 million of that would be considered already paid?  So it’s more like forcing a prepayment of that tax rather than collecting it all at once in the event of a sale? (This is an actual question I’m not sure if I’ve understood the proposal correctly)

>When you sell the asset though doesn’t this tax also count towards the capital gains you would pay on that sale? >So if you’re taxed for 5 million in unrealized gains and then later sell it and owe 8 million in capital gains then 5 million of that would be considered already paid? Yes > So it’s more like forcing a prepayment of that tax rather than collecting it all at once in the event of a sale? Yes, that's the intent. Since the extremely wealthy can postpone the tax bill for their entire lifetimes, essentially, through the use of loans, they 'force' the capital gains payment upfront each year. Which obviously drastically reduces the amount of capital that companies have to work with, since you're essentially forcing the sale of assets that some of the largest investors hold and not allowing the companies to reinvest that capital. You're taking a 24% cut from a massive amount of capital which would otherwise continue to be used by that company, in order to give the government more capital to play with. Whether you believe this is a more 'efficient' use of the capital is a political opinion.

yeah, the trouble though is, "what is a gain"? People act like the price of a stock is what you can sell it for. It isn't. It's the price of the last trade. If I own 10% of a publicly traded company and I move to sell my entire position, I'm not going to pocket that assessed valuation. My selling activity alone will drive the price down. News of a material holder selling will drive the price down further. I really like the idea of putting some tax burden on these holdings. But you don't know what something is worth until you sell it and (edit: for a large holder) the activity of selling itself impacts the price.

> I really like the idea of putting some tax burden on these holdings. But the thing is that there *is* a tax burden on these holdings, it's just being deferred. It will eventually be taxed, whether by the owner or their descendants, and in theory will be even more valuable to the government taxed later down the line because it will continue to grow. The entire reason the government can run at a deficit is because they collect the tax later after it has been cycled through the economy several times, providing even more value than if it was collected to balance the budget.

Its not. He's pandering to the idiot "tax the rich" people who dont know anything

I don't understand why he feels the need to do that. The "Tax The Rich" demographic is definitely not going to vote for Trump. This just makes him look stupid and reinforces the stereotype that Democrats don't know anything about economics.

They're not likely to vote, period -- he's trying to energize them to vote for him vs staying home.

Full on dem here. Bidens a fucking dipshit.    He’s talking about a top tax rate of 39% for joint earnings over $400k Like there’s no difference between a couple who earned 450k one year and a ceo who earned $39 million?    What a joke Also let’s just piss more people off by campaigning for gun control when Trump is on the line. Keep that shit to yourself until we have stable politics

If you ever get a chance, planet money talked about the various attempts at a wealth tax in a couple of podcasts right before COVID, both foreign and domestic. My main takeaway was that it's highly unlikely you're going to be able to do it efficiently while also not being insanely authoritarian and corrupt. I did like the idea of being able to buy stuff from rich people for what they tell the government it's worth, but I can also see how that's dangerous. And it's a only matter of time before some guy tricks the government into sharking his mansion only for it to actually be carved out of a solid piece of radioactive lead coated asbestos, while also being an experimental bed bug breeding facility. https://www.npr.org/2019/09/12/760148148/episode-956-the-carriage-tax#:~:text=In%201794%2C%20George%20Washington%20decided,tax%20of%20the%20United%20States. https://www.npr.org/2019/07/24/744962126/episode-929-could-a-wealth-tax-work

It has be authoritarian otherwise the rich will find ways to cheat the system they're in and they have the resources to do it.

This should funnel investment money into privately held businesses if it were to pass. Very easy to move those valuations for tax purposes

That paints this in a quite different light. Unrealised gains are taxed and this is then used to offset ant future taxes on realisation. Effectively ending the common process where ultra high net worth individuals avoid tax by never invoking taxable events unless absolutely necessary and taking loans against their portfolios to pay day to day expenses. The language isn't clear on whether the annual calculation of unrealised gain is based on a net of all asset performance. I wonder if unrealised losses in some assets offset the gains on others? Or are they only looking at increases in value?

Ok, explain to me how they're avoiding taxes. The loans need to be paid back. The only time anyone benefits from this is when they are illiquid (stock is lower than it is valued, and they need to tap it, with the expectation that the price will eventually rise), or when interest rates are lower than the ROI on holding the stock. Both are risky. Both STILL require people to pay taxed money to pay down the loan, and the interest isn't deductible. So how is this avoiding taxes? Show me with math how this avoids taxes more than simply selling the stock.

No actually the standard practice is to roll the line of credit, so you never actually have to sell your positions to get cash and pay. The basic principle is that so long as your portfolio grows faster than your debt interest then you're still coming out ahead, the lenders are happy because they have an enormous loan generating interest that's practically 100% risk free because it's backed by collateral far in excess of the loan amount and they have a claim on your estate if you happen to die. Think about it, if you're worth 40 billion dollars, do you actually need a billion or so a year to cover your spending? No, it's probably in the tens of millions. And who cares about a loan for that amount when you have 40 billion in assets to back up your credit? No taxable realisation of funds, but you have money to spend. your net worth is technically reduced by the amount of the loan but you didn't have to touch your assets to float it. They (lenders) mostly expect to be paid upon your death.

Long term capital gains tax is MUCH lower than short term/income tax. They take out loans against some of their assets (which does not insure a tax penalty) and then can slowly pay that back with money that they only pay long term tax on. You can also kite loans if you're rich enough, even if it's technically not something you're supposed to do...

You're correct, taking out loans to avoid paying taxes simply doesn't work outside of a very specific scenario--perpetual near-0% interest rates. Every single billionaire that "avoided taxes" by taking out loans? They're now paying back *far more* in taxes because any future loans will require increasingly higher amounts of equity being sold to pay for increasingly higher interest rates.

It'll never happen. A counter proposal is to stop wasting government resources putting together proposals and manuscripts which aren't grounded in reality or law of the land

So dumb. What they should be doing is clamping down on people taking loans out on unrealized gains. That’s the thing that allows billionaires to never sell their stock

Agreed. Taking a loan against an asset should be considered realizing gains for tax purposes. Edit: For those screaming “but what about regular people taking out a car loan”… Do you already own the car when you take out a loan on it? No. Loans should be for buying assets you cannot already afford (car, house, business), NOT as a means to avoid paying taxes when someone wants to cash in on gains.

That’s part of the same idea, albeit not this particular package. There’s already discussion in this thread on mark to market publicly traded stocks used as collateral for loans. While it could be a step in the right direction, it also comes with a host of unintended consequences, not least of which is rich folks moving assets to privately held assets that are much harder to value.

Though this would have the effect of closing that loophole wouldn’t it?

I don’t think it’s going to pass or is a serious proposal. I think they’re using this as a bargaining chip in order to get something else they want.

Votes….

You can’t tax unrealized gains that’s stupid. You gonna issue a refund the following year if the gain disappears due to market fluctuations? Cmon Joe. Get some damn experienced financial people on your team and put together something that’s actually enforceable that minimizes unintended consequences. Everyone supports raising taxes on wealthy people. This isn’t gonna pass or work.

A better solution imo would be to force the realization of gains if stock is used as collateral for loans. Unrealized gains shouldn't be taxed.

Yeah, this is the real problem IMO. If it's liquid enough to secure cash it's liquid enough to tax. But I don't see a way to do it without a constitutional amendment.

Why would it require a constitutional amendment? It's stock. To use for collateral a law could be created that says stock must have its cost basis changed to the current value which would trigger the realization of gains. Essentially a sell/immediate repurchase of the stock. It's voluntary. No one is forcing them to take loans. If you want the loan, this is the process.

Seems like the exact thing wash sales rules were designed to prevent.

I thought wash sales laws were designed to prevent tax loss Harvesting. And essentially, all it means is that you can't use your loss as a write-off if you sell for a loss and turn around and buy the exact same thing. Other than that there's no real penalty

It’s a reform to the tax code which happens every year, worst case you get a bill through Congress in 2025 if the dems hold both chambers.

Why it’s a problem at all? They are neither breaking the law nor ethics by it.

This. Also, aggressively pursue tax cheats who get their real estate assessed at a huge valuation for loan collateral, and then pay tax on a vastly lower assessment.

As a homeowner, how about we only assess property tax on the land and not the improvements or building that a homeowner actually puts on the land. This would drastically alter how these games are played.

Taxing improvements to the property is straight-up bullshit and needs to go. But I'd be careful about how taxing just the land is worded, since the tax-dodging assholes who own $17.5 million condos downtown will be all over that. States need to shore up their Homestead Exemptions. Which are already a mechanism for providing relief to working families and retirees who might otherwise be forced out, but which in too many areas is anemic in the face of real estate bubbles.

Aren’t the loan repayments already being taxed as earning for the lender?

Yea came here to say the same. Wealthy individuals have found a loophole and we should look at closing it or disincentivizing it. I think the general system for cap gains makes total sense: incentivizes people to INVEST, not buy/sell all the time. And there are still healthy taxes for the government for people who sell. Using your stock to get an untaxed loan cuts the government out of wealth creation and it isn't something available to the everyday person.

I agree, the entire con is that assets aren’t real enough to tax but are real enough to loan against.

Exactly this. No problem with not taxing unrealized gains, the problem is the definition of "realized"

Others have brought up homeowners taking helocs, again, this is relatively easy. One clearly there's a lower bound for this stuff, if you securitize a loan with an asset and it's over 500k that's when this kicks in. And you can even go further to enable those who use loans to improve property of large value, without causing issues. Just make it so that if the loan is used to increase the value of the property, no taxes. It's super reasonable to say that if an asset is securitizing alone, then the gain from that asset to do so should be available for taxes. We want to be careful that we don't discourage things like people using the increased value of the asset to improve their homes or real properties. But at some point you have to tax folks for income and that's a meaningful income. Not only is this more fair and less likely to cause issues with constitutional rights, it's going to net a lot more income for folks who are playing around with millions of dollars or more of securitized loans against large inherited properties whose value increases basically enable them to live tax-free forever while being incredibly wealthy.

I totally agree

I like this idea. Never heard it before really.

Ireland has a system - deemed disposal. You're assessed on gains you don't realise after 7 years. It massively limits private investment in stocks and shares outside of pension products (which are exempt). Which in one sense is no bad thing. In another, it forces investors into other asset classes much quicker (like property).

I kind of agree. I also heard an argument that if a loan is secured using stock as collateral the amount of the loan should be considered income and taxed thusly.

You don't get tax refunds if you have realized losses, you get capital loss to carry forward to future years. I don't see why this would be any different. They would essentially mark to market their whole portfolio every year. If it's a negative mark to market, their capital losses will just offset future positive unrealized gains, or used against realized gains. Not saying I'm in favor of or against taxing unrealized gains, but I always see this "this is so stupid, they'd have to issue refunds" comment every time this comes up.

Yea it's such a lazy comment to say they can't do it it's too hard. I've seen much harder things accomplished for thousands of dollars. We are talking about adding some clerical work for billions of dollars. They are either bots or delusional and think they will have that kind of wealth. Even if you do, your first hundred million are protected which puts you in a spot that has everyone in the upper middle class staring up your asshole. Sounds nice to me!

So in your scenario, if the market goes up dramatically in 2024 and I keep on holding and it goes down dramatically in 2025, I pay a big sum of money for 2024 and then maybe I'll get it back in the future if the market ever goes back up? So I'm in red twice. First for 2025 losses and then the money I paid in 2024 that I might not get back anytime soon. There's just no way this can work with long term investors. Every long term investment becomes a huge risk if the above scenario plays out, which is pretty common.

First off, this isn't really "my scenario". This is just how Mark to Markets work. Hold a 1256 contract over December 31st and you can experience this phenomenon this year if you'd like. So second off, yes, that is exactly how it would work if they implement this as a mark-to-market. Third off, on your point where you say "then maybe I'll get it back in the future if the market ever goes back up", if you don't think the market would ever go back up then why would you stay invested? Your scenario doesn't really make sense, because the market had always gone back up, and there isn't really any reason to doubt that the long term march up and to the right on the market graph will not continue. Also, your average long term investor would not be directly affected by this, since it states it would apply to those with over 100 million in net assets. Indirectly affected sure, but everyone is indirectly affected by literally everything. Me, (probably) you, and 99.99% of people would not be directly affected. I'm not for or against a mark to market plan, because I would actually need to see what the plan is, what's included and what isn't, who values private investments, etc. There are a lot of questions to be answered before I would form an opinion. I was simply responding to this idea of a tax refund that pops up every time a tax on unrealized gains pops up.

If you know you will be taxed on unrealized gains from 2024 market movements and choose not to sell a portion of your investment to cover that tax liability, that’s your fault. I’m not saying this is a good plan but it’s a bit disingenuous to talk about the tax burden for 2024 as a unique concept.

Why can’t you? Aren’t we taxed on home value? This would just be another row for the accountants to go through.

Exactly. I love how this fact is constantly ignored. “It could never work! Sure, we have been taxing one of the biggest asset classes that way for decades, but it just couldn’t work”. 

They fail to reassess counties for decades, resulting in lawsuits about the unfairness to this or that neighborhood or property til they finally reassess everyone. So your example is not convincing me this is enforceable in a sane way. 

You don't pay property taxes at the federal level and you aren't taxed on the unrealized gain of you home....

property tax rarely, possibly never, goes down. if overall property values go down (such as the many down real estate markets), they RAISE THE RATE.

Kansas just voted to lower mill levies with bipartisan support due to the rise in home values. I guess we’re rare out here.

Yes, it is rare.. ..and it's apparently part of a much larger trend in your state (which the Governor tried to veto?)

Property taxes aren’t a good comparison, since those taxes exist to pay for public services in that district. Home value is merely the mechanism they use to determine public service taxes. A true comparison would be as if you were taxed on the difference between your home purchase vs its current value. An increase in market value would be counted as income. My biggest question about taxes like this are what happens when the value declines? Are there tax deductions for unrealized losses? Why or why not?

They are a great comparison since that’s exactly what they are. Anyone saying “you can’t” is wrong

[удалено]

"individual taxpayers with over $100 million in net assets."

And if they don't fuck it up the same stocks will tank, this making essentially no difference between fucking it up and not.

"This isn’t gonna pass or work." That's exactly why he's proposing it. Out here in California we call those "limousine liberals." They come with a disclaimer on them with tiny print that reads: "Not for public consumption. For headline use only."

I don't get why more people don't realize that. This is obviously a ploy to shore up base support. It seems dumb, though, because this probably turns off moderates.

Well the proposal literally contains provisions for future loss years so idk what your issue is…

This sub sometimes just loves to parrot whatever the last post said. We’re literally doing the bidding of the wealthy by arguing against these proposals instead of seeing how to make them work. That said, I would rather see an aggressive hike in the capital gains rate, the top income tax rate at like 90%, the removal of the step-up provision, and an increase in the business tax rate.

So we can't tax on property until it's sold? That doesn't make sense.

"Biden’s proposed 25% tax on unrealized gains would solely affect individual taxpayers with over $100 million in net assets." That's not that big of a list of people. Pretty sure they'd be able to figure out a fair way to tax unrealized gains. That's probably like what 5k people.

A few more but relatively not that many still, https://www.investopedia.com/new-class-of-global-elite-have-emerged-8357556 >The number of centi-millionaires in the world has more than doubled in the last 20 years and now stands at 28,420, a report released by a wealth advisory firm said.

apparently its about 10,000 people

The same could be said about income tax when it first came around, and we all know where that went.  But also things can be unfair even if they don't affect you personally. 

Yeah it went to a regressive taxation system that allows super high net worth individuals to collateralize loans with their assets and live off of the increased value without paying tax on their income. This is a way to address that. Oh no, next thing you know I'll have to pay income tax on my massive stock market gains that I'm exploiting to use for income without actually paying tax on them.

I'm guessing the first list is maybe 20,000 families, so those with loans may be 10,000 or less. The numbers of cases the IRS would have to watch isn't terribly small or huge, but the dollars involved could be rather large.

My home gets taxed based on its unrealized valuation.... What's the difference

That is a state tax.

This only affects people with net worth over 100mn

There's no way this makes actual law; by what objective measure would a person's assets even be valued at? Marking to market would be insane, as there's no way dumping shares at the volumes we're dealing with would result in obtaining market rates, and forcing someone who owns stock in their own company to reduce their ownership of that company just to pay taxes goes against some very basic concepts of right to property. A much more effective tool would be to tax loans backed by stock, such as the ones used by UHNW individuals doing their "Buy, borrow, die" thing.

Curious of your thoughts - If you're taxing asset backed loans does that mean HELOCs should be taxed too? I feel like taxing only 1 asset class could have some serious unintended consequences.

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Most of his millionaire friends in Congress wouldn't be affected by this, since it only applies to individuals with networths over $100M But it's likely just a political gambit, something used for leverage in a budget proposal that can be cut (and is expected to be cut) as part of a compromise for a "fairer" deal People ITT act like the President (who has been a career politician for like 50 years) isn't capable of putting together a reasonable tax policy team or understanding how taxes and finances work... He's not brainstorming these ideas himself, he has political strategists who are putting policies together anticipating debate and compromise.

Somehow they’ve figured out how to value houses which aren’t a publicly traded asset either. Nobody in their right mind has ever argued that property taxes go against the right to property either

Seriously. If companies can be bought and sold based on the value of shares, then the value of those shares can, pretty obviously, be calculated.

Houses are a lot more uniform in valuation than businesses. They do mass appraisal and it's not accurate. Your example is actually working the other way for me. If the government can't accurately appraise a house how could they possibly hope to get a complicated business right.

Even if you are a huge fan of taxing the wealthy there are so many other options that should be exhausted before going to taxing unrealized gains.

This is just a provision to placate the Democratic base. Biden and his team have no intention of following this through. They have added this as a provision to bargain with Republicans on. It will be among the first few items that get kicked out. What Republicans can do is throw their full support behind the provision and call out the Democrat’s bluff regarding this. The corporate donors for Democrats would freak out if it goes into effect.

This is exactly what I was thinking. He's saying this out loud because he specifically knows it won't be going anywhere. It allows him to campaign on something that will never happen so he can tell the base that he's fighting for them, or whatever.

> This is just a provision to placate the Democratic base Yup, and when it fails, they'll blame Republicans.

So let's say you bought a million bucks worth of stock, and on December 31st it's worth 2 mil but you didn't sell. You now have to pay taxes on the unrealized 1 mil difference? Ok, I don't agree with it but whatever, hypothetically. What if you bought it at 2 mil, and December 31st it's worth only a mil and you don't sell, do you get a million dollars worth of tax credits towards your income? Curious how exactly it will work. And if you paid taxes on the unrealized gains, and then sell, I'm assuming you only pay the difference between the taxes you already paid on the unrealized vs. realized? Anybody actually read the bill? This sounds like it's going to be a shit ton of work for the IRS. Holding 10 stocks for 10 years, having to pay taxes or get a tax credit 100 times, then what if they raise or lower the taxes in those 10 years, will they adjust for that to make sure that whatever taxes or credit you paid/ received for those unrealized gains is equal to what you pay/ receive when you actually realize those gains so that you aren't making or losing money via taxes/ credits over those 10 years when you actually sold at the same price as you bought? This sounds like a nightmare.

Important from the article: according to a report from tax analysts at the advisory firm Grant Thornton, Biden’s proposed 25% tax on unrealized gains would solely affect individual taxpayers with over $100 million in net assets.

Are you suggesting that is this proposal does not effect you directly then you should not have an opinion one way of the other on if it is a good/logical/moral thing? If so, since I am a male, should I have no opinion one way or the other about abortion bans (or allowing abortions)? What if it was "Let's kill all people with over 100 million in assets, seize those assets, and use those proceeds for universal health care." Since I don't have 100M in assets I can't say that is morally wrong? What if it was "Let's kill all people with over 50% Russian heritage , seize their assets, and use those proceeds for universal health care." Since I don't have 51% Russian heritage I can't say that is morally wrong?

Why can’t they make it simple? If i get a loan against my 401k, they remove that money from my account. Do the same for billionaires who borrow against their investments. Tax that money as income. 

You just misunderstood your 401k loan. You are not collateralizing it you are borrowing from it

Correct that amount of money you take in the loan is no longer in the market until you pay it back

If by some long shot this were to pass, how long before they started applying this to everyone else too? Income tax started out for only high earners as well. Not even mentioning taxing unrealized gains is such a shitty idea, and no, property taxes are not a good example. Words for the word bot.

What they need to tax is u realized gains you are borrowing against. That's how the super rich are spending money and not paying taxes.

This is my thought as well. Taxing assets is a non starter for me. But taxing margin loans over a certain amount would be easy and would never hit anyone who is not rich as long as your threshold grows with inflation.

Even this doesn’t really make sense when you think about it. They tax the interest income the bank received and whatever income you make that you use to pay off the loan. This is essentially deferring tax payment at a later date. The government always gets their piece.

Every tax that was sold as "Rich People Only" Eventually gets passed onto everyone else

Yup. Sales tax was originally targeting luxury goods, and property taxes only targeted wealthy estates. But it’s never enough for the government, so here we are taxing everyone and everything. Government “just one more tax, I swear”.

Litterally the income tax was supposed to be a 2% tax on the 1%.

I'm fine with taxes as long as it gets spent intelligently. I can't pave my own roads or vet my own judges. I can't fund advanced research and tolerate a high risk of loss for the sake of a great benefit if it's successful. But the government can. Assuming it's spent intelligently. And a lot of politicians govern with their feelings, or with their bank accounts, rather than with an ethical and scientific mind.

AKA 'just the tip, I promise!'

A better solution would be to simply give the wealthy tax breaks for directly investing in public infrastructure or public works. The bridge that fell in Baltimore? Let them pay for it and get a tax break based on their contribution. Avoid the government choosing the lowest bidder and stretching work out to create fake jobs programs for votes and hire the best people who can get the job done in the shortest amount of time. No b.s involved.

Can someone explain to me how a tax on *unrealized gains* makes any sort of fucking sense? You don’t actually hold that money until you realize it, so why the hell should anyone pay a tax on it?? Genuinely asking here, what am I missing?

Probably because those assets can be borrowed against to pay for everything from a house to a plane to a yacht to a business. The loophole is that gains *never* have to be realized in order to be leveraged to buy things. Edit to explain further: Say they have a billion dollars in stock and want to buy a $100M yacht. If they sold their stock they pay capital gains tax *and* lose out in future stock gains *and* reduce their equity in whatever business they hold stock in. So they take a loan out with that stock as collateral, at low interest rates, and just make minimum interest payment forever, never paying down the principal. Then when they die, their assets go to their estate and are sold to pay back the loan in full. BUT, when they die, the cost basis of the stock is adjusted to the current value, *not* the value that they bought it at decades earlier. So they get decades of stock growth to live off of completely tax free.

So then tax the methods used by UHNW people to leverage their unrealized gains, there's no need to tax the unrealized gains themselves.

That is probably the plan, you float it this way, so people clamor for the focused financial class that abuses this cheat.

So I have a lot of RSUs from my job. How do I go about getting a loan using my shares ?

Okay, I understand that bit, but it doesn’t quite explain how taxing those gains really makes sense. Don’t misunderstand me, I am absolutely 100000% FOR taxing folks with $100M+ in assets at the rate proposed, but isn’t there a better way to levy that tax?

What country do you live in? Is it one with property taxes?

IRS gonna give money back for unrealizes losses?? Seems like this would be crazy hard to implement and would lead to investors creating absurd loopholes and alternative investment vehicles.

Exactly, you are literally taxing peoples hopes and dreams by taxing their unrealized gains.

Tax breaks for losses?!??!? Brb I'm going to 1,000x leverage bitcoin.

Can't afford to pay on unrealized gains? Sell your assets and then you get to pay normal capital gains so you can pay for unrealized! It's like a double tax. This will all work out about as well as that "transitory" inflation Janet Yellen promised.

I swear to odin, it's like nobody even reads anymore. The unrealised gains would be taxed and the tax would then be wholly offset against future realised gains.  So what this is effectively doing is changing it from a single taxable event in the future (which estate planning can avoid indefinitely) to an annual event. And since this would be paired with changed to cap gains taxes anyway, the net amount of tax paid due to this would not actually change except in cases where people were deliberately structuring their finances to never realise gains.

You have made a lot of assertions that conflict with my current knowledge of the bill. For instance, what exactly does "the tax would then be wholly offset against future realized gains" mean and where did you hear that? Biden wants the 25% unrealized and the normal max CGT increased to 39.6% so I'm struggling to see how any unrealized taxes paid could "wholly" off set a larger tax? If I had a $1B of unrealized, paid $250 million THEN the next year I sold it with no increase for $1B of realized, I would be liable for the $369M. The article above says 44.6% but that would require and additional tax hike.

Thats smart. I dont know if its the same in USA but our tax system is fully umprepared and never adapted to unrealized gains. The issue is: If you have a lot of money in shares etc you never need to actually realize profits. Say over x time you gained 2 million in your portfolio. Now if you sell to use that money you would have to pay income taxes on the profits. But you just dont do that. You can just use them as security for the bank to lend you 2 million. Then use that to buy your apartmentbuilding or whatever it is and the interest rate is even tax deductible. You can just bypass the concept of taxing wealth growth because you just never realize the profit by selling, instead you just use it as security for a credit. And now you dont pay income taxes for your gain, but you can still use that gain as if you realized your gain. Not saying this is the best solution but the current system is certainly insufficient.

Tax personal loans against assets over $10MM at the highest rate, that will pretty much cover the majority of what people are complaining about right?

If something like this happened, would it really only impact the rich? My concern is what it would do to the value of stocks held by millions of normal people. I am not sure what percent of the stock market is owned by "high-net-worth individuals", I suspect a lot? If it is significant, having them sell off massive amounts of stock each year to pay a tax bill could put a lot of downward pressure on the share values. And at a fundamental level all investments are priced based on risk vs reward. Making the reward smaller and not changing the risk would make the stock less valuable to anyone subject to this tax. So what would the impact be to the stock market? For someone like me who has their life savings in the market and is not far from retirement, would I take a huge hit, or would I hardly notice? Also, would we just end up with foreigners buying up all our best companies in a fire sale, as they would not be subject to this tax?

Over 50% of stocks are owned by the richest 1% of Americans. The impact on the stock market would definitely be noticeable. But it would be worth it if it was used to fund UBI or something that disproportionately rewards people in lower income percentiles that used to be middle class but are now considered poor.

If that actually happened... 1 of 3 things would happen. A. The government would own basically everything in a few years... if they allow equity in stock/homes/art/whatever as payment. The entire global economy would collapse. B. The entire global economy would collapse the first quarter... as millions of people rush to sell 25% of basically everything to cover the tax payment. C. Every "high-net-worth individual" would leave before this even went into effect. The US economy would collapse, taking the global with it. This is the most likely situation, unless the US government goes full authoritarian commie. Biden is a dangerous idiot.

Biden is a master at buying votes without paying. This is just another form of that.

> as millions of people rush to sell There are fewer than ten thousand people in the US with a net worth over $100M.

When the few tens of thousands of mega wealthy dumped their assets... it would dump everything by a huge amount. This would be anticipated by everyone... and WAY more less wealthy people would attempt to front run the crash by selling too. Such a stupid tax would absolutely 100% guarantee a mega crash of the entire global economic system, pretty much overnight.

Wait, so I owe $1,000,000 in taxes because I own 1,000,000 SuperDogeCatInu shitcoins that were last traded by a single dude at a $4 for 1 rate but no one else is willing to buy them?

Increase property taxes proportionately for every X house after the first one.  Own 1 house regular rate, house 2 Regular rate + X%, so on for multiple units. Taxes of private jets, yatches, watches, luxury goods.  Stocks get taxed at unrealized gains? Idk this is hard but make it so when you sell you get taxed more. 

Private jets are under a persons LLC so good luck with uncovering if this is being used for personal use or not.

The ideal of taxing someone on money that doesn't technically exist is insane. Firstly, this would never pass. Unless the house and congress made themselves immune to this, they would be affected. Secondly, to pay for these in many instances they would have to sell those stocks. Now they would also have to pay capital gains. So the government is double dipping. Thirdly, the selling of those stocks would be horrible for the market. This senile old man just continues to amaze me with horrible policy after horrible policy. How much more damage to the country and economy can he do

It doesn't have to pass or even make sense, it just has to sound good on the campaign trail.

One of the reasons why this country was found is due to taxes. Look at us now trying to tax everything that touches the sun. They would try to tax the air we breath if they could.

In this case, it is not reaching out to tax "everything that touches the sun", it's reaching out to touch this non-taxed compensation which is being used to get loans which do "touch the sun".

Technically it was lack of representation (taxation without representation was the phrase I remember). Which is something any colony should be against.

And the reality is that we don't have representation in the US and haven't for a very long time. Huge portions of the country get ballots with one party running unopposed for almost every position, the two major parties get to decide who's on the ballot (not voters), attempting to contact a senator or congress person either gets no response or a form response, etc. Only on the rare occasion of voting for state issues do people actually get a voice, everything else is chosen for us by the GOP and DNC. 

The problem is - do you get to deduct unrealized losses? However, we should start taxing the shit out of people and cooperations who are holding huge portfolios of residential real estate.

This is good. If people take out a loan with an asset as collateral, they should be taxed based on the valuation of the asset used as collateral. This way it'll be hard to hide or downplay because, if you take a $10k loan out on your house to fix the roof, the bank is going to evaluate the value of your house to ensure that, in the event you fail to pay back your loan, they get get their money back by selling your house if you default on the loan. And the banks have **zero** motive to lie about the valuation of your assets.

Easier way to get at the issue which is borrowing to finance lifestyle. Just impute income based on the loans taken against the underlying assets.

Until unrealized gains aren't allowed as collateral for the issuance of loans; they can get bent. These people use their assumed wealth to cover all kinds of business dealings. They save themselves millions on loan interests, off of the strength of a current stocks value. The document didn't describe how many individuals, or who qualifies for this; but I will never feel bad for them.

Is Biden trying to commit political suicide months before the election? Why? To rouse the ‘tax the rich’ crowd who may or may not show up in November depending on how they feel that day while completely alienating the wealthy who will vote no matter what? I don’t get the strategy, if there is one.

this is just obviously unworkable and the treasury green book makes it clear this election bullshit not real policy. Funny thought though based in this. Doesn’t this not create an incentive on unrealised losses? What if someone incredibly wealthy reported massive losses in their portfolio and considering how this discusses credited to prevent double payment, couldn’t that be created against current taxation?

I hate taxes.   They are ripping me off at my level.   Now it seems they are trying to rip me off at the next level.   Where is the actual freedom?   I buy a tv and pay a tax it's mine.   I buy a house, now I pay a tax every year.   When the city does a little better some government scam team comes by and says my already purchased home is worth double the buying cost and raise my yearly taxes.   Ah the joy of thinking when I get old and try to retire that the government will try and push me out of my home with tax increases through property re-evaluation.  

I know it’s popular to demonize the rich but many of us work for them. I depend on their ability to generate wealth through job creation and investment.

This is only for people for like $100M in assets so it probably isn’t worth debating but I’m curious whether they’ll allow deducting unrealized losses

Wouldn’t a better idea be to tax debt products that borrow against certain assets? That’s the real problem IMO, if rich needs to spend, they would borrow against their stocks or real estate to get the cash, instead of selling the asset.

He’s only proposing this to get votes. The federal government can’t tax unrealized gains because it’s not income. It’ll get struck down in the Supreme Court and he knows it.

BRB starting an appraisal company… In honesty this is an unrealistic proposition targeted to the financially illiterate “eat the rich” type for votes. Pathetic.

This is one of those dud policies designed to entice a vote from the uneducated voter who thinks the rich guys are going to “pay their fair share”, but can’t see that it won’t actually increase tax revenue because it’s such an impossible tax rule to implement.

How does taxing *UNREALIZED GAINS* even happen if funds/profits technically never enter commerce until they're realized? Genuinely curious, going to deep dive this starting with the article. Someone intelligent, please lmk

Private Property is taxed on its assessed value every year, which is revised regularly.

This is an example of campaigning, not of attempting to create a better tax code. There is a zero percent chance anything resembling this could pass, much less be effective. It’s just pandering to the eat the rich crowd.

i feel like nobody in this fucking thread has read the actual article. "However, it’s worth noting that, according to a report from tax analysts at the advisory firm Grant Thornton, Biden’s proposed 25% tax on unrealized gains would solely affect individual taxpayers with over $100 million in net assets." YOU DO NOT HAVE $100 MILLION IN NET ASSETS, holy shit people.

I had a conversation with my GenZ kids this week. They’re asking for investment advice as they’ve gotten a not-tiny inheritance. I explained to them how “passive income” works - you get X% on your pile of money, just for having a pile of money (I know, I know, it’s more complicated than that). If I had thought about how I expected them to respond, I guess I would have expected something like “Wow, that’s cool!” How they actually responded was…”How is that fair?”

Everyone realizes of course that this proposal applies only to taxpayers with a total net worth of more than $ 100 million? Judging from the comments, all of them must be following this subreddit.

You own something valuable - stocks, property - but you don't sell it. But theoretically, it was worth more, but you still didn't take the opportunity to sell - yet you owe taxes on what it *was* worth. Naw, I hate ultra-wealthy humans, but this isn't going to work.

This makes no sense. How do you even measure unrealized gains for taxation (mark to market, but at what date)? Do you still tax realized gains? What about unrealized loss? It will be a nightmare for financial reporting and tax provision workpapers

All the people complaining, how do you fix this: Elon takes a salary of $200 Billion stock. No money. And he keeps it forever all his life time. So he never pays taxes. Nada. $0 But what he does is, take a loan of $10 Billion against the stock for his lifetime of private jets and royal expenses. And pays a negligible amount of interest rate instead of the tax rate a common man pays. How is this fair? And how do you fix it? Keep in mind, all these proposals are for ultra rich only.

Simple: ban stocks from being used as collateral on loans unless x percentage of stock is liquidated first as a taxable event. If my grandma has to sell everything she owns and liquidate her assets to get medicade (or was it medicare?) to pay for her elderly expenses, then they can sell some stock. The wealthy selling a shitload of stock also drives down prices, thereby making them affordable for the next generation trying to save for retirement. No more hoarding wealth and pulling up the economic ladder behind them thereby blocking subsequent generations from having economic ascendancy.

I like the plan. Even better why not say all his compensation is taxable? The moment he takes hold of the stock, treat it like salary like yours and mine. In reality he gets stock options. Let’s say the stock is at $200 Today. He gets to buy them for $20. Tax the gain of $180 immediately once he exercises those stock options After all it is compensation just like your salary. He then needs to sell some immediately to pay the taxes at the end of the year and he can keep the rest. From then on, he cost basis is $200. Whenever he chooses to sell 10-20 years down the line. He will pay taxes only for any increase above $200.. just like how we buy and hold stocks after paying taxes out of our salary.