Generally speaking, "my money isn't real therefore it shouldn't be taxed" combined with "my money isn't real but real enough to take loans out against and avoid taxation" is a massive issue. However, taxing the loan that uses said assets is the better approach.
Exactly. But when you point this obvious longstanding fact out to the “unrealized gain” morons, they just push to remove property taxes….the one tax that the wealthy truly cannot run away from.
They have weird tax laws that can limit how much your taxes increase. So people that bought homes in 1990 are paying much lower taxes than a neighbor that bought in 2025.
Edit: Can't reply to u/practical-injury-622 but no. In most states you are typically reassessed annually to the point that most people pay relatively the same amount per sqft in taxes. Some other states have caps of tax increases but none are as low as California's.
The thought process around Califoronia's property taxes is logical in a way but it heavily hurts the housing market as people are not willing to sell out of "golden handcuffs".
It also creates gov budgeting issues as newer homes can get taxed at higher rates to compensate.
Personally, I think having it tied to housing inflation is a better system. It keeps taxes more realistic and promotes ebb/flow in the housing market. Price ceilings in general aren't good.
It's worse. "I want roads and plumbing to my mansion, the guy who should pay for it is the mcdonalds worker because income tax is fair and my daddy already paid taxes (theoretically) for my mansion".
Anybody who does a little research should know that property taxes are bad and discourage development disproportionately compared to other taxes. Land value tax would be a much much better replacement
I think we really want a combination of all of these. Income taxes, wealth taxes, property taxes, and land value taxes. For anyone who has investments, there's a wealth tax below which you'd happily accept in exchange for avoiding a specific income tax. I think we should find this value, and trade a portion of income taxes, increasing in high tax brackets, for a roughly equivalent wealth tax. This is then effectively a tax increase for anyone who is invested to a below-average extent, and anyone whose investments make a below-average ROI, and it's a tax decrease for anyone who is more invested and getting more ROI.
For property tax and land value tax I think we want to do a similar thing, introduce agreeable land value taxes in exchange for decreases to property taxes, and instead of tax brackets this would be bracketed by land use / location / local politics. So if a city wanted to, they could introduce land value tax to encourage redevelopment into larger apartments or other more productive uses, but still carve out exceptions for their particular single family home voter base.
I'll accept any improvement, even incremental, and I think getting land value taxes and wealth taxes into the playbook is a great idea. And I'm a little peeved at California for, in my opinion, proposing perhaps the stupidest version of a wealth tax possible rather than something good. It's simultaneously not enough, in that it isn't actually changing how taxation occurs and the incentive structures it creates, doesn't do anything long term, and also way too much, in that it's a huge, unprecedented, highly politicized and publicized tax that will have people avoiding putting wealth in California even if it fails. But maybe it's the big ask to grab attention before you push the real bargain.
Taxing people on the value of their homes is immoral. I’ve seen people inherit relatively modest homes from their parents and need to sell them to move into an apartment because they didn’t have the liquidity to pay for the property taxes.
If they don't have the money to pay the taxes on a modest home that sounds like the right move anyway.
Homes need more and more expensive maintenance, if they're struggling for cash it wouldn't be a good idea to keep the home even if the tax didn't exist.
Yeah sorry I don’t want to use a tax that actively discourages you from improving your property. I didn’t know you could only fund schools with property taxes
The loan tax the above commenter mentioned makes the most sense. The absurdity lies in taking out massive loans on "fairy dust"(Matthew McConaughey as Mark Hannah) in order to make purchases and what not.
A house is tangible and more than likely insured against total loss. The value of a stock or cryptocurrency is just a number on a screen, especially in the era of AI.
And the unknown price of stocks in the 1700s. If you bought a share in the east india company, the price was not being calculated and re-valued every microsecond like SpaceX is today on the stock market.
This problem still exists in the private market. How do you value the stock of a 1 person law firm that by law cannot be sold to a non-lawyer and has wildly differing revenues on a yearly basis. Or there's thinly traded capital goods like a mega-yacht. Do you value it at the purchase price or the market price (which may be significantly less since it is a depreciating asset that only 10 people in the world could potentially buy it)?
Then there's the realized v. unrealized gains debate. If you are taxing unrealized gains, does the holder also get the benefit unrealized losses?
> Then there's the realized v. unrealized gains debate. If you are taxing unrealized gains, does the holder also get the benefit unrealized losses?
Most wealth taxes are annual taxes that don't take into account realized/unrealized gains. Those only come into play when talking about capital gains taxes. If we went to a wealth tax, I could see it reasonable to argue we get rid of capital gains.
A billionaire with a $200 million mansion is paying a wealth tax of 20%. A middle-class family with a $500,000 house that has $100,000 equity is paying 500%.
Why is property tax levied against the developed value of the property and not the land value? If I bought an empty/underutilized lot and spent loads of post-tax money to build a great home for me and my family, why am I taxed perpetually on that value I added?
Everyone has to contribute. If you have more you should contribute more.
But imagine a world where you pay say 40% net - but so does Musk!
Free healthcare, free childcare, free education, free transport, public parks, public holidays, free amenities, no homeless etc. Literally the only way to build a utopia.
You want Musk to pay taxes? Don't you know that means he'd have to sell some shares? That's literally communism and would bring about the end of civilization, trillionaires must be able to pay a lower effective tax rate than the average janitor.
Right but your house relies on infrastructure to support it and services to protect it.
I would love to see one of these libertarians actually go out and you know, live on their own. Outside of law, infrastructure, any service delivery at all. But as soon as you explain that roads are paids with via taxes, they start going offi how they don't need roads.
This is where the "we can't tax it because it's not real" line stops working for me. We already tax property values for regular people who own their homes. That "value" isn't real, but we fully expect regular people to pay it. I think we can tax the value of a CEOs stock portfolio even though it isn't "real" and expect them to pay it. Maybe it will force a bigger portion CEO compensation back to being a salary rather than stock options too, which I only really see as a positive.
Well, property taxes are completely different types of taxation that are assessed by the states & municipalities and can't really be assessed by the Federal government per the Constitution.
So, this really isn't relevant to the conversation.
Sorta. Property tax isn’t a tax on gains from your investment in the land/house; for that we use…capital gains, and it’s not taxed until you realize it, just like other investments.
Property tax is a tax on the services your land and home demand from the public.
My house is assessed at about 25% more than the ones next to it because it is updated and they have not been touched since 1976. They are otherwise similar in land area, finished square footage, frontage, etc.
My taxes are based on the assessed value of my house. Can you describe how my home is using 25% more public services than the 70s houses?
> My house is assessed at about 25% more than the ones next to it because it is updated and they have not been touched since 1976.
It doesn't work like that most places. Generally the appraisal (market value, assment) for an updated house isn't that much higher than one that wasn't updated. Maybe 5%, definitely not 25%.
I assume you've appealed and used the houses sold around you for comps?
If it makes more people want to live and visit and do business there it does. Property taxes also aren’t as dynamic as income or other taxes, they tend to adjust slower. But as I’ve said, I acknowledge we’re in the realm of imperfect here.
How does owning a home do so? (Not living in it, but owning it)
It doesn’t by default, it gives you access to those things, but you have to pay even if you don’t necessarily use them.
Equity ownership is the same, you have access to to courts for equity disputes, the SEC needs to exist to oversee trades, law enforcement has to enforce these equity disputes, and government backed corporate and legal infrastructure in general.
All of these things require taxes to operate, just like home ownership depends on services that require taxes to operate, therefore both should be taxed.
> Property tax is a tax on the services your land and home demand from the public.
companies demand services from the public just as much as a private residence does, so if i own a share in a company, why wouldn't this argument apply all the same?
Companies pay property taxes, so are at least equal in that sense.
The distinction (and note I said “sorta”) is a land owner places a distinct, almost linear burden on local infrastructure—schools, trash pickup, etc. That’s not really the case with a company just existing.
Note also that we tax people on the literal appreciation of a house the same way we do the literal appreciation of a stock—when it’s realized.
> is a land owner places a distinct, almost linear burden on local infrastructure—schools, trash pickup, etc. That’s not really the case with a company just existing
why does a company not place a similar burden on local infrastructure? i'm not sure if by "just existing" you mean to imply that companies don't do anything, whereas people living in a house do - that's obviously false. look at how much use amazon makes use of road systems as opposed to some soccer mom, for example.
> we tax people on the literal appreciation of a house the same way we do the literal appreciation of a stock—when it’s realized
not sure if you've ever paid property taxes, but this is not just false but obviously false in a way that everyone knows.
I understand. It's not perfectly analogous but it's close enough for government work.
In this case, we should tax capital gains even though the value isn't "real", in the same way we tax property based on it's value even though it's not "real".
Both taxes are/would be imperfect, but that's what we've got right now. I'm open to other suggestions that increase taxes on the wealthiest in the country.
IMO taxing cap gains would be extraordinarily messy. Better to just close a couple loopholes so we’re reliably taxing when the income is eventually realized/inherited.
Property tax is based on an area, and covers the direct services provided for that area such as roads, schools and emergency services.
The value of your home is real. It’s called the market price. You can sell and move if you’d like to. In most cases where a home’s value has increased, so have the level of services provided in that area. Schools used to have asbestos and no air conditioning. Teachers didn’t have a union and didn’t receive benefits. As things have improved, advances in medicine have increased life expectancy, etc. so too has the cost to sustain these services.
I am so sick of this naive perspective that property taxes are bad. Read about Florida and California trying to limit property tax increases. It’s caused all sorts of issues.
And because property tax pays for services IN A SPECIFIC AREA, it’s not realistic to tax unrealized capital gains of investments and somehow allocate that money to local governments and entities.
In my opinion we need to focus on strengthening our court system and rule of law. If we can’t elect good leaders who prioritize our needs over special interests, we will never succeed in reforming taxes —and, worse, we will continue to damage the fundamental structures that have lead to the U.S. being such a prosperous nation.
I am not saying property taxes are bad. In fact, I am a firm supporter of them.
My point was that people (mainly the wealthy) can't hide behind the fact that their stock portfolios value isn't "real" and thus we can't tax it. They complain that they'd have to sell their positions to pay for the tax and that's not fair. Well, too bad. Property taxes are similar in this sense. The value in the property isn't "real". If I bought a 300k house and the value 5 years later is at 500k, I'm paying for a 500k value property tax, despite my job paying basically the same. In both cases, the value isn't "real", in that it's locked behind an ability to sell, a thing that the person holding it may not want to do.
Again, I say too bad. If the gander is going to get taxed on the home that they actively live in and use every single day (a thing that I think is fine and necessary at this point) then the goose can get taxed on their stock portfolios and capital gains.
Sure. It'll be hard, and we'll have to close loop holes that clever tax accountants find. It'll be a neverending battle. Doesn't mean the current status quo is acceptable and that we shouldn't even try.
How else do you propose you pay your fair share for the schools, roads, police, firefighters, libraries, and administration in the town which your house is located?
Typically imputed rent is considered a sort of income, so it would be taxed continuously as income tax. Basically, if you own a home and live in it, you are both the landlord and the renter; every month, you effectively "pay yourself" the equivalent rent of the home, which is both an expense and an income. At the end of the fiscal year when you pay your taxes, all of that imputed income from the year would be taxed like any other income.
"But wait, I already pay my mortgage! Why this, too?" Mortgage payments are just paying off the loan you took to buy your house; you are still effectively renting it from yourself by living there, so considering the imputed rent as income wouldn't change whether you took a mortgage, or somehow managed to pay the full house price up-front, or inherited it, etc.
You’re realizing it through usage and deducting depreciation
Also property tax is more so community tax that can’t accurately hit people who live on edges and enjoy the next zip code over that’s better in every way
Apples to oranges (that means you are trying to compare two things that aren’t the same, as if they are the same thing). You can take out a heloc or reverse mortgage on that value. Most states let you file a homestead exemption, too.
You are taxed on the full value of the house even if the bank owns 90% of it. If you have $50k equity in a $500,000 house you are paying a wealth tax of 1000%.
That is not how percentages work. Your property tax on a $500,000 house (at least where I live) would be on the order of $5000, which is 10 percent of your net worth, trending down towards 1% as you repay your mortgage (i.e. as your net worth increases)
Also, you own the entire house, and benefit from the entire increase in its value (or decrease, if you are unlucky), you just have a liability to the bank because they loaned you the money to buy it. If you wanted your wealth tax to vary based on loans against the wealth, then the loans that the wealthy take against their stock portfolio would escape taxation by the same mechanism.
That's property tax, not income tax - it's an entirely separate type of taxation that's only assessed by the states & municipalities.
This is not an apples to apples argument. Constitutionally, it's an entirely different type of taxation and the federal government is not allowed to tax it unless they want to assess it as an apportioned direct tax, which they won't.
It's a property tax on an asset. It's a pretty intuitive argument against those who say we can't do wealth taxes on unrealized gains... because we already do that with property taxes.
I've yet to see any good explanations as to why taxing financial property would be different than physical property...other than "it is too hard" - which is kind of a bullshit reason.
This is a meaningless distinction. If the Constitution is an impediment, the states could tax billionaires and the Fed govt could offload certain funding obligations to states in an equal amount.
We're talking about philosophical not legal arguments. Constitutions can be changed. That's just a process issue. Sure, a big hurdle, but if the logic is sound then there's no reason not to amend the Constitution accordingly (other than the obvious 'rich people don't want it', but that's another process issue).
The explanation is that property is stuck in the ground, stocks are not. Any wealth tax on stocks just means that another countries stock exchange is about to become extremely popular.
> other than "it is too hard" - which is kind of a bullshit reason.
It's kind of bullshit for publicly traded companies, but it's nearly impossible for private companies. If you did it right every private company would have to pay for an expensive audit and outside valuation every year. It would also be trivial to game because the IRS isn't capable of auditing every private company and valuations are incredibly subjective.
So the first is ok because...they are taxes? You described taxes.
I'm ok with taxes. Wealth taxes seem reasonable to help the community - the financial health of a community counts as good enough justification as far as I'm concerned.
Property taxes are not a tax on “unrealized gains.” If I paid $500,000 for my house, and it’s still worth exactly what I paid, there are no “gains.” Yet I’m still taxed on the entire $500,000 value.
I might not even have any equity in the house at all. If I have a $500,000 mortgage on a $500,000 house, then my financial position on it is $0. Yet I’m paying taxes on $500,000.
I’m not making an argument about whether or not that’s fair, or should be changed. I’m merely pointing out that it’s a completely different scenario than taxing unrealized gains on stock assets. It’s a nonsensical comparison, but it gets made anyway, every time this comes up.
That's a distinction from capital gains taxes on unsold shares, but not a distinction from wealth taxes, which are based on the value, not on the gain.
The “wealth” in a house is the equity, not the value. If I’m mortgaged to my eyeballs, I have no equity, I have no “wealth.” But I’m still taxed on the full value.
Again, it’s not at all a fair comparison, but Reddit insists on repeating it.
> In its ruling, the Supreme Court did not hold that all federal income taxes were unconstitutional, but rather held that income taxes on rents, dividends, and interest were direct taxes and thus had to be apportioned among the states on the basis of population.
> The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States
>> Article I, Section 8, Clause 1 of the Constitution provides Congress with broad authority to lay and collect taxes for federal debts, the common defense, and the general welfare.1 The Supreme Court has emphasized the significance of this power, stating that it is “no accident” it appears first in the list of congressional powers2 and is “the one great power upon which the whole national fabric is based.”3 By the Constitution’s terms, the power of Congress to levy taxes is subject to but “one exception and only two qualifications.”4 Articles exported from any state may not be taxed at all,5direct taxes must be levied by the rule of apportionment,6 and indirect taxes by the rule of uniformity.7 The Supreme Court has emphasized the sweeping character of this power by saying from time to time that it “reaches every subject,”8 that it is “exhaustive”9 or that it “embraces every conceivable power of taxation.”10 Despite few express limitations on the taxing power, the scope of Congress’s taxing power has been at times substantially curtailed by judicial decisions with respect to the manner in which taxes are imposed,11 the objects for which they may be levied,12 and the subject matter of taxation.13
There is no point, you're talking about a tax type that cannot be assessed by the federal government and using it as support for creating a federal tax on stock.
The idea is that bexause the value ofnthe stock is unrealized, it shouldn't be taxed. But a house is the same, an unrealized asset, and millions manage it.
I think it’s because differentiation of where that share of stock’s jurisdiction becomes questionable. Is it at the NYSE in New York or is it where the Corporate Headquarters is housed? Because if that’s the case, there will be a lot more incorporating in Delaware. Also is the mechanism of this stock protected under some specific state law?
A federal tax eliminates this distinction by removing loopholes and engaging with incorporating in the United States directly.
Land taxes definitely make sense though. You don't want someone taking up land and not improving or using it forever. It's also needed to support infrastructure related to the land.
But is that really a tax on that wealth? Property tax is basically govt HOA fees. It’s used to maintain the township and state infrastructure that makes living there possible, desirable, etc.
The fair way to handle who pays what is based on how much their property is worth. There’s probably a decent argument/correlation that the more it costs the more the township/states needs to spend to help maintain that region.
Don’t get me wrong our taxes are fucked and should be overhauled. I’m just not sure this is the best example.
I have a really hard time coming to terms with the fact that a man can work hard and build a home with his own two hands, paid off, and still if he gets too sick to pay his property tax he can still be evicted from the home he built and paid for himself.
There has to be a better way to fund municipal budgets.
That would be fine, or even great, georgism rules, but I don’t think that would address OPs issue- an LVT in a high dollar area would not necessarily be that much lower- the land value is the bulk of the value of the home in a lot of markets.
How does is it disproportionate? Expensive property paying expensive taxes for great services and impoverished areas paying low taxes for shitty services is the definition of proportionate.
Property taxes are a tiny portion of a home’s full value. If you simultaneously own your home outright and are also incapable of paying your property taxes it’s time to sell your home to generate funds and rent, or sell off another asset.
It’s ridiculous to say that because somebody could hypothetically have their entire net worth tied up in a paid off home an be incapable of paying taxes that property taxes are inherently bad tax law.
If you were disabled you would collect a disability check....and most states would cap your property tax based on your income. You would fare MUCH better than someone that became disabled and had to pay market rent.
Yes I have no problem paying my bills. Because I can work. And yes I also have a nest egg. But I don’t know how many decades they would last me if I got too sick to work.
And the earlier it happens to you, the less time you have to save for that nest egg, and the more you will need to last you until the end of your life.
Again, if you have zero money left and a paid off house, sell your house. Your house only has value because it relies on the myriad of infrastructure that needs maintenance and it has to be paid for somehow. Borrow against it if you’d rather retain ownership. You have options, use them.
Throwing out hypothetical sob stories and edge cases to try to justify wholistic changes to tax law is frankly nonsense. Land value taxes are inherently better than income taxes at taxing wealth. We should be leaning into them, not away from them. If you think income taxes are effective just look at the endless games billionaires play with borrowing against their assets to avoid paying them.
A HELOC isn’t the only type of home equity loan. There’s programs for you, you have to shop around and you’ll likely pay a super high rate, but someone out there would give you a home equity loan.
In the unlikely, imaginary scenario where there was a place where no one worked, and everyone owned there home, there would be no taxes? There has to be a system we can design that doesn't fall apart this much, even if this is a scenario that will never happen
Sales tax, inheritance tax, services tax, etc. not saying any of these are better but there's hundreds of other ways taxes could function in such a hypothetical society.
If nobody worked, the government wouldn’t be able to spend any money anyways. Why would they need tax revenue? Who would they be paying? Nobody is working.
We would be having bigger problems than tax revenue if nobody was working.
And when people living in that house don’t claim any taxable income? You either don’t see the circular logic here, or you’re one of those “taxation is theft” folks.
Why not just ban evictions? Raising the income tax would just be a handout from workers to people that own property. I’m not really sure it is moral to tax working people to pay for homeowners that did not save enough for retirement, particularly when most of those working people are renters.
If you are talking about share buybacks. The company doesn't hold those shares. They are removed from the market and it drives up the share value for the remaining shareholders. If you are talking about mutual funds, the owners of the funds, not the mutual fund company that's providing a service would be taxed.
I would actually argue also that if a renter built and paid for the home they were in, that would also be fair that they shouldn’t be able to be evicted.
It makes sense because in the long run, the property belongs to the country and all occupants are temporary. All citizens have a vested interest in keeping the country up.
Sure. There just has to be a better way to best that I stress than a system that can kick a man out of a home he built and paid for himself just because he gets sick and cannot work anymore.
My opinion on whether the govt should be entitled to a tax is whether the govt services or its assets enable the valuation of the asset being taxed. I think land should be taxed at the parcels value while the property value should be exempt if house was funded and built on commercial interests. To me, the land value is realized for as long as the land is developed. Likewise on stocks, the NYSE is owned by a corporation/conglomerate. The corporation that owns it should pay tax on the resources and government services it consumes to operate. Rather than taxing stocks and assets that are speculative in response to leverage, I think they should just be forced to either be liquidated or held off the lendee's books and net value calculations and make those assets inaccessible until the loan is paid.
and this is how we got Prop 13 in California, which has basically destroyed public services in the state for nearly half a century now.
in my opinion the solution should be that the state lets you carry some of the tax the applies to appreciated value as a balance that is due when you sell the property. this could also be accomplished through the creation of a public sector bank that effectively loans the property owner the money at little or no interest, but allows the government to effectively collect and spend the revenue.
This too is wrong. You should be taxed sales tax when you buy the house, and taxed capital gains when you sell the house, but no taxes outside of that.
Seems like the easy solution would be to cause taking out a loan against an asset to update the cost basis of that asset for tax purposes and then you’d pay taxes on the gains that have been “realized”.
I think it’s a matter of interest rate vs compounding rate. It’s a no brainer to borrow at 4% when you’re earning 10-11% or more. My solution to the billionaire collateralized loan issue is to either disallow those types of loans all together…or make it barely worth the trouble to do it and make it so they should just sell more stock to pay for stuff….that’s mostly how they’re paid anyways. I think there should be a flat 10-15% upfront origination fee, and the interest rate should be prime +7-8% minimum. Want to borrow 10m dollars for a new yacht? Cool, that’ll be 1.5m dollars and 12% on the remaining loan.
When you're a billionaire though they don't really use an asset against your loan, they just go, "you seem good for it". The discretionary assessment for granting a no-interest loan to a VIP client means they don't need to provide a traceable, quantifiable asset to value.
Lots of people work for a bank, I used to work for a bank. If you want to pull rank here, list the billionaire VIP clients you provide no-interest loans to.
The market effect of taxing assets is lowering the perceived value of the asset. If it costs money to hold an asset, a person is less likely to horde such an asset.
Or just set it to loan use types. Personal loans can be taxed but home loans or vehicle loans can be exempt, for example. It would obviously be more complex than that but it isn't too difficult to target the loophole without blowing up the average person.
Mortgage is loan to acquire an asset. Same as loans to acquire a business or to create a new business. Those don't need to be taxed. The money spent will be taxed on other side anyways. House/business seller or costs paid to build a new business
We need to tax when an asset is brought to existence for generating money. SpaceX borrowing money on non-trading stock based on valuation of traded stock is one such example. In this transaction neither SpaceX nor the lender are paying any tax
No one is saying they aren't ever taxed. People are saying that a large share of their economic gains are never taxed in their entire lifetime. A billionaire's wealth may increase by billions, lttle or none of that increase appears as taxable income, and rhe tax can potentially be deferred for decades
It doesn't matter if buy borrow die is or isn't the majority of how they fund their lifestyle. That's not the point.
I was thinking that taking a loan out using investment as collateral should trigger a taxable event (as if you were forced to sell and rebuy the assets used). Then the taxes on the capital gains are collected, and the cost basis changes to the current value.
There's some interesting loopholes around borrowing, trading, step-ups and GRATs that are pretty common among the wealthy, it's just a lot more complicated than most realize.
Even if that's the case - the step-up-basis loophole is so absurd, creating such strange incentives while also adding complexity to the tax system. We should remove it for that alone.
There's no other tax you (or technically your estate) can avoid by simply deferring it *so* long that the government just forgets about it.
FWIW, I don't agree with the parent post. Taxing the loan part of "Buy Borrow Die" doesn't make much sense to me. The problem is solved far more cleanly by just removing the step-up-basis nonsense.
Maybe with todays records we can, but imagine inheriting stock that your dad earned/bought in the 1960s.... no electronic records. How do you price them if you are not sure what decade they were bought in?
The real complication is with privately held investments and companies (like the family farm, small business, rental properties that have depreciated, etc.)
We measure “economic income” as currently-taxed income plus new unrealized gains.
Oh, so you make $10bn in unrealized capital gains in a year, and therefore the $200mn you borrowed for living expenses specifically to avoid paying taxes on the $10bn is actually nothing.
The borrowing against stock is a pretty rare thing that reddit focuses on but actually isn't that common. Even when it exists you have to pay interest on the loans
If the interest rate on the loan is lower than the rate of return of the stocks then you come out ahead. That's a layup in our current market. Just funnel some company money into stock buybacks and you're sitting pretty.
People forget that a loan is essentially a repurchase agreement if you use collateral.
A home loan for instance is a complex purchase agreement between 3 parties. Buyer, seller and bank. And someone needs to pay the capital gains for that sale.
There is basically nothing stopping a gov doing something similar for borrowing against assets. Because they are "realising" capital gains when they put a monetary value on the shares or home and selling to the bank at an aggreeed value.
The cost base would adjust and you could presumably even take a capital tax loss later if the shares do drop against the new cost base.
And I think you could structure it so that doing so for investment purposes you don't get hit. For buying stuff or buybacks etc you would take the hit.
Completely agree with this. However, I do also think we need to look at inheritance tax in addition otherwise the US is also losing a ton of tax revenue to step-up basis.
I'm totally fine with a step up in basis to tax people taking loans, but I don't even know how much revenue you'd generate? I know it gets talked about a lot but I haven't really seen people putting up numbers.
To be clear, I do not think this is in any way enough. But it’s something. Closing the carried interest loophole and bringing back inheritance tax should also be easy sells.
Deemed disposition on any asset used as collateral for a loan. Problem solved. This seriously isnt difficult, there is just no desire to actually fix it, largely because its not that big a deal and hardly used anyway.
People are content to scream into the void about a wealth tax, taxing unrealized gains, or other stupidity that will never happen instead of understanding how to apply a real solution, to what amounts to mostly a non issue.
That is the right way. It’s a slippery slope and very complicated to enact a wealth tax. It wouldn’t be difficult to add a line item to loan forms to identify the type of collateral and then add a tax to unrealised stocks. Banks would have to report any loan using certain types of collateral and report it to the IRS just like brokerages do with gains.
The problem is republicans will call it out as raising taxes and the average American doesn’t have a clue that this is how the ultra wealthy avoid paying taxes on almost all of their spending money.
>Taxing these loans is dumb, just a punitive response to something that isn’t a problem.
If you are just taxing asset backed loans as if they were realised gains, then I don't see how that's meaningfully different from taxing someone’s income.
If you are going to have a CGT, but allow loans backed by the same assets to be untaxed, you just create incentives to take the loans and avoid the tax.
It’s really only a problem for billionaires. Essentially the Musks and Zuckerbergs of the world end up paying a tax rate of below 1% using the below strategy. Most people think that ‘hey at least they end up paying estate taxes on money inherited over the the gift tax limit’, but through loopholes like a dynasty trust their kids can avoid paying taxes on almost all of it. This country is swimming in a mountain of debt, the middle class is getting tapped out paying massive income tax (my effective tax rate is over 28%), while billionaires can live obscenely lavish lifestyles off of loans and don’t pay any taxes on their gains. The trillion dollars that Elon musk is worth, almost none of that will ever be taxed.
Here is their strategy:
Billionaires often employ the “buy, borrow, die”strategy to avoid income and capital gains taxes. First, they acquire appreciating assets like stocks or real estate. Instead of selling these assets when they need cash (which would trigger capital gains tax), they borrow against them at favorable interest rates. Since loans aren’t considered income, no tax is owed.
For example, Larry Ellison, founder of Oracle, has used his shares as collateral for personal loans, including a $10 billion credit line. This allowed him to fund major purchases, including his $300 million Hawaiian island, without selling shares or triggering taxes.
The final component “die” provides perhaps the biggest tax advantage. When heirs inherit assets, they receive a stepped-up cost basis, resetting the value to the current market price. This erases past capital gains, so heirs can sell immediately without paying capital gains tax or keep the assets and repeat the process.
But the mortgage deduction was a Reagan era policy and led to our current increase in artificial price increases for homes. Rescinding that would help home buyers and reduce the value of homes, which is why it’s never been seriously proposed
I'm aware. But I don't think the housing counterfactual is an apples to apples comparison here. I do thin it's worthwhile to have a taxation policy that incentivizes investment as a result.
1., property tax is the state and not the feds.
I want housing prices to fall. I do not want to treat the housing market like it's the stock market and likewise, I do not want the stock market treated like the housing market.
In my version of this: the taxes paid on the loan proceeds go towards stepping up the cost basis, so they pay less in taxes when they sell the underlying assets (that is, the total tax bill is as though the loan never happened, they don't get a discount). Repaying the loan doesn't affect taxes.
Of course, estate taxes need to be redone so the tax bill is as though the estate was liquidated and taxes paid on all gains. Plus no more lower taxes on gains, treat all income the same.
The problem with tax free loans on assets is that they can be used to consume obscenely without paying income/capital gains taxes.
In general what we want is a system that incentivizes investment, and progressively taxes consumption.
Selling stock should be tax free if used to buy other stock. Every brokerage should operate the same as an IRA.
All movement of money outside of brokerages should be treated as progressively taxed income unless used for investment elsewhere (real estate, venture capital, etc.)
IRS heavily polices shell companies used for personal consumption.
Correct. No capital gains taxes. Capital gains is treated as income. Income is already progressively taxed.
Step up cost basis is a huge problem, but so is tax free consumption. It’s not fair for wage earners to be hit with 30%+ top consumption tax and billionaires to be hit with 0% consumption tax. That’s a regressive system.
You’d still have to track capital gains otherwise you’re double taxing the initial investment.
What’s the benefit here? There’s plenty of play to move investments around without realizing gains, and we can just treat capital gains are income anyways. And why would we want to ultra wealthy to have even more ways to avoid realizing gains?
The benefit is that you're not taxing reallocating investments to better opportunities. Taxing reallocation leads to more inefficient investments overall.
Many times people don't want to move money to better investment opportunities because they'd incur capital gains. It doesn't make sense to tax money that's just going from one investment to another investment.
It's better just to tax progressively/heavily whatever leaves the market instead.
The key to economic growth is well allocated investment, so you want to encourage that as much as possible.
This article is terribly framed on the evidence of why Holden sees the economics as poor.
After admonishing the Australian Treasurer for post hoc ergo propter hoc, Holden proceeds to do exactly the same thing with Basel (I+II) and Fmr PM Keating’s bank deregulation. With the added fallacy of ‘appeal to authority’ by invoking Mirlees and Henry without much explaining of why they didn’t support capital gains taxation. Not to mention all the school boy taunts opposition-affiliated Holden peppers his article with that suggests he cares more about beating the Government than he does about selling a strong economic case to the public.
Instead the thrust of Holden’s argument is buried at the end where he complains first about high government spending (hardly a capital gains issue) and about an uncalibrated carve out for small businesses and implied penalties for the ‘ engine room’ of Australia. Which is was nascent 2 weeks ago when this article was written and the details of which remain undefined still. Holden is shooting into the fog and claiming he hit something because no one has visibility to dispute it.
There’s a real debate around optimal taxation, but Holden fails to present his case with openness and diligence here.
Our country has been favoring capital over labor since Reagan. Thats what trickledown economics is and thats how the system has been built since 1980. Thats why we have the K shaped economy here today. Its all been designed that way and its functioning exactly how its intended. This is the wealth extraction phase during the downfall of an empire
It gets worse and worse for more and more people but there's a lot of survivorship bias keeping us on this course. People want to believe that they will get different results doing the same thing.
I wonder what the timeline is for true social revolution. How bad does it need to get? The timelines seem very long to me. America will learn everything the hard way, slowly.
There's not a timeline just catalysts if you spook people too fast rather than getting to the same goal slowly. We could literally have chains on us 24/7 in the future and there would be no revolt if we got there slowly enough
The sad part is that it a social revolution is not mandatory. There was no social revolution that saved many of the other formerly biggest superpowers. Sometimes they slip into authoritarianism, sometimes they slip until they are basically the sidekick to the new superpower. There were times when I was optimistic, especially seeing young people take the charge on climate change, wealth inequality, BLM, but each of those concerns have fallen by the wayside. If anything, it seems like people are more hopelessly capitalistic trying to get their bag through sports betting, side hustles, and get rich quick schemes more than ever. Progress may came from a series of decent elections that enact incremental change. Progress may require a tragedy to get momentum. Or progress ain’t coming and the American dream dies with worsening inequality as we watch rich people on our phones and argue about whether raising the minimum wage will make Taco Bell too expensive.
Not to mention every time they loosen financial conditions by cutting interest rates, increasing money supply, or artificially providing liquidity to financial institutions, it subsidizes wealth for asset owners and punishes the value of labor.
Theyve been running loose monetary policy since the dot com era, except for a brief period under Biden.
> Our country has been favoring capital over labor since Reagan
i mean... it's not like this is a well-kept secret: the name of the system itself loudly declares that it prioritizes non-working owners of capital over laborers.
The K shaped economy BS is getting old when the lower and middle class are shrinking as upper middle class grows. And real median incomes have steadily increased.
https://fred.stlouisfed.org/series/MEHOINUSA672N
Oh yeah I'm so brainwashed to think a shrinking lower income class is a good thing...
And for america its the only special one that works and changing it collapses everything. Im not from there nor my friends but they hold significant assets from nasdaq. They concentrate global cashflow.
Oh that's interesting... In that case I propose my own talking point:
There's no economic case for why I should work when I can simply sit on my ass and wait for gains. Just grant me enough capital and I'll immediately show the world just how much more prosperous I can be by sitting on my ass. It's really quite impressive, isn't it?
Notice that this article focuses on the much rarer case of a successful business incurring capital gains, and avoids the far more common use of the capital gains discount to favor people who live off of stock investments, or real estate speculation. There is simply no case that this type of speculative income should be taxed less than paycheck income.
I never hear much about a progressive FTT (financial transactions tax) that could be imposed on transactions over $15k and apply even when billionaires take a loan on pledged securities.
I keep seeing studies that only highlight the “negative” possible outcomes like lower liquidity and higher transaction costs…
But so what?! It seems we are already in a bad place with the current regime where high-pay professionals pay most of the tax revenues and the top 0.01% are running WILD!
Actually, a FFT of 0.01% on every financial transaction would eliminate the need for any other taxes, pay off the national debt and generate a vast surplus forever.
Unfortunately people seem to think that paying a penny for every dollar that changes hands is somehow worse than what we have now
The nonpartisan CBO has evaluated such a tax. They estimate that it would reduce the deficit by around $300b over ten years. Nice, and worthwhile, but not the miracle solution you suggest.
You are mathing. There is an old wsj piece about how paying the draconian$100,000 tax on a $billion transaction would collapse the banking system. Lol, the brokers make more than that
It's certainly much more complicated than your second paragraph puts it. From a government electability standpoint I would imagine "we will remove literally all of your taxes except one without cutting services" would be outstandingly popular across the spectrum. If it were that simple it would be democratically mandated
I already pay over 20% tax on a majority of my financial transactions. These on top of income taxes. Big banks switching their money from their left to right hand is non-essential compared to mine and it would be worth their money to hire enough people to avoid transactions that would be taxed.
Well, I pay over 20% tax on majority of daily transactions where I receive or give money. Banks and other entities do so many money transactions precisely because they are not taxed currently. I can't imagine if a FTT were implemented and it would gather so much taxes, that a lot of those transactions are quite unnecessary and those transactions would drop quickly in at least an order of magnitude, probably several.
For example, it takes just a few minutes to think up of a system to avoid a big portion of those taxes: an offshore tax haven arbitration/bartering "bank" where companies deposit an initial sum (which is taxed) and that transactions with other banks are arbitrated through there. As long as a company's clients and suppliers are present in the same arbitration system, trade would still happen without having to pay taxes on them, or at very least for the money.
For FTT (financial transactions tax), the positives are pretty close to a single one: more tax revenue. Whatever the tax, the what the increased tax revenue is actually used can be excluded from the study: the fiscal policy works the same whether the tax was collected from import tariffs or income taxes.
Of course some taxes are used to shape behavior which can be counted as positive, like taxing emissions. Most studies probably just find that the way FTT would shape behavior are negative for the economy and any study that wouldn't highlight them, would be a pretty bad one.
Yeah. This is literally just apologism for the wealthy here. If there’s a separate class of income that only the wealthy have access to, and that income is treated preferentially, you’re further engineering a society with the permanent stratification of an increasingly rich upper class and an increasingly poor lower class. And that’s awful. Why are we so keen to return to feudalism?
This is a nation of temporarily embarrassed millionaires that could be one of the ~200 wealthy people one day! Better not do anything to help the hundreds of millions who won’t!! Just in case!!!
If taxing unrealized gains made sense, we would be demanding it from everyone. Not just Musk but any worker or retiree with investments, teacher pensions, etc.
Why not only tax it for people above a certain net worth? And of course the vast majority of working class people wouldn't want their unrealized gains taxed, it makes far more sense to tax their income. For the rich, who often don't have an "income" the same way regular people have, it's often the only way to actually tax them. I don't think this argument holds up to scrutiny.
Again, the ultra wealthy should not be treated the same as everyone else. If that was the case, there would be a flat tax rate.
The wealthy avoid taxes and sometimes pay literally zero dollars in taxes some years.
"He said US billionaires buy an asset, build one or inherit a fortune, and then borrow against their wealth. Because they don't realise any gains or sell any stock, they're not taking any income, which could be taxed. 'They then borrow from a bank at a relatively low interest rate, live off that and can use the interest expenses as deductions on their income,' he said."
What you're describing is rarely used because it's not a universally useful strategy. Loans have to be paid back, with interest. With cash. You can't borrow a billion dollars unless you're generating a billion dollars in income and the only way to do that is to sell assets.
Another way to tax wealth would be an estate tax that limits the deductibility of charitable donations. As it stands, the wealthy can avoid paying tax when they die, by donating their assets to charity. This allows rich assholes to escape taxes by donating their money to things like The Heritage Foundation or The Church of Scientology. Limit tax deductibility to the first billion dollars of assets. Anything more that is left over when you die is taxed at 50%.
Welcome to shell corporations and other easy means of skirting laws like that.
Companies cant be restricted on borrowing amounts (or else every company and the economy will fail), and it's easy to make a fake company for people with the means.
They still have to pay the loan back eventually, which means they have to sell stock, which they get taxed on. It will delay tax being paid but, in theory, they’re still paying in full eventually.
Actually, that is how it works for people with enough wealth since the interest rate on their loans is lower than the average return on their assets/investments.
Loans are literally free money until it has to be paid back. Which can potentially be never.
Because they're skirting income taxes they should be paying by doing this.
They're cheating you.
The result is Mark Zuckerberg gets to buy 1/5 of Hawaii and US debt is spiraling. The value of your dollar getting hammered while The Zuck Class uses these loans to buy up all the assets and then charge you money to rent them back.
You set a threshold of $1M and tax all income including these Income Tax Avoidance Loans as income at 30%.
We basically need a trap at the very top that says hey if you make a lifetime's worth of money in one single year that's enough anything above that is taxed at the full rate because you're part of America and you are making that kind of money because of everything that exists around you.
That may have been related to executing stock options.
I’m a financial advisor. I will tell you that I regularly advise my clients to collateralize securities and other assets to take non-taxable loans that they won’t need to pay back. The loan gets repaid at death.
Whole life insurance is also used frequently in this way.
You advise your clients in their 40s and 50s to take out loans at 5%-6% interest to avoid one time capital gains tax of around 20% and hold the loans for 40+ years?
They are typically older than that but it depends on the situation. Interest rates can also be more favorable depending on the composition of the portfolio.
I don't get it Mark Zuckerberg sold some stock and he also paid some taxes how can you possibly say that he's not paying enough in taxes when you can clearly see that he paid something he's a good guy maybe we should just leave him alone you guys
Except they dont, they just buy another ticket on the merry go round and take out further soeculative loans on further speculative gains, and pay virtually nothing.
They can keep borrowing at a couple% per year to the bankers until they die, all their unrealized gains go to heirs at the STEP UP BASIS, meaning no taxes on the billion$ over years of accumulated cap gains, then the heirs pay off the loans. Absolutely zero income taxes contributed to society on billions of income. This whole article is crap. Earn a dollar, pay a tax to allow governed to work and keep things sane.
Out of interest…do you think banks are this dumb? They are the most risk adverse institutions yet you think they are writing endless cheques in loans without repayment? You guys come to an economics sub and say stuff like this? Comical
They get their payments on time every time. Of course they are happy with getting interest on loans guarantees by collateral. That's their whole frigging business.
I think their point is that taxing all loans doesn’t really make sense. It seems true that some people abuse the system like you say, but punishing all loan takers, of which the majority are not abusing the system in that way, seems like a poor solution.
If the loan is based on an appreciating asset, they just take out a new larger loan to repay the first. Couple that with exceedingly low interest rates and one could do this indefinitely.
Eventually the loan is repaid in full by the estate when the borrower dies. But then the asset has been marked to market and shows no capital gains and thus remains untaxed.
Now if the value of the underlying asset tanks then this fails and the government comes and bails them out.
They don’t really have to pay the loans back, because they just keep rolling it forward forever. If I get a million dollars a year in equity at my job, as long as the value of the company stays stable or growing, I can just keep borrowing say half of that a year to finance my life. I get a million a year in equity, and my loan balance goes up by 500,000 a year. So after two years, my equity is worth 2 million, plus whatever the gap between the price the equity was issued at and the current market price. My loan balance is 1 million. The bank is happy because say it’s secured with 1.25 million worth of stock, I’m happy because I’ve got to live like I make half a million dollars a year, but I have very little income and pay almost nothing in tax relative to my wealth because my cash salary is quite low and as long as the stock is never sold, I never owe taxes on the stock. I just owe tax on the very low cash portion of my salary.
Maybe my estate will have to pay it back, but who cares. I’m dead, there’s a trust separate from my estate that gets the step up basis and it’s holding enough for my next several generations to lounge about and do nothing. The bank gets paid back out of whatever equity was used to secure the loan.
The theory of equity based compensation is that they’re selling the underlying asset to fund their lifestyle. Selling the asset leads to a taxable event where they get taxed on the gain. Because they’re allowed to just borrow against their equity, secured by the equity, it’s not taxable income.
From what I understand (in the US) what you can do if you've got enough is basically never pay back the loans.
Then you die and all you money has been set up to be inherited (and there are many loopholes to avoid any kind of inheritance tax)
When someone inherits the assets the value gets kinda "reset." The capital is only sold to settle the loans after you die, so since the value is reset there is no capital gain and thus no capital gains tax
For example, if you bought a stock at 1 dollar, it goes up to 100 dollars, then you die and you're kid gets it. Then it goes to 105 and they sell. They only owe capital gains on the 5 growth since it was inherited.
So the end result is you lived as if your capital gains were income, but have never had to pay capital gains taxes (which are already lower than income tax rates)
(disclaimer, im on CPA, and not rich enough to need to understand all the steps to dodging the taxes, so this may not be right down to the finest detail)
Please stop getting your talking points off reddit, loan issuers arnt this stupid, almost no one is adopting this strategy. You guys must think financial institutions are complete idiots.
Nonsense. It is a free money glitch the ultra wealthy use to avoid paying tax rates that you and I pay. If they make a return of 10% on their billions in stock and pay a 3% interest rate on the loans against said stock, then they are getting off scott free.
but they never realize capital gains. They just take out loans and then they get stepped up for the estate when they die. Whatever loss there was in the loan is dwarfed by not paying the capital gains taxes. Especially when that interest is tax deductible.
Because it seems like in this example the individual in question is using the loans as a method of lowering their taxable income, by avoiding paying capital gains.
Edit: instead of selling an asset for the cash, take out a loan. Avoid capital gains tax. Repay the loan with a different loan. Rinse and repeat.
Because if you’ve a lot of wealth that is tied up in an illiquid asset or something that allows you to have authoritative control over bigger assets (shares with voting power allows to influence board and company), then normally you will have to sell it to gather enough money to invest in some other big opportunity. But taking out loans without paying taxes allows the rich (the owners of capital) to corner and hoard resources to the extreme as them not selling their previous resource in the market leads to a contrived shortage of certain resources in the market (if I don’t have to unload my shares in A to fund my investment in B, I’m keeping the price of A high as my shares never reach the market as they should - so no change in supply - while the price of B also goes high as I’m eating up all the available demand; same situation can be used for houses / real estate / commodities / new age tech / etc.). With society moving towards equality, we need to reduce the disproportionate wealth that one factor of production owns - capital owners. Labour, as a factor of production, needs to get a higher share in the wealth creation process to reduce inequality.
We always hear arguments about how we must give preferential tax treatment to capital to incentivize investment but for some reason never hear that we have to give special treatment to labor income to incentivize work.
If my money is doing more work for me than the work I can do for myself (by, you know, actually working), then I am disincentivized from working. If my money is doing more work for me than the employees I pay wages to, then I'm disincentivized to keep employees on my payroll, and I sure as shit am disincentivized from paying my employees more, or even a living wage.
This isn't hard. When investments are taxed at a lower rate than income, then I'm going to lean more into investments than into work. I'm going to lean more into investments than into paying my employees. There is a direct line between taxing investments lower than income and the struggle of average employees (read: most employees). If there is one thing that led to employee wages becoming decoupled from employee productivity, it was capital shifting toward investments, and overseas investments in particular, and away from their domestic/captured workforce.
Money doesn’t do more work for you than it does paying employees. Businesses generally aim to earn enough return from an employee to cover all other costs AND aim a profit. The uncertainty of this is called risk (specifically in the case of businesses, it’s typically execution risk). The delta is the value add. If Facebook is paying an engineer $300,000 - the work the engineer provides is directly or indirectly generating at least that much in value (and in the case of good businesses, many multiples of value).
Anyone with 3 brain cells knows the fastest way to grow money is through a business. The huge variable is the execution.
If I'm a business owner and I can invest my money in operations elsewhere or in other business ventures, and those ventures can secure me 10% profits, then why in the world would I continue to invest my profits back into my own business if my own business doesn't have 10% profit margins (which many, many do not)?
One option guarantees me a fairly stable and predictable return, and the only work I have to do is sit there. The other option is unpredictable at best with variable returns YOY, and while it may be able to generate better returns, it takes an incredible amount of work to make it successful.
I'll also state that your choice of examples is one of the MAG 7 and a tech giant, is not particularly indicative of normal everyday businesses.
From what I've read on the subject there is a case for taxing them at the same rate only if the capital gains rate only applies to returns above the risk-free rate.
We should only be taxed on the income above what it takes to live. We get a measly $15k standard deduction while a business can claim whatever expenses they want.
Where they’re frozen (like here in the UK), that’s a tax increase every year. And a very poor tax increase indeed: rather than an increase in rates that can be well understood and modelled, it’s a tax increase determined by whatever the rate of inflation happens to be.
No. They are not the same thing. Adjusting brackets is not the same thing as adjusting basis. If they were then you'd already be satisfied with the bracket adjustments for capital gains taxes.
It’s not about adjusting brackets for capital gains. It’s about avoiding taxing inflationary gains.
If you purchase some object in 2000 for $500k, then sell it in 2026 for $550k, that is absolutely a real-terms loss. You’d be applying a tax when there’s not an actual gain.
Indexation seeks to solve this. You tax the actual real terms gain (or gain above the risk-free rate of return).
The cost base is indexed. So the difference between inflation and the rrf is ~1% per year. That's pretty close to matching such theories. The uncertainties in determining if a project is worth the investment are far greater than 1% per year.
The US has to borrow and pay $1 trillion annually to maintain its current spending level. Should they tax your paycheck more or these guys? Let’s hear it.
I don't work in retirement and a big reason is that working just isn't worth it. I pay 0% federal taxes on my investments and Roth IRA withdrawals, and 0% state (MI) taxes on my military retirement and any IRA withdrawals.
Why work?
Yes, this is just my anecdote but you can replicate this kind of thing by the millions. The article is just silly.
Funny, they make you take 401k withdrawals at age whatever because they want to collect taxes on it. Why doesn’t that apply to all investments? We know the answer obviously
We just need to change the system so that once you hit a certain amount of income in a single year you are taxed at the same rate for investment and income from work.
Set it to $1 million and tie it to inflation.
Anything under $1M dollars in a single calendar year stays how it is now. Every dollar over $1M? Tax the same whether it's capital gains or salary.
Im ok with this in theory, but why add the complexity? Just get rid of the investment tax rate and treat everything as regular income. Then significantly lower the tax rate for the average Joe and raise it to pre-Reagan levels for the wealthy.
You end up creating loopholes for the wealthy with a complex system. Why should investment income be treated differently from normal income? It isn't logical or fair to tax labor at a higher rate than capital.
The problem is that billionaires have an “income” of 80k a year. The extra money they get is based off of loans borrowed against the value of their company. That’s not considered income
Forget even collateralized loans vs income. Look at collateralized loans against stock vs. Collateralized loans against homes (aka mortgages). Almost everywhere but California property taxes rise with the market value of the house. The average American (though less and less these days given the affordability crisis) is being taxed on realized gains. But God forbid we apply that same logic to billionaires.
Why? Municipalities need their funding source, but the rich don't play by the same rules. Therefore the middle class foots the bill.
Put simply, if we can raise taxes based on unrealized gains for homeowners, we can do it for billionaires.
There is a French Economist Gabriel Zucman that talked recently on a podcast about this sort of thing as it pertains to how to tax billionaires. Its on spotify and probably on youtube, I recommend it
Capitol gains tax was 30%, with a 50% discount. So 15%.
I pay over 30% in income tax.
The idea isn't "we hate the rich, get 'em".
The idea is, we want to lower income taxes, but the budget can't afford it, where can we push the burden of taxes to?
And the Australian economy in particular is difficult because most investment money does not go to businesses. It gets tied up in buildings that sit there producing nothing for anyone.
My personal proposal is to half CGT on investment in australian businesses and off-set that by doubling CGT in australian property. It's not a viable long term strategy, but for 15 years it would push all wealth into investing in australian businesses, which boosts productivity, rather than buildings that slowly deteriorate but end up worth 10x and add nothing.
Right now the australian economy doesnt produce enough exciting young companies, because all the money is tied up in existing structures. Sitting there. Doing nothing but accumulating value.
It's quite simple, really. You should have to pay tax on the asset when you receive it, just as a regular employee is taxed when they are awarded an RSU. The fact that the asset was awarded pre-IPO changes nothing. You were awarded an asset that had value when you received it, and you should pay tax on that based on the value of it when you were awarded it - the asset's cost basis. Then, if it's worth more when you sell it, you pay capital gains on the positive cost basis. If it's worth less when you sell it, you get a credit for the loss.
I can, to a degree, see the argument for not taxing unrealized gains...but even then, there should be some way of controlling how those unrealized gains are used as collateral. If they're real enough to be collateral, they're real enough to be taxed.
But once realized they should be taxed MUCH more than income from work, since no actual contribution was made to get that increase wealth. Like three or four times the standard income tax rate, minimum.
Biggest scam ever by the Ultra Wealthy. It’s ok to tax everyone property taxes every single year when the house hasn’t even been sold. So the bullsh*t about realized and unrealized is a hunk of crap 💩.
None to do it differently either. We've tried differently and we know it creates incoming quality on the scale never seen in the history of the world. Let's try the other way. Maybe we'll like it more, if we don't like it, we can always go back
The point is not about gaining money in a meaningful way. Its about reducing/eliminating the negative effect the wealth hoarding and rent seeking has on the ramaining 99% of population.
Its not about fairness, its about making world actually able to function.
I would even come at it from a different angle and say that it’s not really possible to tax work and investment the same anyways. At least not without more extensive changes to the tax code
Set capital gains rates equal to earned income rates tomorrow, and investment is taxed substantially higher than labor is
Micro levy on all stock trades could easily generate a tril at the end of the year. HFT could pay a small flat rate since it wouldn't work for traders like that. Do that and close out the loop holes of buying things tax free with stocks we could easily start chipping away at the debt while not raising taxes or passing the price onto 'the people'.
as someone who has made it to the point in life where I can effectively live off my savings, it actually feels kind of wrong how little I pay in taxes on capital gains compared to what I used to pay in income tax. I can assure that I wouldn't decide to stop investing if I were taxed more. I would just pay more tax.
A large part of investing is just straight up extortion. Investors acquire existing wealth and demand payments for access. If consumers don't want to pay the premium, they can just replace the captured wealth, creating competition and lower prices. However, the economy doesn't have the resources to replace all the captured wealth, because resources are scarce. To avoid wasting resources on producing replacements to the captured wealth, you have to pay the owners. Wasting resources becomes the threat of the extortion scheme.
In the end, that gives you a rent seeking or feudal economy.
Note that things get much uglier with wealth that can't practically be replaced, like land.
As always, the “professional” economic commentariat is shamelessly morally bankrupt and totally beholden to putting a crappy gloss on whatever the wealthy want.
At some point society has to reckon with the fact that we cannot have enormously wealthy parasites sucking the world dry, and contributing nothing of broad value. Elon Musk cannot be personally “wealthier” than 88% of countries on Earth, and basically pretend to be a debt addled pauper.
At a minimum, equity based compensation, dual class stock structures, and the shareholder value theory of fiduciary duty need to be explicitly outlawed or aggressively curtailed. Corporations and wealthy individuals must be forced to actually act in the interests of more than just the shareholders. The market will never “correct itself”. Only a government has the power to force them to heel. Treating unrealized gains used to secure a loan (or the loan itself) as income would go a long way to maybe saving society from the parasite class
Equity based compensation is taxed just like cash when it vests, buying and selling by insiders is usually fairly well regulated and public. What would outlawing it change?
If the example is Elon Musk then the issue seems to be more the insane pay packages his boards approve, it seems to be more of a corporate governance issue than an income tax issue. His pay packages and the amount of stock he holds does create a strong incentive to lie to the market to increase his personal wealth, but perhaps a limit on ownership would be more appropriate to fix that? Not sure how that would even be practical in real terms. Certainly it would help if the SEC that hadn't been completely neutered.
Shareholder value over everything is a terrible mantra, on that I agree with you.
Fair enough on the first point. I’m using “equity based compensation” as a catchall both non-cash based reimbursement and the loan structures used by executives predominantly to dodge showing real income by existing on permanently extended lines of credit and loans. I should be more precise. The problem isn’t really the compensation, but that it’s not taxed as income and they’re allowed to spend endlessly with. Capital gains taxes mean nothing if the wealthiest never have to actually realize a capital gain. Really that entire system needs to be completely outlawed or we need to treat debt secured by equity in a company as income.
Multiclass share structures should just be flat out illegal. It defeats the whole self correcting aspect of the market.
Yes, much more aggressive enforcement would be helpful, but the problem isn’t really that the SEC is toothless (though it is). It’s the fact that the market has been treated as the only thing that matters since Regan and the law has been warped to support it. A rule banning stock buybacks would be a good idea, a law explicitly overturning citizens united and sharply restricting political donations and PACs would probably be another
I personally do not think we need to totally dismantle the current system, just shift incentives. 3 things in particular, that can be accomplished together actually. 1. Create a SWF funded by capital and not labor wages, combining a fiduciary interest with democratic co production. This will lead to a shifting of incentives and a stakeholder relationship with the localities and municipalities who own and administer these funds. Then we include cost of externalities into market price. Finally, due to public ownership and administration of these funds we begin shifting to stakeholder primacy. We could also implement elements of a circular economy to bring wastes and byproducts to their highest value uses.
Ah yes, let’s find one specific weird econ argument as we plug our ears and scream to avoid the Pikkety of it all. There’s a hundred artful solutions to end this democracy-preventing wealth disparity, tradeoffs about and something has to give.
...says the wealthy people looking to avoid taxes.
Look, seriously, fuck off. If you have enough money to be investing in a serious way, you're doing better than 95% of us and the economic case is "people are going without medical care, food, and other essentials." Your ass is getting taxed.
I'd be perfectly ok exempting 401k or IRA or whatever. Or even saying any holdings under a threshold, say, 100k. Past that? Cry me a river. Your ass is getting taxed.
"There is no economic case for taxing work and investment the same" Personally, I'd like some data with your whine. This is just the "Don't tax me" business defender crowd making it personal against some Aussie pol who's saying something important and not showing how his argument fails.
It's economics, boys, build the charts, show your work.
Shout out to Gary's Economics youtube on this topic. Probably not considered "serious" here as he's not really a full academic, but he's well educated and works in finance. That guy has educated me so much on these things, and when it comes to "tax wealth not work", I'm a believer for sure. Otherwise, you concentrate wealth to much and diminish government budgets so badly, and remove assets from working people to such an extent, that society WILL basically turn into neo-feudalism. I mean, we see it already. Assets since the Reagan era of thinkers have moved form public institutions and working people into large corporations and the ultra-wealthy at a startling pace. I don't think most people are OK with that.
Loses me the when they complain about wealth destroying taxation. We already have taxes against the assessed value of real estate, we can tax fungible assets as well. We can tax fungible assets valued over say $50 million at 5% and it would not impact the median nor average person. I do not give a flying fuck how it impacts the 1% of the 1% who’ve been bleeding the working class for decades. While we are at it lift the payroll tax cap as well.
If you tax assets over $50m you're taxing commercial real estate. Those taxes are usually paid by leaseholders anyways. You aren't taxing the landlords in commercial real estate.
Well he's right, they shouldn't be taxed the same. Investments are a risk, they should be taxed at an inordinately higher % and a certain percent of holdings over 5 million should have to be liquidated every year. The liquidation percent and tax percent should be progressive based on the amount over 5 million you hold.
Wrong. it would hurt u due influence of large scale investors and tame the casino, and push compensation to taxable income, as well as balance work vs. capital, AND provide greater opportunity for competition vs consolidation.
If you evaluate based on market cap you will absolutely reduce incentive to publicly list a company by making it a tax liability. Founders will want to keep it private where they control the evaluation and tax liability and they’re not at the mercy of others.
That will increase the sway of large scale investors as smaller investors won’t even be possible.
Definitely an argument that it promotes competition as it’ll be harder for companies to raise capital at scale. But don’t think that benefit is gonna outweigh the downsides of hamstringing the stock market
Duh. You tax investment lower, because the people investing are taking a bigger risk with their money than sticking it in the bank (so they should keep more of the reward for higher risk), and that investment helps the company with its own financing, which drives the economy.
They haven’t even done that though, otherwise income taxes would be starting at 30%. I didn’t know Jim Chalmers tried to tax unrealised gains, obviously wasn’t paying attention at the time but that is genuinely insane. Also it’s interesting Paul Keating is his hero, because his reforms were genuinely pro market. This is nothing of the sort.
This policy is the biggest foot gun I’ve seen in my time following politics. The liberals were completely irrelevant up until budget night and now Labor have opened the door to them. If they had of limited the changes to property the pushback would’ve been way less.
Let’s tax neither! And while we’re at it cut taxes on spending. We can tax the use of finite resources to encourage their efficient use as well as things that are bad for oneself and/or society.
If the government needs more money after that, then they can print it or make cuts. Hopefully it ends up being a surplus can pay down debt and then get distributed.
fenderputty | 11 days ago
Generally speaking, "my money isn't real therefore it shouldn't be taxed" combined with "my money isn't real but real enough to take loans out against and avoid taxation" is a massive issue. However, taxing the loan that uses said assets is the better approach.
AstralElement | 11 days ago
My house’s value isn’t realized, and yet I am taxed on it.
UReactionaryGarbage | 11 days ago
Exactly. But when you point this obvious longstanding fact out to the “unrealized gain” morons, they just push to remove property taxes….the one tax that the wealthy truly cannot run away from.
HowdyDiarrhea | 11 days ago
They can in Florida if Ronnie D has his way
elev8dity | 10 days ago
and they already sort of did in California which is why their property market is so out of whack.
Couldntve-make-it-up | 10 days ago
They don't pay property taxes in CA?
I_Am_Dwight_Snoot | 10 days ago
They have weird tax laws that can limit how much your taxes increase. So people that bought homes in 1990 are paying much lower taxes than a neighbor that bought in 2025.
Edit: Can't reply to u/practical-injury-622 but no. In most states you are typically reassessed annually to the point that most people pay relatively the same amount per sqft in taxes. Some other states have caps of tax increases but none are as low as California's.
The thought process around Califoronia's property taxes is logical in a way but it heavily hurts the housing market as people are not willing to sell out of "golden handcuffs". It also creates gov budgeting issues as newer homes can get taxed at higher rates to compensate.
Personally, I think having it tied to housing inflation is a better system. It keeps taxes more realistic and promotes ebb/flow in the housing market. Price ceilings in general aren't good.
Couldntve-make-it-up | 10 days ago
Oooof, that's regressive AF
scoobydiverr | 10 days ago
Property prices in California are mainly due to their refusal to build while demand has consistently grown.
Practical-Injury-622 | 10 days ago
Is that not how they work everywhere? Your only taxed the assessed value at time of purchase, and assessed value doesnt change until sold again.
hadinger | 10 days ago
Whole state will be under water in a few years so let them eat cake
HowdyDiarrhea | 10 days ago
I agree lol
doyletyree | 10 days ago
I was actually on another thread before your username splattered all across my consciousness. Had to come back to give you the up boat.
HowdyDiarrhea | 10 days ago
I appreciate it 😂
DogfaceDino | 10 days ago
These people are the same people fighting against property tax.
dust4ngel | 10 days ago
> These people are the same people fighting against property tax
"i want roads and plumbing but i don't want to pay taxes."
cogman10 | 10 days ago
It's worse. "I want roads and plumbing to my mansion, the guy who should pay for it is the mcdonalds worker because income tax is fair and my daddy already paid taxes (theoretically) for my mansion".
cradleu | 10 days ago
Anybody who does a little research should know that property taxes are bad and discourage development disproportionately compared to other taxes. Land value tax would be a much much better replacement
Meyermagic | 10 days ago
I think we really want a combination of all of these. Income taxes, wealth taxes, property taxes, and land value taxes. For anyone who has investments, there's a wealth tax below which you'd happily accept in exchange for avoiding a specific income tax. I think we should find this value, and trade a portion of income taxes, increasing in high tax brackets, for a roughly equivalent wealth tax. This is then effectively a tax increase for anyone who is invested to a below-average extent, and anyone whose investments make a below-average ROI, and it's a tax decrease for anyone who is more invested and getting more ROI.
For property tax and land value tax I think we want to do a similar thing, introduce agreeable land value taxes in exchange for decreases to property taxes, and instead of tax brackets this would be bracketed by land use / location / local politics. So if a city wanted to, they could introduce land value tax to encourage redevelopment into larger apartments or other more productive uses, but still carve out exceptions for their particular single family home voter base.
I'll accept any improvement, even incremental, and I think getting land value taxes and wealth taxes into the playbook is a great idea. And I'm a little peeved at California for, in my opinion, proposing perhaps the stupidest version of a wealth tax possible rather than something good. It's simultaneously not enough, in that it isn't actually changing how taxation occurs and the incentive structures it creates, doesn't do anything long term, and also way too much, in that it's a huge, unprecedented, highly politicized and publicized tax that will have people avoiding putting wealth in California even if it fails. But maybe it's the big ask to grab attention before you push the real bargain.
cogman10 | 10 days ago
IMO, the wealth and income taxes can cover everything. Property tax is just a form of wealth tax.
DogfaceDino | 10 days ago
Taxing people on the value of their homes is immoral. I’ve seen people inherit relatively modest homes from their parents and need to sell them to move into an apartment because they didn’t have the liquidity to pay for the property taxes.
MastodonFarm | 10 days ago
A land value tax wouldn’t prevent that.
ric2b | 10 days ago
If they don't have the money to pay the taxes on a modest home that sounds like the right move anyway.
Homes need more and more expensive maintenance, if they're struggling for cash it wouldn't be a good idea to keep the home even if the tax didn't exist.
Petrichordates | 10 days ago
No, owning a home but wanting it not to be taxed to fund local schools is immoral.
Petrichordates | 10 days ago
Bro hates schooling our children apparently.
cradleu | 10 days ago
Yeah sorry I don’t want to use a tax that actively discourages you from improving your property. I didn’t know you could only fund schools with property taxes
Background_Body2696 | 10 days ago
The loan tax the above commenter mentioned makes the most sense. The absurdity lies in taking out massive loans on "fairy dust"(Matthew McConaughey as Mark Hannah) in order to make purchases and what not.
A house is tangible and more than likely insured against total loss. The value of a stock or cryptocurrency is just a number on a screen, especially in the era of AI.
serious_sarcasm | 10 days ago
The only real reason Adam Smith gave against taxing stock was the complexity of it in a world where stocks were slips of paper that could be hidden.
Impossible-Rip-5858 | 10 days ago
And the unknown price of stocks in the 1700s. If you bought a share in the east india company, the price was not being calculated and re-valued every microsecond like SpaceX is today on the stock market.
This problem still exists in the private market. How do you value the stock of a 1 person law firm that by law cannot be sold to a non-lawyer and has wildly differing revenues on a yearly basis. Or there's thinly traded capital goods like a mega-yacht. Do you value it at the purchase price or the market price (which may be significantly less since it is a depreciating asset that only 10 people in the world could potentially buy it)?
Then there's the realized v. unrealized gains debate. If you are taxing unrealized gains, does the holder also get the benefit unrealized losses?
cogman10 | 10 days ago
> Then there's the realized v. unrealized gains debate. If you are taxing unrealized gains, does the holder also get the benefit unrealized losses?
Most wealth taxes are annual taxes that don't take into account realized/unrealized gains. Those only come into play when talking about capital gains taxes. If we went to a wealth tax, I could see it reasonable to argue we get rid of capital gains.
serious_sarcasm | 10 days ago
Well, for starters, we have computers.
We also regularly value companies exactly like that. Do you think banks just give out loans without checking?
You also don’t seem to understand the difference between stock and non-stock companies.
And you would base the value at the specific time the tax is being levied. This is already a basic legal principle from tax court to child support.
ImportantCommentator | 10 days ago
So you don't own a share of the infrastructure?
---N0MAD--- | 10 days ago
What if we only taxed the value of second homes?
Or only taxed the value of homes worth more than 10-15 times the average annual income of the county?
Then the wealthy would pay an unavoidable property tax and middle America who can barely afford homes anymore get a huge break.
solo-ran | 10 days ago
A billionaire with a $200 million mansion is paying a wealth tax of 20%. A middle-class family with a $500,000 house that has $100,000 equity is paying 500%.
devillurker | 10 days ago
In Australia you don't pay taxes on your primary residence, only other land which is considered an investment
AsparagusBig3989 | 10 days ago
Why is property tax levied against the developed value of the property and not the land value? If I bought an empty/underutilized lot and spent loads of post-tax money to build a great home for me and my family, why am I taxed perpetually on that value I added?
BilbaoBoggins | 10 days ago
Because we have to fund the country..
Everyone has to contribute. If you have more you should contribute more.
But imagine a world where you pay say 40% net - but so does Musk!
Free healthcare, free childcare, free education, free transport, public parks, public holidays, free amenities, no homeless etc. Literally the only way to build a utopia.
ric2b | 10 days ago
You want Musk to pay taxes? Don't you know that means he'd have to sell some shares? That's literally communism and would bring about the end of civilization, trillionaires must be able to pay a lower effective tax rate than the average janitor.
GhostofBeowulf | 10 days ago
Right but your house relies on infrastructure to support it and services to protect it.
I would love to see one of these libertarians actually go out and you know, live on their own. Outside of law, infrastructure, any service delivery at all. But as soon as you explain that roads are paids with via taxes, they start going offi how they don't need roads.
Ok-Industry5153 | 10 days ago
Property tax is a use tax. If you sell the house, then capital gains (maybe). Same asset separate issues.
ArcticLeopard | 10 days ago
Land value tax or bust
shammwow | 10 days ago
Tax is theft.
TheGreatDay | 11 days ago
This is where the "we can't tax it because it's not real" line stops working for me. We already tax property values for regular people who own their homes. That "value" isn't real, but we fully expect regular people to pay it. I think we can tax the value of a CEOs stock portfolio even though it isn't "real" and expect them to pay it. Maybe it will force a bigger portion CEO compensation back to being a salary rather than stock options too, which I only really see as a positive.
bennihana09 | 10 days ago
Property taxes work different on commercial real estate as well. Properties typically sell for MULTIPLES above their tax basis.
klingma | 10 days ago
Well, property taxes are completely different types of taxation that are assessed by the states & municipalities and can't really be assessed by the Federal government per the Constitution.
So, this really isn't relevant to the conversation.
carlos_the_dwarf_ | 10 days ago
Sorta. Property tax isn’t a tax on gains from your investment in the land/house; for that we use…capital gains, and it’s not taxed until you realize it, just like other investments.
Property tax is a tax on the services your land and home demand from the public.
tincartofdoom | 10 days ago
My house is assessed at about 25% more than the ones next to it because it is updated and they have not been touched since 1976. They are otherwise similar in land area, finished square footage, frontage, etc.
My taxes are based on the assessed value of my house. Can you describe how my home is using 25% more public services than the 70s houses?
snark42 | 10 days ago
> My house is assessed at about 25% more than the ones next to it because it is updated and they have not been touched since 1976.
It doesn't work like that most places. Generally the appraisal (market value, assment) for an updated house isn't that much higher than one that wasn't updated. Maybe 5%, definitely not 25%.
I assume you've appealed and used the houses sold around you for comps?
carlos_the_dwarf_ | 10 days ago
The steelman there would be:
More square footage and some other things that add value (eg a pool) translates to more needs from things like sewage/water/trash.
It’s progressive, so someone affording a nicer house can afford more taxes.
But property taxes are also just imperfect.
tincartofdoom | 10 days ago
> Property tax is a tax on the services your land and home demand from the public.
This is what you said.
And no difference in square footage. No pool.
My nicer interior finishes and better siding do not consume more services.
carlos_the_dwarf_ | 10 days ago
Thanks? I’m aware of what I said.
Blackhawk149 | 10 days ago
Inflation
epelle9 | 10 days ago
And companies also demand services from the public.
So do individuals who own American stocks backed by the US legal and financial systems.
carlos_the_dwarf_ | 10 days ago
They do, and they pay other taxes including property taxes, and their owners pay taxes on income realized.
But a stock moving up because, I don’t know, gas got cheaper places no net burden on the public in the way that a new building does.
epelle9 | 10 days ago
A stock moving up because gas got cheaper has the same net effect as house prices going up because say, your town blew up in social media.
Yet you get taxed on the increased home price, but no similar tax based on the stock.
carlos_the_dwarf_ | 10 days ago
If it makes more people want to live and visit and do business there it does. Property taxes also aren’t as dynamic as income or other taxes, they tend to adjust slower. But as I’ve said, I acknowledge we’re in the realm of imperfect here.
GhostofBeowulf | 10 days ago
Right but unless you're taking out a HELOC every few years you aren't using the gains from your house to finance your lifestyle...
Jon_ofAllTrades | 10 days ago
There are already other taxes to account for that.
Sales tax, VAT, B&O, payroll, property, etc.
The point is, equity ownership in and of itself doesn’t realize value or consumer services.
epelle9 | 10 days ago
It definitely does, the SEC for one.
How does owning a home do so? (Not living in it, but owning it)
It doesn’t by default, it gives you access to those things, but you have to pay even if you don’t necessarily use them.
Equity ownership is the same, you have access to to courts for equity disputes, the SEC needs to exist to oversee trades, law enforcement has to enforce these equity disputes, and government backed corporate and legal infrastructure in general.
All of these things require taxes to operate, just like home ownership depends on services that require taxes to operate, therefore both should be taxed.
dust4ngel | 10 days ago
> Property tax is a tax on the services your land and home demand from the public.
companies demand services from the public just as much as a private residence does, so if i own a share in a company, why wouldn't this argument apply all the same?
carlos_the_dwarf_ | 10 days ago
Companies pay property taxes, so are at least equal in that sense.
The distinction (and note I said “sorta”) is a land owner places a distinct, almost linear burden on local infrastructure—schools, trash pickup, etc. That’s not really the case with a company just existing.
Note also that we tax people on the literal appreciation of a house the same way we do the literal appreciation of a stock—when it’s realized.
dust4ngel | 10 days ago
> is a land owner places a distinct, almost linear burden on local infrastructure—schools, trash pickup, etc. That’s not really the case with a company just existing
why does a company not place a similar burden on local infrastructure? i'm not sure if by "just existing" you mean to imply that companies don't do anything, whereas people living in a house do - that's obviously false. look at how much use amazon makes use of road systems as opposed to some soccer mom, for example.
> we tax people on the literal appreciation of a house the same way we do the literal appreciation of a stock—when it’s realized
not sure if you've ever paid property taxes, but this is not just false but obviously false in a way that everyone knows.
carlos_the_dwarf_ | 10 days ago
A company does if they have a building or whatever; they pay property tax on that if they do.
Of course they do other things, and they also pay other forms of taxes.
> obviously false
We objectively don’t tax the cap gains from a home until they’re realized, so I’m not sure what you mean here.
dust4ngel | 10 days ago
> We objectively don’t tax the cap gains from a home until they’re realized, so I’m not sure what you mean here
you said appreciation - property taxes increase with appreciation.
carlos_the_dwarf_ | 10 days ago
Yes, I know they can change as the house appreciates.
Are you unaware of the distinction I’m making with cap gains or are you just nitpicking my language because you didn’t like a thing I said?
TheGreatDay | 10 days ago
I understand. It's not perfectly analogous but it's close enough for government work.
In this case, we should tax capital gains even though the value isn't "real", in the same way we tax property based on it's value even though it's not "real".
Both taxes are/would be imperfect, but that's what we've got right now. I'm open to other suggestions that increase taxes on the wealthiest in the country.
carlos_the_dwarf_ | 10 days ago
IMO taxing cap gains would be extraordinarily messy. Better to just close a couple loopholes so we’re reliably taxing when the income is eventually realized/inherited.
m0n3ym4n | 10 days ago
Property tax is based on an area, and covers the direct services provided for that area such as roads, schools and emergency services.
The value of your home is real. It’s called the market price. You can sell and move if you’d like to. In most cases where a home’s value has increased, so have the level of services provided in that area. Schools used to have asbestos and no air conditioning. Teachers didn’t have a union and didn’t receive benefits. As things have improved, advances in medicine have increased life expectancy, etc. so too has the cost to sustain these services.
I am so sick of this naive perspective that property taxes are bad. Read about Florida and California trying to limit property tax increases. It’s caused all sorts of issues.
And because property tax pays for services IN A SPECIFIC AREA, it’s not realistic to tax unrealized capital gains of investments and somehow allocate that money to local governments and entities.
In my opinion we need to focus on strengthening our court system and rule of law. If we can’t elect good leaders who prioritize our needs over special interests, we will never succeed in reforming taxes —and, worse, we will continue to damage the fundamental structures that have lead to the U.S. being such a prosperous nation.
TheGreatDay | 10 days ago
I am not saying property taxes are bad. In fact, I am a firm supporter of them.
My point was that people (mainly the wealthy) can't hide behind the fact that their stock portfolios value isn't "real" and thus we can't tax it. They complain that they'd have to sell their positions to pay for the tax and that's not fair. Well, too bad. Property taxes are similar in this sense. The value in the property isn't "real". If I bought a 300k house and the value 5 years later is at 500k, I'm paying for a 500k value property tax, despite my job paying basically the same. In both cases, the value isn't "real", in that it's locked behind an ability to sell, a thing that the person holding it may not want to do.
Again, I say too bad. If the gander is going to get taxed on the home that they actively live in and use every single day (a thing that I think is fine and necessary at this point) then the goose can get taxed on their stock portfolios and capital gains.
LivingCorner1421 | 11 days ago
this would be a nightmare to tax
HowdyDiarrhea | 11 days ago
They already do it in other countries.
TheGreatDay | 10 days ago
Sure. It'll be hard, and we'll have to close loop holes that clever tax accountants find. It'll be a neverending battle. Doesn't mean the current status quo is acceptable and that we shouldn't even try.
KartoffelLoeffel | 10 days ago
I guess there’s no need to try then
wirthmore | 10 days ago
Thank you for your assent. Here are 4 Elon Bucks.
artvandalaythrowaway | 10 days ago
How else do you propose you pay your fair share for the schools, roads, police, firefighters, libraries, and administration in the town which your house is located?
SCP-iota | 10 days ago
It's realized if you live in it. See also: imputed rent
ric2b | 10 days ago
So the tax is higher or lower depending on how much time I'm living in the house?
SCP-iota | 10 days ago
Typically imputed rent is considered a sort of income, so it would be taxed continuously as income tax. Basically, if you own a home and live in it, you are both the landlord and the renter; every month, you effectively "pay yourself" the equivalent rent of the home, which is both an expense and an income. At the end of the fiscal year when you pay your taxes, all of that imputed income from the year would be taxed like any other income.
"But wait, I already pay my mortgage! Why this, too?" Mortgage payments are just paying off the loan you took to buy your house; you are still effectively renting it from yourself by living there, so considering the imputed rent as income wouldn't change whether you took a mortgage, or somehow managed to pay the full house price up-front, or inherited it, etc.
See also: Georgism
ZachF8119 | 10 days ago
You’re realizing it through usage and deducting depreciation
Also property tax is more so community tax that can’t accurately hit people who live on edges and enjoy the next zip code over that’s better in every way
Joo_Unit | 10 days ago
You can take out HELOC against its value though and that process includes affirming value of the collateral and interest payments.
SweepsAndBeeps | 10 days ago
Apples to oranges (that means you are trying to compare two things that aren’t the same, as if they are the same thing). You can take out a heloc or reverse mortgage on that value. Most states let you file a homestead exemption, too.
kaplanfx | 10 days ago
Are you wealthy enough to buy the tax policy you want though?
Nojopar | 10 days ago
That's the real problem.
solo-ran | 10 days ago
You are taxed on the full value of the house even if the bank owns 90% of it. If you have $50k equity in a $500,000 house you are paying a wealth tax of 1000%.
FindingRelevantInfo | 10 days ago
The bank's name is not on the deed. The house is yours and you bought it with money the bank lent you. The house is colateral for the money you owe.
ric2b | 10 days ago
The bank doesn't own 90%, otherwise they'd get 90% of the value of the sale when you sold the house.
They just have a claim on the house if you default on the loan.
ItsTheAlgebraist | 10 days ago
That is not how percentages work. Your property tax on a $500,000 house (at least where I live) would be on the order of $5000, which is 10 percent of your net worth, trending down towards 1% as you repay your mortgage (i.e. as your net worth increases)
Also, you own the entire house, and benefit from the entire increase in its value (or decrease, if you are unlucky), you just have a liability to the bank because they loaned you the money to buy it. If you wanted your wealth tax to vary based on loans against the wealth, then the loans that the wealthy take against their stock portfolio would escape taxation by the same mechanism.
klingma | 11 days ago
That's property tax, not income tax - it's an entirely separate type of taxation that's only assessed by the states & municipalities.
This is not an apples to apples argument. Constitutionally, it's an entirely different type of taxation and the federal government is not allowed to tax it unless they want to assess it as an apportioned direct tax, which they won't.
tragicpapercut | 10 days ago
It's a property tax on an asset. It's a pretty intuitive argument against those who say we can't do wealth taxes on unrealized gains... because we already do that with property taxes.
I've yet to see any good explanations as to why taxing financial property would be different than physical property...other than "it is too hard" - which is kind of a bullshit reason.
klingma | 10 days ago
Nope, we, as in the Federal Government, do NOT tax property.
We can't do that actually because of the Constitutional limitations on the right of the government to assess taxes.
It's why the government had to pass the 16th Amendment to even get income taxes.
So, there's your proper argument against taxing financial property.
MastodonFarm | 10 days ago
This is a meaningless distinction. If the Constitution is an impediment, the states could tax billionaires and the Fed govt could offload certain funding obligations to states in an equal amount.
Nojopar | 10 days ago
We're talking about philosophical not legal arguments. Constitutions can be changed. That's just a process issue. Sure, a big hurdle, but if the logic is sound then there's no reason not to amend the Constitution accordingly (other than the obvious 'rich people don't want it', but that's another process issue).
tragicpapercut | 10 days ago
Then local communities can tax stocks? They somehow tax local property just fine.
AK_Panda | 10 days ago
That argument would only apply to the US. The article is about Australia.
The_Admiral_ | 10 days ago
The explanation is that property is stuck in the ground, stocks are not. Any wealth tax on stocks just means that another countries stock exchange is about to become extremely popular.
snark42 | 10 days ago
> other than "it is too hard" - which is kind of a bullshit reason.
It's kind of bullshit for publicly traded companies, but it's nearly impossible for private companies. If you did it right every private company would have to pay for an expensive audit and outside valuation every year. It would also be trivial to game because the IRS isn't capable of auditing every private company and valuations are incredibly subjective.
Houses are much easier to get valuated/appraised.
twoforward1back | 10 days ago
Because the physical asset has implications for the surrounding community, that infrastructure needs to be paid for.
Virtual assets such as stock don't have the same burden. I'm not driving to and from my stock or sending my kids to school near my stock.
However loans against virtual assets should by taxed.
tincartofdoom | 10 days ago
I don't own a house or land. I own a title to a house and the land under it. I don't drive to and from my title. It's virtual.
twoforward1back | 10 days ago
Does that title enable you to sleep under that roof? And to sell the property and keep the money if you so wish?
tincartofdoom | 10 days ago
You know you can sell "virtual" assets for money as well, right.
And you know they give you voting powers, which I don't have over my house.
My house doesn't declare dividends either.
MastodonFarm | 10 days ago
Stock is equity in a corporation, which owns real assets (including real estate in many cases). It’s no more virtual than real estate.
twoforward1back | 10 days ago
Does the corporation pay taxes on those real assets?
ric2b | 10 days ago
Are you asking if companies pay property taxes?
tragicpapercut | 10 days ago
So the first is ok because...they are taxes? You described taxes.
I'm ok with taxes. Wealth taxes seem reasonable to help the community - the financial health of a community counts as good enough justification as far as I'm concerned.
Kombatnt | 10 days ago
Property taxes are not a tax on “unrealized gains.” If I paid $500,000 for my house, and it’s still worth exactly what I paid, there are no “gains.” Yet I’m still taxed on the entire $500,000 value.
I might not even have any equity in the house at all. If I have a $500,000 mortgage on a $500,000 house, then my financial position on it is $0. Yet I’m paying taxes on $500,000.
I’m not making an argument about whether or not that’s fair, or should be changed. I’m merely pointing out that it’s a completely different scenario than taxing unrealized gains on stock assets. It’s a nonsensical comparison, but it gets made anyway, every time this comes up.
ric2b | 10 days ago
That's a distinction from capital gains taxes on unsold shares, but not a distinction from wealth taxes, which are based on the value, not on the gain.
Kombatnt | 10 days ago
The “wealth” in a house is the equity, not the value. If I’m mortgaged to my eyeballs, I have no equity, I have no “wealth.” But I’m still taxed on the full value.
Again, it’s not at all a fair comparison, but Reddit insists on repeating it.
serious_sarcasm | 10 days ago
Property tax and income tax are both direct taxes, so what are you talking about?
klingma | 10 days ago
Are you aware of how the Income Tax was created? I'm guessing not since you asked this question to imply that I don't know what I'm talking about.
Check out the 16th Amendment to the Constitution, as that's the answer to your question.
So, what are you talking about? They're again not the same.
serious_sarcasm | 10 days ago
> In its ruling, the Supreme Court did not hold that all federal income taxes were unconstitutional, but rather held that income taxes on rents, dividends, and interest were direct taxes and thus had to be apportioned among the states on the basis of population.
https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitution
Article I, Section 8, Clause 1:
> The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States
>> Article I, Section 8, Clause 1 of the Constitution provides Congress with broad authority to lay and collect taxes for federal debts, the common defense, and the general welfare.1 The Supreme Court has emphasized the significance of this power, stating that it is “no accident” it appears first in the list of congressional powers2 and is “the one great power upon which the whole national fabric is based.”3 By the Constitution’s terms, the power of Congress to levy taxes is subject to but “one exception and only two qualifications.”4 Articles exported from any state may not be taxed at all,5direct taxes must be levied by the rule of apportionment,6 and indirect taxes by the rule of uniformity.7 The Supreme Court has emphasized the sweeping character of this power by saying from time to time that it “reaches every subject,”8 that it is “exhaustive”9 or that it “embraces every conceivable power of taxation.”10 Despite few express limitations on the taxing power, the scope of Congress’s taxing power has been at times substantially curtailed by judicial decisions with respect to the manner in which taxes are imposed,11 the objects for which they may be levied,12 and the subject matter of taxation.13
https://constitution.congress.gov/browse/essay/artI-S8-C1-1-1/ALDE_00013387/#ALDF_00023679
IvoryTowerResident | 10 days ago
can we get a tax for future wages for individual income? Because not like they will suddenly stop earning income and if that happens just refund
serious_sarcasm | 10 days ago
You can in fact prepay your income taxes based on projected income. It’s common for self-proprietors and high income wait staff.
You can also have no withholding, and pay all your taxes at once.
plummbob | 10 days ago
That's the point. Arguments from illiquidity are in bad faith because most Americans make tax payments on illiquid assets.
klingma | 10 days ago
There is no point, you're talking about a tax type that cannot be assessed by the federal government and using it as support for creating a federal tax on stock.
Your logic doesn't follow.
plummbob | 10 days ago
The idea is that bexause the value ofnthe stock is unrealized, it shouldn't be taxed. But a house is the same, an unrealized asset, and millions manage it.
MastodonFarm | 10 days ago
Why does it have to be a federal tax?
AstralElement | 10 days ago
I think it’s because differentiation of where that share of stock’s jurisdiction becomes questionable. Is it at the NYSE in New York or is it where the Corporate Headquarters is housed? Because if that’s the case, there will be a lot more incorporating in Delaware. Also is the mechanism of this stock protected under some specific state law?
A federal tax eliminates this distinction by removing loopholes and engaging with incorporating in the United States directly.
snubdeity | 10 days ago
Did you read the article?
It's uh... not about the US.
epelle9 | 10 days ago
Lets implement a financial property tax, all properties are taxed at the same rate whether they are physical properties or financial ones.
Rough-Board1218 | 10 days ago
Property taxes are state/local taxes. The federal government can't do a property tax without a constitutional amendment
MEDICARE_FOR_ALL | 10 days ago
Land taxes definitely make sense though. You don't want someone taking up land and not improving or using it forever. It's also needed to support infrastructure related to the land.
kinkycarbon | 10 days ago
How do we tax people with sealed Pokemon products?
unexpected_input | 10 days ago
You're taxed on the assessed value of your house, not on increases in your house's value as though the appreciation were a windfall.
Petrichordates | 10 days ago
I reckon that's not a proper comparison. Property taxes are assessed based on your home value, but are not a tax on your home investment.
Chodenski1965 | 10 days ago
Because you are occupying land that other people cannot occupy until such time as you sell or abandon the land. It's a user tax.
eze6793 | 10 days ago
But is that really a tax on that wealth? Property tax is basically govt HOA fees. It’s used to maintain the township and state infrastructure that makes living there possible, desirable, etc.
The fair way to handle who pays what is based on how much their property is worth. There’s probably a decent argument/correlation that the more it costs the more the township/states needs to spend to help maintain that region.
Don’t get me wrong our taxes are fucked and should be overhauled. I’m just not sure this is the best example.
akmalhot | 10 days ago
Local vs federal taxes , and it's 1-2% if the value
And housing values aren't volatile , or traded quickly (not considered a liquid asset )
Choosemyusername | 11 days ago
To be fair, property tax is a bad tax.
I have a really hard time coming to terms with the fact that a man can work hard and build a home with his own two hands, paid off, and still if he gets too sick to pay his property tax he can still be evicted from the home he built and paid for himself.
There has to be a better way to fund municipal budgets.
joeydimaggio | 11 days ago
So how do you propose we pay for local services?
dust4ngel | 10 days ago
> how do you propose we pay for local services?
arguably land value tax as it encourages useful development and disincentivizes land hoarding.
joeydimaggio | 10 days ago
That would be fine, or even great, georgism rules, but I don’t think that would address OPs issue- an LVT in a high dollar area would not necessarily be that much lower- the land value is the bulk of the value of the home in a lot of markets.
HumanTraffic2 | 10 days ago
Any other tax.
Doesn't property tax then disproportionately benefit wealthy municipalities that can collect higher taxes?
Ambitious-Intern-928 | 10 days ago
How does is it disproportionate? Expensive property paying expensive taxes for great services and impoverished areas paying low taxes for shitty services is the definition of proportionate.
joeydimaggio | 10 days ago
Disproportionate to what? If your alternative is raising the income tax then no, a property tax can be fairer regardless of the municipality.
Choosemyusername | 11 days ago
Income tax would be better.
That way if you fall on hard times like health problems, you can’t be evicted from a home you built and paid for yourself
Seamus-Archer | 11 days ago
If you own your home outright you can borrow against it for the tiny percentage of its value you owe in taxes each year.
Choosemyusername | 10 days ago
If you tick all of the right boxes at the bank, sure.
If I asked for a HELOC right now I would be denied.
Seamus-Archer | 10 days ago
Keep building up that straw man…
Property taxes are a tiny portion of a home’s full value. If you simultaneously own your home outright and are also incapable of paying your property taxes it’s time to sell your home to generate funds and rent, or sell off another asset.
It’s ridiculous to say that because somebody could hypothetically have their entire net worth tied up in a paid off home an be incapable of paying taxes that property taxes are inherently bad tax law.
Learn to pay your bills, the rest of us do.
Ambitious-Intern-928 | 10 days ago
If you were disabled you would collect a disability check....and most states would cap your property tax based on your income. You would fare MUCH better than someone that became disabled and had to pay market rent.
Choosemyusername | 10 days ago
Yes I have no problem paying my bills. Because I can work. And yes I also have a nest egg. But I don’t know how many decades they would last me if I got too sick to work.
And the earlier it happens to you, the less time you have to save for that nest egg, and the more you will need to last you until the end of your life.
Seamus-Archer | 10 days ago
Again, if you have zero money left and a paid off house, sell your house. Your house only has value because it relies on the myriad of infrastructure that needs maintenance and it has to be paid for somehow. Borrow against it if you’d rather retain ownership. You have options, use them.
Throwing out hypothetical sob stories and edge cases to try to justify wholistic changes to tax law is frankly nonsense. Land value taxes are inherently better than income taxes at taxing wealth. We should be leaning into them, not away from them. If you think income taxes are effective just look at the endless games billionaires play with borrowing against their assets to avoid paying them.
Creme_de_la_Coochie | 10 days ago
A HELOC isn’t the only type of home equity loan. There’s programs for you, you have to shop around and you’ll likely pay a super high rate, but someone out there would give you a home equity loan.
arcanearts101 | 11 days ago
In the unlikely, imaginary scenario where there was a place where no one worked, and everyone owned there home, there would be no taxes? There has to be a system we can design that doesn't fall apart this much, even if this is a scenario that will never happen
Kerlyle | 10 days ago
Sales tax, inheritance tax, services tax, etc. not saying any of these are better but there's hundreds of other ways taxes could function in such a hypothetical society.
Choosemyusername | 10 days ago
If nobody worked, the government wouldn’t be able to spend any money anyways. Why would they need tax revenue? Who would they be paying? Nobody is working.
We would be having bigger problems than tax revenue if nobody was working.
Semyaz | 10 days ago
And when people living in that house don’t claim any taxable income? You either don’t see the circular logic here, or you’re one of those “taxation is theft” folks.
joeydimaggio | 11 days ago
Why not just ban evictions? Raising the income tax would just be a handout from workers to people that own property. I’m not really sure it is moral to tax working people to pay for homeowners that did not save enough for retirement, particularly when most of those working people are renters.
Zalophusdvm | 11 days ago
Ya…like taxing billionaires unrealized investment gains!
Choosemyusername | 11 days ago
You are describing just higher corporate taxes since these gains are rarely in their personal name. They are normally gains on the companies.
Zalophusdvm | 11 days ago
Great! Sounds like a plan to me.
elev8dity | 10 days ago
What do you think a shareholder is? The corporation doesn't own itself.
Choosemyusername | 10 days ago
Often, it literally is. Companies can and do buy company shares, including its own.
ImportantCommentator | 10 days ago
That just increases the percentage a share is of the company.
elev8dity | 10 days ago
If you are talking about share buybacks. The company doesn't hold those shares. They are removed from the market and it drives up the share value for the remaining shareholders. If you are talking about mutual funds, the owners of the funds, not the mutual fund company that's providing a service would be taxed.
Choosemyusername | 10 days ago
That’s left pocket/right pocket stuff. Same outcome, different label on the excel column.
elev8dity | 10 days ago
What a nonsensical statement.
Character-Active2208 | 11 days ago
And just like that, the Georgist Symbol shone brightly in the night sky
PunishedMedlock | 11 days ago
Property tax is just payment for the amenities that support your home and protect your investment.
Choosemyusername | 11 days ago
Well it’s not great protection if you can be forced to be homeless if you fall sick even though you built your own home.
Pleasant-Radio5771 | 11 days ago
What alternative would you suggest?
LivingCorner1421 | 11 days ago
i think property tax should be way more and income tax on labor should be way less
Choosemyusername | 10 days ago
You think it’s fair to kick a person out of the home they built and paid for just because they say, got cancer and could no longer work?
Serious-Reception-12 | 10 days ago
Why should we protect homeowners from what scenario and not renters?
Choosemyusername | 10 days ago
I would actually argue also that if a renter built and paid for the home they were in, that would also be fair that they shouldn’t be able to be evicted.
Serious-Reception-12 | 10 days ago
So we should subsidize people wealthy enough to afford their own homes, but leave relatively poorer renters are out in cold?
Wellontheotherhand1 | 10 days ago
It makes sense because in the long run, the property belongs to the country and all occupants are temporary. All citizens have a vested interest in keeping the country up.
Choosemyusername | 10 days ago
Sure. There just has to be a better way to best that I stress than a system that can kick a man out of a home he built and paid for himself just because he gets sick and cannot work anymore.
ric2b | 10 days ago
Sounds like sick people that can't work anymore should get financial help, regardless them being homeowners or renters.
In fact renters would be more at risk.
Serious-Reception-12 | 10 days ago
Property tax is far better than any other kind of tax. Take care of people that can’t work in other ways if we need to.
ShroomBear | 10 days ago
My opinion on whether the govt should be entitled to a tax is whether the govt services or its assets enable the valuation of the asset being taxed. I think land should be taxed at the parcels value while the property value should be exempt if house was funded and built on commercial interests. To me, the land value is realized for as long as the land is developed. Likewise on stocks, the NYSE is owned by a corporation/conglomerate. The corporation that owns it should pay tax on the resources and government services it consumes to operate. Rather than taxing stocks and assets that are speculative in response to leverage, I think they should just be forced to either be liquidated or held off the lendee's books and net value calculations and make those assets inaccessible until the loan is paid.
ric2b | 10 days ago
That logic can apply to any tax. Person with little money has to pay tax -> doesn't have the money -> has to sell assets to pay it.
Nothing special about property taxes in that scenario.
Ambitious-Intern-928 | 10 days ago
Most states have programs to limit property tax based on income. The more restrictive states only allow this for the elderly or disabled.
turb0_encapsulator | 10 days ago
and this is how we got Prop 13 in California, which has basically destroyed public services in the state for nearly half a century now.
in my opinion the solution should be that the state lets you carry some of the tax the applies to appreciated value as a balance that is due when you sell the property. this could also be accomplished through the creation of a public sector bank that effectively loans the property owner the money at little or no interest, but allows the government to effectively collect and spend the revenue.
sajnt | 10 days ago
You utilize it constantly and exclude others from land that was once free for anyone to use.
Jamooser | 10 days ago
You're taxed based on its value. But you're not being taxed on it. You're being taxed on the multiple services it is attached to.
TBSchemer | 10 days ago
You realize the value of your house every day, when you're actually using it.
AstralElement | 10 days ago
And billionaires realize the value of their stocks everyday as they use them.
They don’t have all that access because they only have $5 million liquid.
SnugglyCoderGuy | 10 days ago
OK, replace property tax with a progressive income tax.
giraloco | 10 days ago
Your house is taxed on the full value even if you only have 10% equity. Much worse than a wealth tax.
ric2b | 10 days ago
Because you own it, if you sell it you also get the full value of the sale.
You might additionally have a debt where you gave the house as collateral, that doesn't mean you don't own the house.
snark42 | 10 days ago
Wealth tax would also apply to leveraged investments so it's the same in that regard.
NDSoBe | 10 days ago
Your house is depreciating. The land value is real and its rent value is being consumed.
HelloYesThisIsFemale | 10 days ago
You shouldn't be taxed on that either.
CrunchyMage | 11 days ago
This too is wrong. You should be taxed sales tax when you buy the house, and taxed capital gains when you sell the house, but no taxes outside of that.
Muroid | 11 days ago
Seems like the easy solution would be to cause taking out a loan against an asset to update the cost basis of that asset for tax purposes and then you’d pay taxes on the gains that have been “realized”.
pants_mcgee | 10 days ago
Just get rid of stepping up the cost basis on death.
Loans are not a problem and the rich realize gains all the time. And even if they don’t, government get its fair share when they die.
Opeth4Lyfe | 11 days ago
I think it’s a matter of interest rate vs compounding rate. It’s a no brainer to borrow at 4% when you’re earning 10-11% or more. My solution to the billionaire collateralized loan issue is to either disallow those types of loans all together…or make it barely worth the trouble to do it and make it so they should just sell more stock to pay for stuff….that’s mostly how they’re paid anyways. I think there should be a flat 10-15% upfront origination fee, and the interest rate should be prime +7-8% minimum. Want to borrow 10m dollars for a new yacht? Cool, that’ll be 1.5m dollars and 12% on the remaining loan.
poopbutt23111 | 10 days ago
If it’s such a no brainer why are there countless examples of billionaires selling stock and paying tax on capital gains?
https://www.forbes.com/sites/phoebeliu/2025/12/30/tech-ai-billionaires-sold-most-stock-this-year/
Yvaelle | 11 days ago
When you're a billionaire though they don't really use an asset against your loan, they just go, "you seem good for it". The discretionary assessment for granting a no-interest loan to a VIP client means they don't need to provide a traceable, quantifiable asset to value.
poopbutt23111 | 10 days ago
I work for a bank. That’s not how it works lol.
Yvaelle | 10 days ago
Lots of people work for a bank, I used to work for a bank. If you want to pull rank here, list the billionaire VIP clients you provide no-interest loans to.
poopbutt23111 | 10 days ago
Banks don’t provide interest free loans bud
Yvaelle | 10 days ago
They do to billionaires.
poopbutt23111 | 10 days ago
lol ok
dacommie323 | 11 days ago
But a threshold would still be needed as every mortgage is a massive loan against an asset’s perceived value.
elev8dity | 10 days ago
The market effect of taxing assets is lowering the perceived value of the asset. If it costs money to hold an asset, a person is less likely to horde such an asset.
fireball_jones | 11 days ago
Or just 1 exception per taxable unit for that specific case. Just 1.
mortemdeus | 11 days ago
Or just set it to loan use types. Personal loans can be taxed but home loans or vehicle loans can be exempt, for example. It would obviously be more complex than that but it isn't too difficult to target the loophole without blowing up the average person.
klingma | 11 days ago
So then credit cards would be taxed as well, they essentially operate the same way.
If you tax the loan then you need to make the interest & fees deductible, thus taking us back to 1970's era tax rules. Not a great idea.
Nojopar | 10 days ago
Why would you need the interest or fees deductible? That doesn't follow whatsoever.
Blah64 | 10 days ago
credit cards are not asset backed loans
klingma | 10 days ago
What? They absolutely can be.
wazzedup1989 | 10 days ago
What asset is your credit card secured against
psrandom | 10 days ago
Mortgage is loan to acquire an asset. Same as loans to acquire a business or to create a new business. Those don't need to be taxed. The money spent will be taxed on other side anyways. House/business seller or costs paid to build a new business
We need to tax when an asset is brought to existence for generating money. SpaceX borrowing money on non-trading stock based on valuation of traded stock is one such example. In this transaction neither SpaceX nor the lender are paying any tax
Formal_Economist7342 | 11 days ago
Economists working for the highest bidder. Taleb is an asshole but he is often right.
bmelch12 | 11 days ago
Probably a stupid question but isn’t the loan taxed to the lender? The interest income would be income for the financial institution making the loan?
poopbutt23111 | 10 days ago
Yes it contributes to lenders net income and is taxed.
The borrower eventually still has to pay capital gains on their investments to pay off the loan too.
The_Keg | 10 days ago
You are talking to stupid people thats why.
Bezos has been selling shares to fund blue origins for nearly ten years now.
https://www.cnbc.com/amp/2017/04/06/bezos-is-selling-amazon-stock-to-fund-rocket-venture.html
https://finance.yahoo.com/markets/stocks/articles/bill-gates-just-did-unthinkable-132955202.html
pants_mcgee | 10 days ago
Musk sold 40+ billion in Tesla stock last year.
Reddit found about buy, borrow, die and turned it into the boogie man.
UnluckyDot | 10 days ago
No one is saying they aren't ever taxed. People are saying that a large share of their economic gains are never taxed in their entire lifetime. A billionaire's wealth may increase by billions, lttle or none of that increase appears as taxable income, and rhe tax can potentially be deferred for decades
It doesn't matter if buy borrow die is or isn't the majority of how they fund their lifestyle. That's not the point.
krakmunky | 10 days ago
I was thinking that taking a loan out using investment as collateral should trigger a taxable event (as if you were forced to sell and rebuy the assets used). Then the taxes on the capital gains are collected, and the cost basis changes to the current value.
Wouldn’t that work?
fenderputty | 10 days ago
Not 100% sure and I personally think even taxing the loans isn't going far enough, but it's better than nothing and an easier sell.
Corzex | 10 days ago
This is called deemed disposition and is absolutely a thing that could be applied to assets used as collateral for loans.
Ch1Guy | 10 days ago
Can we stop with the buy borrow die nonsense?
"For the top 1 %, new borrowing each year is fairly small: 1–2 % of economic income."
"“Buy, borrow, die” is not a dominant tax avoidance strategy for the rich."
https://www.sciencedirect.com/science/article/abs/pii/S0047272725002178
Study after study shows that the wealthy borrow a tiny fraction of their economic income.
snark42 | 10 days ago
There's some interesting loopholes around borrowing, trading, step-ups and GRATs that are pretty common among the wealthy, it's just a lot more complicated than most realize.
PolishTar | 10 days ago
Even if that's the case - the step-up-basis loophole is so absurd, creating such strange incentives while also adding complexity to the tax system. We should remove it for that alone.
There's no other tax you (or technically your estate) can avoid by simply deferring it *so* long that the government just forgets about it.
FWIW, I don't agree with the parent post. Taxing the loan part of "Buy Borrow Die" doesn't make much sense to me. The problem is solved far more cleanly by just removing the step-up-basis nonsense.
Ch1Guy | 10 days ago
Maybe with todays records we can, but imagine inheriting stock that your dad earned/bought in the 1960s.... no electronic records. How do you price them if you are not sure what decade they were bought in?
snark42 | 10 days ago
The real complication is with privately held investments and companies (like the family farm, small business, rental properties that have depreciated, etc.)
Ah_Ca_Iraa | 10 days ago
What the hell is economic income?
We measure “economic income” as currently-taxed income plus new unrealized gains.
Oh, so you make $10bn in unrealized capital gains in a year, and therefore the $200mn you borrowed for living expenses specifically to avoid paying taxes on the $10bn is actually nothing.
Ch1Guy | 10 days ago
Yes.... 40 million in capital gains tax is nothing to a guy that makes 10 billion a year.
And no the guy isnt willing to pay 10 million a year for life to avoid the one time 40 million.
PlasticEconomist4 | 11 days ago
The borrowing against stock is a pretty rare thing that reddit focuses on but actually isn't that common. Even when it exists you have to pay interest on the loans
poopbutt23111 | 10 days ago
Yep. Whenever someone parrots that bulllshit on here I know they are a moron.
Do those loans exist? Sure. But they aren’t some crazy long term never pay tax trick like some people think they are.
AsSubtleAsABrick | 10 days ago
Right? Why would someone rather pay 5% (or whatever) a year perpetually than 15% once?
Ah_Ca_Iraa | 10 days ago
If the interest rate on the loan is lower than the rate of return of the stocks then you come out ahead. That's a layup in our current market. Just funnel some company money into stock buybacks and you're sitting pretty.
PlasticEconomist4 | 10 days ago
Which stocks have a guaranteed rate of return
giraloco | 10 days ago
This is nothing compared to the loophole when a billionaire dies. Capital gains are erased and never taxed.
fenderputty | 10 days ago
Ohh I’m for ending that too
Churchbushonk | 10 days ago
Or, don’t allow stocks to be collateral unless they are realized gains. Simple.
Kindtrarian | 10 days ago
That’s huge. Tax a loan against unrealized assets (other than a primary residence) as income.
fremeer | 10 days ago
People forget that a loan is essentially a repurchase agreement if you use collateral.
A home loan for instance is a complex purchase agreement between 3 parties. Buyer, seller and bank. And someone needs to pay the capital gains for that sale.
There is basically nothing stopping a gov doing something similar for borrowing against assets. Because they are "realising" capital gains when they put a monetary value on the shares or home and selling to the bank at an aggreeed value.
The cost base would adjust and you could presumably even take a capital tax loss later if the shares do drop against the new cost base.
And I think you could structure it so that doing so for investment purposes you don't get hit. For buying stuff or buybacks etc you would take the hit.
bailtail | 10 days ago
Completely agree with this. However, I do also think we need to look at inheritance tax in addition otherwise the US is also losing a ton of tax revenue to step-up basis.
Fit_Salamander_2814 | 10 days ago
Are you perhaps mistaking 'assets' for 'money'?
Flushles | 10 days ago
I'm totally fine with a step up in basis to tax people taking loans, but I don't even know how much revenue you'd generate? I know it gets talked about a lot but I haven't really seen people putting up numbers.
fenderputty | 10 days ago
To be clear, I do not think this is in any way enough. But it’s something. Closing the carried interest loophole and bringing back inheritance tax should also be easy sells.
Corzex | 10 days ago
Deemed disposition on any asset used as collateral for a loan. Problem solved. This seriously isnt difficult, there is just no desire to actually fix it, largely because its not that big a deal and hardly used anyway.
People are content to scream into the void about a wealth tax, taxing unrealized gains, or other stupidity that will never happen instead of understanding how to apply a real solution, to what amounts to mostly a non issue.
5256chuck | 10 days ago
I love reading Reddit comments (sometimes). This was one of ‘em. Thanks.
-OptimisticNihilism- | 10 days ago
That is the right way. It’s a slippery slope and very complicated to enact a wealth tax. It wouldn’t be difficult to add a line item to loan forms to identify the type of collateral and then add a tax to unrealised stocks. Banks would have to report any loan using certain types of collateral and report it to the IRS just like brokerages do with gains.
The problem is republicans will call it out as raising taxes and the average American doesn’t have a clue that this is how the ultra wealthy avoid paying taxes on almost all of their spending money.
pants_mcgee | 10 days ago
Why tax it at all. People taking out loans and doing stuff is generally a good thing.
Why does it matter if a loan is backed by your house or properties or stocks or anything the lender accepts.
AK_Panda | 10 days ago
>Why tax it at all. People taking out loans and doing stuff is generally a good thing.
People working and spending income is generally a good thing, so why tax income at all?
pants_mcgee | 10 days ago
There are good ways to tax and bad ways.
Taxing these loans is dumb, just a punitive response to something that isn’t a problem.
AK_Panda | 10 days ago
>Taxing these loans is dumb, just a punitive response to something that isn’t a problem.
If you are just taxing asset backed loans as if they were realised gains, then I don't see how that's meaningfully different from taxing someone’s income.
If you are going to have a CGT, but allow loans backed by the same assets to be untaxed, you just create incentives to take the loans and avoid the tax.
-OptimisticNihilism- | 10 days ago
It’s really only a problem for billionaires. Essentially the Musks and Zuckerbergs of the world end up paying a tax rate of below 1% using the below strategy. Most people think that ‘hey at least they end up paying estate taxes on money inherited over the the gift tax limit’, but through loopholes like a dynasty trust their kids can avoid paying taxes on almost all of it. This country is swimming in a mountain of debt, the middle class is getting tapped out paying massive income tax (my effective tax rate is over 28%), while billionaires can live obscenely lavish lifestyles off of loans and don’t pay any taxes on their gains. The trillion dollars that Elon musk is worth, almost none of that will ever be taxed.
Here is their strategy:
Billionaires often employ the “buy, borrow, die”strategy to avoid income and capital gains taxes. First, they acquire appreciating assets like stocks or real estate. Instead of selling these assets when they need cash (which would trigger capital gains tax), they borrow against them at favorable interest rates. Since loans aren’t considered income, no tax is owed.
For example, Larry Ellison, founder of Oracle, has used his shares as collateral for personal loans, including a $10 billion credit line. This allowed him to fund major purchases, including his $300 million Hawaiian island, without selling shares or triggering taxes.
The final component “die” provides perhaps the biggest tax advantage. When heirs inherit assets, they receive a stepped-up cost basis, resetting the value to the current market price. This erases past capital gains, so heirs can sell immediately without paying capital gains tax or keep the assets and repeat the process.
The_Keg | 10 days ago
The mere fact the likes of you brought up "taxing the loan" means you dont know shits about taxation.
What I do not understand is it used to be common knowledge that billionaires sold off assets all the time.
https://www.cnbc.com/amp/2017/04/06/bezos-is-selling-amazon-stock-to-fund-rocket-venture.html
Where the fuck did the whole "Billionaires never sell stocks and just borrow until they die" myth come from?
Pro publica?
https://www.wsj.com/finance/stocks/elon-musk-other-leaders-sell-stock-at-historic-levels-as-market-soars-tax-changes-loom-11639089782
>Insiders like the Waltons, Mark Zuckerberg and Google’s co-founders have sold $63.5 billion through November, up 50% from 2020
DonutAdmirable9831 | 11 days ago
“Fuck people buying homes”
This approach doesn’t make any sense either unfortunately. I’m not too sure what the right balance would be however
Electrical-Wish-519 | 11 days ago
But the mortgage deduction was a Reagan era policy and led to our current increase in artificial price increases for homes. Rescinding that would help home buyers and reduce the value of homes, which is why it’s never been seriously proposed
TheGreatDay | 11 days ago
We can probably just write tax laws to exclude home values under a certain value. Carve outs in tax law are very common.
pants_mcgee | 10 days ago
Why not just remove or change the already existing rules that allow people to avoid taxes.
TheGreatDay | 10 days ago
I'm in favor of that too. I'm very for anything that increases tax on the richest people in the country.
Will_Sommers | 10 days ago
Great point!
chillinewman | 10 days ago
But they only borrow against a small part of their wealth, by taxing the loans you leave most the wealth untaxed. Is definitely not better.
Edit: I'm talking about wealth and you reply with property taxes.
fenderputty | 10 days ago
I'm aware. But I don't think the housing counterfactual is an apples to apples comparison here. I do thin it's worthwhile to have a taxation policy that incentivizes investment as a result.
1., property tax is the state and not the feds.
adorientem88 | 10 days ago
Do you get the tax money back when the loan is repaid?
fenderputty | 10 days ago
No.
Ra_In | 10 days ago
In my version of this: the taxes paid on the loan proceeds go towards stepping up the cost basis, so they pay less in taxes when they sell the underlying assets (that is, the total tax bill is as though the loan never happened, they don't get a discount). Repaying the loan doesn't affect taxes.
Of course, estate taxes need to be redone so the tax bill is as though the estate was liquidated and taxes paid on all gains. Plus no more lower taxes on gains, treat all income the same.
CrunchyMage | 10 days ago
This is the way.
The problem with tax free loans on assets is that they can be used to consume obscenely without paying income/capital gains taxes.
In general what we want is a system that incentivizes investment, and progressively taxes consumption.
Selling stock should be tax free if used to buy other stock. Every brokerage should operate the same as an IRA.
All movement of money outside of brokerages should be treated as progressively taxed income unless used for investment elsewhere (real estate, venture capital, etc.)
IRS heavily polices shell companies used for personal consumption.
pants_mcgee | 10 days ago
There is no problem borrow against assets to consume obscenely except for the step up in cost basis on death.
Btw your stock idea means no one pays capital gains ever again. Needs some work.
CrunchyMage | 10 days ago
Correct. No capital gains taxes. Capital gains is treated as income. Income is already progressively taxed.
Step up cost basis is a huge problem, but so is tax free consumption. It’s not fair for wage earners to be hit with 30%+ top consumption tax and billionaires to be hit with 0% consumption tax. That’s a regressive system.
pants_mcgee | 10 days ago
You’d still have to track capital gains otherwise you’re double taxing the initial investment.
What’s the benefit here? There’s plenty of play to move investments around without realizing gains, and we can just treat capital gains are income anyways. And why would we want to ultra wealthy to have even more ways to avoid realizing gains?
CrunchyMage | 10 days ago
The benefit is that you're not taxing reallocating investments to better opportunities. Taxing reallocation leads to more inefficient investments overall.
Many times people don't want to move money to better investment opportunities because they'd incur capital gains. It doesn't make sense to tax money that's just going from one investment to another investment.
It's better just to tax progressively/heavily whatever leaves the market instead.
The key to economic growth is well allocated investment, so you want to encourage that as much as possible.
Young_Lochinvar | 10 days ago
This article is terribly framed on the evidence of why Holden sees the economics as poor.
After admonishing the Australian Treasurer for post hoc ergo propter hoc, Holden proceeds to do exactly the same thing with Basel (I+II) and Fmr PM Keating’s bank deregulation. With the added fallacy of ‘appeal to authority’ by invoking Mirlees and Henry without much explaining of why they didn’t support capital gains taxation. Not to mention all the school boy taunts opposition-affiliated Holden peppers his article with that suggests he cares more about beating the Government than he does about selling a strong economic case to the public.
Instead the thrust of Holden’s argument is buried at the end where he complains first about high government spending (hardly a capital gains issue) and about an uncalibrated carve out for small businesses and implied penalties for the ‘ engine room’ of Australia. Which is was nascent 2 weeks ago when this article was written and the details of which remain undefined still. Holden is shooting into the fog and claiming he hit something because no one has visibility to dispute it.
There’s a real debate around optimal taxation, but Holden fails to present his case with openness and diligence here.
Busterlimes | 11 days ago
Our country has been favoring capital over labor since Reagan. Thats what trickledown economics is and thats how the system has been built since 1980. Thats why we have the K shaped economy here today. Its all been designed that way and its functioning exactly how its intended. This is the wealth extraction phase during the downfall of an empire
So_HauserAspen | 11 days ago
It gets worse and worse for more and more people but there's a lot of survivorship bias keeping us on this course. People want to believe that they will get different results doing the same thing.
Busterlimes | 11 days ago
Your last sentence explains the insane nature of the human race
DetroitLionsSBChamps | 10 days ago
I wonder what the timeline is for true social revolution. How bad does it need to get? The timelines seem very long to me. America will learn everything the hard way, slowly.
Simp_Simpsaton | 10 days ago
There's not a timeline just catalysts if you spook people too fast rather than getting to the same goal slowly. We could literally have chains on us 24/7 in the future and there would be no revolt if we got there slowly enough
WalksByNight | 10 days ago
The timeline is approximately eight missed meals. Everything happens quickly after that, and dinner on the third night will probably be looted.
Thesweptunder | 10 days ago
The sad part is that it a social revolution is not mandatory. There was no social revolution that saved many of the other formerly biggest superpowers. Sometimes they slip into authoritarianism, sometimes they slip until they are basically the sidekick to the new superpower. There were times when I was optimistic, especially seeing young people take the charge on climate change, wealth inequality, BLM, but each of those concerns have fallen by the wayside. If anything, it seems like people are more hopelessly capitalistic trying to get their bag through sports betting, side hustles, and get rich quick schemes more than ever. Progress may came from a series of decent elections that enact incremental change. Progress may require a tragedy to get momentum. Or progress ain’t coming and the American dream dies with worsening inequality as we watch rich people on our phones and argue about whether raising the minimum wage will make Taco Bell too expensive.
Long-Blood | 10 days ago
Not to mention every time they loosen financial conditions by cutting interest rates, increasing money supply, or artificially providing liquidity to financial institutions, it subsidizes wealth for asset owners and punishes the value of labor.
Theyve been running loose monetary policy since the dot com era, except for a brief period under Biden.
LivingCorner1421 | 10 days ago
yeah well put really.
and we wonder why " no one wants to work"
assets generate crazy amounts of money but labor does not.....
dust4ngel | 10 days ago
> Our country has been favoring capital over labor since Reagan
i mean... it's not like this is a well-kept secret: the name of the system itself loudly declares that it prioritizes non-working owners of capital over laborers.
Busterlimes | 10 days ago
Yup.
Money = Power
Its downright foolish to think that democracy can survive an economic system that allows the undemocratic accumulation of unlimited power.
Power should be allocated by the people and only by the people.
N0b0me | 10 days ago
Didn't read the article clearly
hardsoft | 11 days ago
The K shaped economy BS is getting old when the lower and middle class are shrinking as upper middle class grows. And real median incomes have steadily increased.
https://fred.stlouisfed.org/series/MEHOINUSA672N
Oh yeah I'm so brainwashed to think a shrinking lower income class is a good thing...
VersChorsVers | 11 days ago
I don't understand, you say "K shaped economy BS" then immediately describe what a K shaped economy is.
Busterlimes | 11 days ago
This is how propagandized by capitalists the average person is.
Busterlimes | 11 days ago
This is how propagandized by capitalists the average person is.
floridabeach9 | 11 days ago
do you know what K shaped recovery means?
your comment is kinda funny.
TiberiusKent | 11 days ago
I agreed with the first sentence, and then each sentence after less and less until the last that didn’t have a period that I disagree with.
Busterlimes | 11 days ago
Disagree or not. That is the reality
Sevastous-of-Caria | 10 days ago
And for america its the only special one that works and changing it collapses everything. Im not from there nor my friends but they hold significant assets from nasdaq. They concentrate global cashflow.
ASpanishInquisitor | 11 days ago
Oh that's interesting... In that case I propose my own talking point:
There's no economic case for why I should work when I can simply sit on my ass and wait for gains. Just grant me enough capital and I'll immediately show the world just how much more prosperous I can be by sitting on my ass. It's really quite impressive, isn't it?
Weary_Wrap_4419 | 10 days ago
Notice that this article focuses on the much rarer case of a successful business incurring capital gains, and avoids the far more common use of the capital gains discount to favor people who live off of stock investments, or real estate speculation. There is simply no case that this type of speculative income should be taxed less than paycheck income.
theiwhoillneverbe | 11 days ago
I never hear much about a progressive FTT (financial transactions tax) that could be imposed on transactions over $15k and apply even when billionaires take a loan on pledged securities.
I keep seeing studies that only highlight the “negative” possible outcomes like lower liquidity and higher transaction costs…
But so what?! It seems we are already in a bad place with the current regime where high-pay professionals pay most of the tax revenues and the top 0.01% are running WILD!
mytyan | 10 days ago
Actually, a FFT of 0.01% on every financial transaction would eliminate the need for any other taxes, pay off the national debt and generate a vast surplus forever.
Unfortunately people seem to think that paying a penny for every dollar that changes hands is somehow worse than what we have now
Necessary_Oil8622 | 10 days ago
The nonpartisan CBO has evaluated such a tax. They estimate that it would reduce the deficit by around $300b over ten years. Nice, and worthwhile, but not the miracle solution you suggest.
overitallofittoo | 10 days ago
It's a start!
elev8dity | 10 days ago
That would be a penny on every hundred dollars, wouldn't it?
mytyan | 10 days ago
You are mathing. There is an old wsj piece about how paying the draconian$100,000 tax on a $billion transaction would collapse the banking system. Lol, the brokers make more than that
xWaffleicious | 10 days ago
It's certainly much more complicated than your second paragraph puts it. From a government electability standpoint I would imagine "we will remove literally all of your taxes except one without cutting services" would be outstandingly popular across the spectrum. If it were that simple it would be democratically mandated
mytyan | 10 days ago
It's not popular at all with the wall street crowd. They claim it would collapse the banking system
xWaffleicious | 10 days ago
Sure, but the wall street crowd isn't the majority of the American voter base
izzymaestro | 10 days ago
Someone tell the American voter base this, please.
The Horatio Alger carrot is enough to keep half of them voting against their actual interests.
PickledPokute | 10 days ago
I already pay over 20% tax on a majority of my financial transactions. These on top of income taxes. Big banks switching their money from their left to right hand is non-essential compared to mine and it would be worth their money to hire enough people to avoid transactions that would be taxed.
mytyan | 10 days ago
The banksters don't. Btw, this would be on every transaction where money changes hands, not just transactions in finance markets
PickledPokute | 10 days ago
Well, I pay over 20% tax on majority of daily transactions where I receive or give money. Banks and other entities do so many money transactions precisely because they are not taxed currently. I can't imagine if a FTT were implemented and it would gather so much taxes, that a lot of those transactions are quite unnecessary and those transactions would drop quickly in at least an order of magnitude, probably several.
For example, it takes just a few minutes to think up of a system to avoid a big portion of those taxes: an offshore tax haven arbitration/bartering "bank" where companies deposit an initial sum (which is taxed) and that transactions with other banks are arbitrated through there. As long as a company's clients and suppliers are present in the same arbitration system, trade would still happen without having to pay taxes on them, or at very least for the money.
GhostofBeowulf | 10 days ago
Implement this with a capital backed social wealth fund and now we are cooking.
PickledPokute | 10 days ago
For FTT (financial transactions tax), the positives are pretty close to a single one: more tax revenue. Whatever the tax, the what the increased tax revenue is actually used can be excluded from the study: the fiscal policy works the same whether the tax was collected from import tariffs or income taxes.
Of course some taxes are used to shape behavior which can be counted as positive, like taxing emissions. Most studies probably just find that the way FTT would shape behavior are negative for the economy and any study that wouldn't highlight them, would be a pretty bad one.
Present-Fly4422 | 10 days ago
Yeah. This is literally just apologism for the wealthy here. If there’s a separate class of income that only the wealthy have access to, and that income is treated preferentially, you’re further engineering a society with the permanent stratification of an increasingly rich upper class and an increasingly poor lower class. And that’s awful. Why are we so keen to return to feudalism?
Capable-Grab5896 | 10 days ago
Because everyone thinks they are going to be the duke, at worst.
mrbignameguy | 10 days ago
This is a nation of temporarily embarrassed millionaires that could be one of the ~200 wealthy people one day! Better not do anything to help the hundreds of millions who won’t!! Just in case!!!
mister_empty_pants | 10 days ago
If taxing unrealized gains made sense, we would be demanding it from everyone. Not just Musk but any worker or retiree with investments, teacher pensions, etc.
KingFebirtha | 10 days ago
Why not only tax it for people above a certain net worth? And of course the vast majority of working class people wouldn't want their unrealized gains taxed, it makes far more sense to tax their income. For the rich, who often don't have an "income" the same way regular people have, it's often the only way to actually tax them. I don't think this argument holds up to scrutiny.
mister_empty_pants | 10 days ago
The taxes are paid when the value of the company is converted into cash by the holder. Same as everyone else.
KingFebirtha | 10 days ago
> Same as everyone else.
Again, the ultra wealthy should not be treated the same as everyone else. If that was the case, there would be a flat tax rate.
The wealthy avoid taxes and sometimes pay literally zero dollars in taxes some years.
"He said US billionaires buy an asset, build one or inherit a fortune, and then borrow against their wealth. Because they don't realise any gains or sell any stock, they're not taking any income, which could be taxed. 'They then borrow from a bank at a relatively low interest rate, live off that and can use the interest expenses as deductions on their income,' he said."
mister_empty_pants | 10 days ago
What you're describing is rarely used because it's not a universally useful strategy. Loans have to be paid back, with interest. With cash. You can't borrow a billion dollars unless you're generating a billion dollars in income and the only way to do that is to sell assets.
Present-Fly4422 | 10 days ago
If it can’t be taxed, you shouldn’t be able to borrow against it.
El_Cato_Crande | 10 days ago
We're all dragons
SpiceEarl | 10 days ago
Another way to tax wealth would be an estate tax that limits the deductibility of charitable donations. As it stands, the wealthy can avoid paying tax when they die, by donating their assets to charity. This allows rich assholes to escape taxes by donating their money to things like The Heritage Foundation or The Church of Scientology. Limit tax deductibility to the first billion dollars of assets. Anything more that is left over when you die is taxed at 50%.
weHaveThoughts | 10 days ago
The Founding Fathers including Thomas Jefferson believed we should tax estates up to 100% to prevent oligarchy.
TotallynotJimmyKorr | 11 days ago
Written by Prof D. Kapital, professor emeritus at Neoliberal U. and associate at Kill - Thepoor LLC.
Seriously. If the wealthy can take out loans on speculative unrealized capital gains to use as income, then those loans should be taxed as income.
Homeless-Joe | 10 days ago
What if we just had regulations preventing those loans?
AffordableDelousing | 10 days ago
It is also necessary to prevent over- concentration of wealth, which can cause capitalism to fail for various reasons.
mrpickles | 10 days ago
Just tax wealth
UnluckyDot | 10 days ago
What about an universal annual borrow limit? Can only take out so much per year. Same hard limit for everyone, no matter what tax bracket.
EtchAGetch | 10 days ago
Welcome to shell corporations and other easy means of skirting laws like that.
Companies cant be restricted on borrowing amounts (or else every company and the economy will fail), and it's easy to make a fake company for people with the means.
The_Keg | 10 days ago
>Insiders like the Waltons, Mark Zuckerberg and Google’s co-founders have **sold $63.5 billion** through November, up 50% from 2020
https://www.wsj.com/finance/stocks/elon-musk-other-leaders-sell-stock-at-historic-levels-as-market-soars-tax-changes-loom-11639089782
>Jeff Bezos cashed in nearly $6 billion of Amazon stock throughout the year
https://finance.yahoo.com/news/founders-ceos-cashed-more-16-013255116.html
ds16653 | 11 days ago
We wouldn't even need to, billionaires fund their lifestyle with loans, they can take out loans to pay the tax.
Turb0Womble | 10 days ago
They still have to pay the loan back eventually, which means they have to sell stock, which they get taxed on. It will delay tax being paid but, in theory, they’re still paying in full eventually.
Do you have a point I’m not understanding?
DeathMetal007 | 11 days ago
Why? They have to pay the loans back. They don’t just get free income as a loan. That’s not how loans work at all.
coporate | 11 days ago
Actually, that is how it works for people with enough wealth since the interest rate on their loans is lower than the average return on their assets/investments.
Loans are literally free money until it has to be paid back. Which can potentially be never.
alilhillbilly | 11 days ago
Why?
Because they're skirting income taxes they should be paying by doing this.
They're cheating you.
The result is Mark Zuckerberg gets to buy 1/5 of Hawaii and US debt is spiraling. The value of your dollar getting hammered while The Zuck Class uses these loans to buy up all the assets and then charge you money to rent them back.
You set a threshold of $1M and tax all income including these Income Tax Avoidance Loans as income at 30%.
We basically need a trap at the very top that says hey if you make a lifetime's worth of money in one single year that's enough anything above that is taxed at the full rate because you're part of America and you are making that kind of money because of everything that exists around you.
Ch1Guy | 10 days ago
But they arent doing it.
Zuck has sold 6.5 billion dollars of stock in the past 5 years.
https://www.secform4.com/insider-trading/1548760.htm
DogfaceDino | 10 days ago
That may have been related to executing stock options.
I’m a financial advisor. I will tell you that I regularly advise my clients to collateralize securities and other assets to take non-taxable loans that they won’t need to pay back. The loan gets repaid at death.
Whole life insurance is also used frequently in this way.
Ch1Guy | 10 days ago
You advise your clients in their 40s and 50s to take out loans at 5%-6% interest to avoid one time capital gains tax of around 20% and hold the loans for 40+ years?
DogfaceDino | 10 days ago
They are typically older than that but it depends on the situation. Interest rates can also be more favorable depending on the composition of the portfolio.
alilhillbilly | 10 days ago
I don't get it Mark Zuckerberg sold some stock and he also paid some taxes how can you possibly say that he's not paying enough in taxes when you can clearly see that he paid something he's a good guy maybe we should just leave him alone you guys
Ch1Guy | 10 days ago
No all im saying is the BS that billionaires dont sell stock, they borrow against it until they die is a reddit meme
alilhillbilly | 10 days ago
Is it possible that Mark Zuckerberg is using a variety of strategies?
Ch1Guy | 10 days ago
Not without a single shred of evidence he is using debt long term when all evidence points to the contrary..
TotallynotJimmyKorr | 11 days ago
Except they dont, they just buy another ticket on the merry go round and take out further soeculative loans on further speculative gains, and pay virtually nothing.
numba1cyberwarrior | 11 days ago
You don't lol, you have to pay the loan eventually
gtpc2020 | 11 days ago
They can keep borrowing at a couple% per year to the bankers until they die, all their unrealized gains go to heirs at the STEP UP BASIS, meaning no taxes on the billion$ over years of accumulated cap gains, then the heirs pay off the loans. Absolutely zero income taxes contributed to society on billions of income. This whole article is crap. Earn a dollar, pay a tax to allow governed to work and keep things sane.
Mallymalvs | 10 days ago
Out of interest…do you think banks are this dumb? They are the most risk adverse institutions yet you think they are writing endless cheques in loans without repayment? You guys come to an economics sub and say stuff like this? Comical
gtpc2020 | 10 days ago
They get their payments on time every time. Of course they are happy with getting interest on loans guarantees by collateral. That's their whole frigging business.
DogfaceDino | 10 days ago
I use Goldman Sachs for portfolio backed loans for my clients.
BitingSatyr | 10 days ago
https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
Lecterr | 11 days ago
I think their point is that taxing all loans doesn’t really make sense. It seems true that some people abuse the system like you say, but punishing all loan takers, of which the majority are not abusing the system in that way, seems like a poor solution.
OnlyHalfBrilliant | 10 days ago
If the loan is based on an appreciating asset, they just take out a new larger loan to repay the first. Couple that with exceedingly low interest rates and one could do this indefinitely.
Eventually the loan is repaid in full by the estate when the borrower dies. But then the asset has been marked to market and shows no capital gains and thus remains untaxed.
Now if the value of the underlying asset tanks then this fails and the government comes and bails them out.
Weird-Passage155 | 10 days ago
They don’t really have to pay the loans back, because they just keep rolling it forward forever. If I get a million dollars a year in equity at my job, as long as the value of the company stays stable or growing, I can just keep borrowing say half of that a year to finance my life. I get a million a year in equity, and my loan balance goes up by 500,000 a year. So after two years, my equity is worth 2 million, plus whatever the gap between the price the equity was issued at and the current market price. My loan balance is 1 million. The bank is happy because say it’s secured with 1.25 million worth of stock, I’m happy because I’ve got to live like I make half a million dollars a year, but I have very little income and pay almost nothing in tax relative to my wealth because my cash salary is quite low and as long as the stock is never sold, I never owe taxes on the stock. I just owe tax on the very low cash portion of my salary.
Maybe my estate will have to pay it back, but who cares. I’m dead, there’s a trust separate from my estate that gets the step up basis and it’s holding enough for my next several generations to lounge about and do nothing. The bank gets paid back out of whatever equity was used to secure the loan.
The theory of equity based compensation is that they’re selling the underlying asset to fund their lifestyle. Selling the asset leads to a taxable event where they get taxed on the gain. Because they’re allowed to just borrow against their equity, secured by the equity, it’s not taxable income.
Bengineer4027 | 11 days ago
From what I understand (in the US) what you can do if you've got enough is basically never pay back the loans.
Then you die and all you money has been set up to be inherited (and there are many loopholes to avoid any kind of inheritance tax)
When someone inherits the assets the value gets kinda "reset." The capital is only sold to settle the loans after you die, so since the value is reset there is no capital gain and thus no capital gains tax
For example, if you bought a stock at 1 dollar, it goes up to 100 dollars, then you die and you're kid gets it. Then it goes to 105 and they sell. They only owe capital gains on the 5 growth since it was inherited.
So the end result is you lived as if your capital gains were income, but have never had to pay capital gains taxes (which are already lower than income tax rates)
(disclaimer, im on CPA, and not rich enough to need to understand all the steps to dodging the taxes, so this may not be right down to the finest detail)
Mallymalvs | 10 days ago
Please stop getting your talking points off reddit, loan issuers arnt this stupid, almost no one is adopting this strategy. You guys must think financial institutions are complete idiots.
Gandalftron | 11 days ago
Nonsense. It is a free money glitch the ultra wealthy use to avoid paying tax rates that you and I pay. If they make a return of 10% on their billions in stock and pay a 3% interest rate on the loans against said stock, then they are getting off scott free.
01Metro | 10 days ago
..the money they would need to liquidate in order to pay the loan back would be taxed though?
Appropriate_Scar_262 | 11 days ago
but they never realize capital gains. They just take out loans and then they get stepped up for the estate when they die. Whatever loss there was in the loan is dwarfed by not paying the capital gains taxes. Especially when that interest is tax deductible.
numba1cyberwarrior | 11 days ago
Complete myth, very few rich people use that strategy
chuck354 | 11 days ago
Are those very few people the ones at the top of the pyramid with the most income/assets?
fail-deadly- | 11 days ago
Because it seems like in this example the individual in question is using the loans as a method of lowering their taxable income, by avoiding paying capital gains.
Edit: instead of selling an asset for the cash, take out a loan. Avoid capital gains tax. Repay the loan with a different loan. Rinse and repeat.
King-Meister | 11 days ago
Because if you’ve a lot of wealth that is tied up in an illiquid asset or something that allows you to have authoritative control over bigger assets (shares with voting power allows to influence board and company), then normally you will have to sell it to gather enough money to invest in some other big opportunity. But taking out loans without paying taxes allows the rich (the owners of capital) to corner and hoard resources to the extreme as them not selling their previous resource in the market leads to a contrived shortage of certain resources in the market (if I don’t have to unload my shares in A to fund my investment in B, I’m keeping the price of A high as my shares never reach the market as they should - so no change in supply - while the price of B also goes high as I’m eating up all the available demand; same situation can be used for houses / real estate / commodities / new age tech / etc.). With society moving towards equality, we need to reduce the disproportionate wealth that one factor of production owns - capital owners. Labour, as a factor of production, needs to get a higher share in the wealth creation process to reduce inequality.
floridabeach9 | 11 days ago
they avoid selling their investments which creates a taxable event.
the loan rate can be negotiated, when the tax rate on the investment sale cannot.
AndyKJMehta | 10 days ago
They may be unrealized, but they can also be margin called.
FuguSandwich | 10 days ago
We always hear arguments about how we must give preferential tax treatment to capital to incentivize investment but for some reason never hear that we have to give special treatment to labor income to incentivize work.
Heffe3737 | 11 days ago
If my money is doing more work for me than the work I can do for myself (by, you know, actually working), then I am disincentivized from working. If my money is doing more work for me than the employees I pay wages to, then I'm disincentivized to keep employees on my payroll, and I sure as shit am disincentivized from paying my employees more, or even a living wage.
This isn't hard. When investments are taxed at a lower rate than income, then I'm going to lean more into investments than into work. I'm going to lean more into investments than into paying my employees. There is a direct line between taxing investments lower than income and the struggle of average employees (read: most employees). If there is one thing that led to employee wages becoming decoupled from employee productivity, it was capital shifting toward investments, and overseas investments in particular, and away from their domestic/captured workforce.
thomasrat1 | 10 days ago
A trust fund kid, doing drugs, traveling around, pays less in taxes than a neuro surgeon making the same amount.
There is something wrong with that. One of those people make for a much better society, and one gets tax breaks
UsernameNSomeNumbers | 10 days ago
Money doesn’t do more work for you than it does paying employees. Businesses generally aim to earn enough return from an employee to cover all other costs AND aim a profit. The uncertainty of this is called risk (specifically in the case of businesses, it’s typically execution risk). The delta is the value add. If Facebook is paying an engineer $300,000 - the work the engineer provides is directly or indirectly generating at least that much in value (and in the case of good businesses, many multiples of value).
Anyone with 3 brain cells knows the fastest way to grow money is through a business. The huge variable is the execution.
Heffe3737 | 10 days ago
If I'm a business owner and I can invest my money in operations elsewhere or in other business ventures, and those ventures can secure me 10% profits, then why in the world would I continue to invest my profits back into my own business if my own business doesn't have 10% profit margins (which many, many do not)?
One option guarantees me a fairly stable and predictable return, and the only work I have to do is sit there. The other option is unpredictable at best with variable returns YOY, and while it may be able to generate better returns, it takes an incredible amount of work to make it successful.
I'll also state that your choice of examples is one of the MAG 7 and a tech giant, is not particularly indicative of normal everyday businesses.
Timbo1994 | 11 days ago
From what I've read on the subject there is a case for taxing them at the same rate only if the capital gains rate only applies to returns above the risk-free rate.
Witty_Leek8053 | 11 days ago
Well then my income earned through actual work should also only be taxed on the amount above inflation.
Scrandon | 10 days ago
We should only be taxed on the income above what it takes to live. We get a measly $15k standard deduction while a business can claim whatever expenses they want.
vishbar | 11 days ago
It is. That’s why thresholds are increased every year to account for inflation.
AK_Panda | 10 days ago
>That’s why thresholds are increased every year to account for inflation.
That doesn't seem particularly common globally.
vishbar | 10 days ago
It is in most countries.
Where they’re frozen (like here in the UK), that’s a tax increase every year. And a very poor tax increase indeed: rather than an increase in rates that can be well understood and modelled, it’s a tax increase determined by whatever the rate of inflation happens to be.
AK_Panda | 10 days ago
According to the IMF:
>Most countries do not adjust their tax systems for inflation, or do so only partially.
And yes, it is a tax increase every year. One that governments like because they get increased tax revenues without having to do anything.
guachi01 | 10 days ago
It is not. That just changes the brackets.
vishbar | 10 days ago
Yes, meaning your income is (in theory) taxed at a constant percentage assuming it is the same in real terms year over year.
guachi01 | 10 days ago
No. They are not the same thing. Adjusting brackets is not the same thing as adjusting basis. If they were then you'd already be satisfied with the bracket adjustments for capital gains taxes.
vishbar | 10 days ago
It’s not about adjusting brackets for capital gains. It’s about avoiding taxing inflationary gains.
If you purchase some object in 2000 for $500k, then sell it in 2026 for $550k, that is absolutely a real-terms loss. You’d be applying a tax when there’s not an actual gain.
Indexation seeks to solve this. You tax the actual real terms gain (or gain above the risk-free rate of return).
guachi01 | 10 days ago
If it's not about bracket adjustment then the analogy to taxes on wages fails.
egowritingcheques | 11 days ago
The cost base is indexed. So the difference between inflation and the rrf is ~1% per year. That's pretty close to matching such theories. The uncertainties in determining if a project is worth the investment are far greater than 1% per year.
Desperate-Gazelle-63 | 10 days ago
The US has to borrow and pay $1 trillion annually to maintain its current spending level. Should they tax your paycheck more or these guys? Let’s hear it.
PickledPokute | 10 days ago
Tax everyone more. The top end even more.
guachi01 | 10 days ago
I don't work in retirement and a big reason is that working just isn't worth it. I pay 0% federal taxes on my investments and Roth IRA withdrawals, and 0% state (MI) taxes on my military retirement and any IRA withdrawals.
Why work?
Yes, this is just my anecdote but you can replicate this kind of thing by the millions. The article is just silly.
tkn121821 | 10 days ago
Funny, they make you take 401k withdrawals at age whatever because they want to collect taxes on it. Why doesn’t that apply to all investments? We know the answer obviously
alilhillbilly | 11 days ago
We just need to change the system so that once you hit a certain amount of income in a single year you are taxed at the same rate for investment and income from work.
Set it to $1 million and tie it to inflation.
Anything under $1M dollars in a single calendar year stays how it is now. Every dollar over $1M? Tax the same whether it's capital gains or salary.
Test-NetConnection | 11 days ago
Im ok with this in theory, but why add the complexity? Just get rid of the investment tax rate and treat everything as regular income. Then significantly lower the tax rate for the average Joe and raise it to pre-Reagan levels for the wealthy.
alilhillbilly | 10 days ago
Because, normal people doing normal investments like cashing out money to build a home or start a business are why capital gains rates exist.
The thing is people like Elon musk don't need those rates anymore at their current level of wealth.
But regular people might cash out a few hundred thousand dollars and that should be there for them
Test-NetConnection | 10 days ago
You end up creating loopholes for the wealthy with a complex system. Why should investment income be treated differently from normal income? It isn't logical or fair to tax labor at a higher rate than capital.
starrymahogany | 10 days ago
The problem is that billionaires have an “income” of 80k a year. The extra money they get is based off of loans borrowed against the value of their company. That’s not considered income
alilhillbilly | 10 days ago
Right, so you tax that as well.
Though I think that's a somewhat separate issue.
starrymahogany | 10 days ago
Well yeah obviously I was just saying that technically speaking isn’t considered “income” or at least traditional income from a job.
Shapen361 | 11 days ago
Forget even collateralized loans vs income. Look at collateralized loans against stock vs. Collateralized loans against homes (aka mortgages). Almost everywhere but California property taxes rise with the market value of the house. The average American (though less and less these days given the affordability crisis) is being taxed on realized gains. But God forbid we apply that same logic to billionaires.
Why? Municipalities need their funding source, but the rich don't play by the same rules. Therefore the middle class foots the bill.
Put simply, if we can raise taxes based on unrealized gains for homeowners, we can do it for billionaires.
gdhanda23 | 10 days ago
Forget unrealized gains for a moment, what is the argument to tax realized capital gains at half the rate of income from labour.
You literally get taxed more if you realized gains of 100k in one year and did not work than you would if you made 100k by busting your ass.
Comfortable_Ring_439 | 10 days ago
There is a French Economist Gabriel Zucman that talked recently on a podcast about this sort of thing as it pertains to how to tax billionaires. Its on spotify and probably on youtube, I recommend it
Yeeeoow | 10 days ago
This guy is a goof.
Capitol gains tax was 30%, with a 50% discount. So 15%.
I pay over 30% in income tax.
The idea isn't "we hate the rich, get 'em".
The idea is, we want to lower income taxes, but the budget can't afford it, where can we push the burden of taxes to?
And the Australian economy in particular is difficult because most investment money does not go to businesses. It gets tied up in buildings that sit there producing nothing for anyone.
My personal proposal is to half CGT on investment in australian businesses and off-set that by doubling CGT in australian property. It's not a viable long term strategy, but for 15 years it would push all wealth into investing in australian businesses, which boosts productivity, rather than buildings that slowly deteriorate but end up worth 10x and add nothing.
Right now the australian economy doesnt produce enough exciting young companies, because all the money is tied up in existing structures. Sitting there. Doing nothing but accumulating value.
burntUpOnReentry | 11 days ago
It's quite simple, really. You should have to pay tax on the asset when you receive it, just as a regular employee is taxed when they are awarded an RSU. The fact that the asset was awarded pre-IPO changes nothing. You were awarded an asset that had value when you received it, and you should pay tax on that based on the value of it when you were awarded it - the asset's cost basis. Then, if it's worth more when you sell it, you pay capital gains on the positive cost basis. If it's worth less when you sell it, you get a credit for the loss.
Fortestingporpoises | 10 days ago
>Jim Chalmers is pushing a wealth-destroying agenda that ignores financial experts and threatens to stifle growth in our best companies.
"Wealth-destroying." Fuck your wealth.
shevek2317 | 10 days ago
I can, to a degree, see the argument for not taxing unrealized gains...but even then, there should be some way of controlling how those unrealized gains are used as collateral. If they're real enough to be collateral, they're real enough to be taxed.
But once realized they should be taxed MUCH more than income from work, since no actual contribution was made to get that increase wealth. Like three or four times the standard income tax rate, minimum.
Optimal_Willow_4389 | 10 days ago
Biggest scam ever by the Ultra Wealthy. It’s ok to tax everyone property taxes every single year when the house hasn’t even been sold. So the bullsh*t about realized and unrealized is a hunk of crap 💩.
isthereadrwho | 10 days ago
None to do it differently either. We've tried differently and we know it creates incoming quality on the scale never seen in the history of the world. Let's try the other way. Maybe we'll like it more, if we don't like it, we can always go back
Slow_Ad2458 | 10 days ago
The point is not about gaining money in a meaningful way. Its about reducing/eliminating the negative effect the wealth hoarding and rent seeking has on the ramaining 99% of population.
Its not about fairness, its about making world actually able to function.
Obvious_Chapter2082 | 11 days ago
I would even come at it from a different angle and say that it’s not really possible to tax work and investment the same anyways. At least not without more extensive changes to the tax code
Set capital gains rates equal to earned income rates tomorrow, and investment is taxed substantially higher than labor is
TentacleHockey | 10 days ago
Micro levy on all stock trades could easily generate a tril at the end of the year. HFT could pay a small flat rate since it wouldn't work for traders like that. Do that and close out the loop holes of buying things tax free with stocks we could easily start chipping away at the debt while not raising taxes or passing the price onto 'the people'.
turb0_encapsulator | 10 days ago
as someone who has made it to the point in life where I can effectively live off my savings, it actually feels kind of wrong how little I pay in taxes on capital gains compared to what I used to pay in income tax. I can assure that I wouldn't decide to stop investing if I were taxed more. I would just pay more tax.
Microtom_ | 10 days ago
A large part of investing is just straight up extortion. Investors acquire existing wealth and demand payments for access. If consumers don't want to pay the premium, they can just replace the captured wealth, creating competition and lower prices. However, the economy doesn't have the resources to replace all the captured wealth, because resources are scarce. To avoid wasting resources on producing replacements to the captured wealth, you have to pay the owners. Wasting resources becomes the threat of the extortion scheme.
In the end, that gives you a rent seeking or feudal economy.
Note that things get much uglier with wealth that can't practically be replaced, like land.
Weird-Passage155 | 10 days ago
As always, the “professional” economic commentariat is shamelessly morally bankrupt and totally beholden to putting a crappy gloss on whatever the wealthy want.
At some point society has to reckon with the fact that we cannot have enormously wealthy parasites sucking the world dry, and contributing nothing of broad value. Elon Musk cannot be personally “wealthier” than 88% of countries on Earth, and basically pretend to be a debt addled pauper.
At a minimum, equity based compensation, dual class stock structures, and the shareholder value theory of fiduciary duty need to be explicitly outlawed or aggressively curtailed. Corporations and wealthy individuals must be forced to actually act in the interests of more than just the shareholders. The market will never “correct itself”. Only a government has the power to force them to heel. Treating unrealized gains used to secure a loan (or the loan itself) as income would go a long way to maybe saving society from the parasite class
speckyradge | 10 days ago
Equity based compensation is taxed just like cash when it vests, buying and selling by insiders is usually fairly well regulated and public. What would outlawing it change?
If the example is Elon Musk then the issue seems to be more the insane pay packages his boards approve, it seems to be more of a corporate governance issue than an income tax issue. His pay packages and the amount of stock he holds does create a strong incentive to lie to the market to increase his personal wealth, but perhaps a limit on ownership would be more appropriate to fix that? Not sure how that would even be practical in real terms. Certainly it would help if the SEC that hadn't been completely neutered.
Shareholder value over everything is a terrible mantra, on that I agree with you.
Weird-Passage155 | 10 days ago
Fair enough on the first point. I’m using “equity based compensation” as a catchall both non-cash based reimbursement and the loan structures used by executives predominantly to dodge showing real income by existing on permanently extended lines of credit and loans. I should be more precise. The problem isn’t really the compensation, but that it’s not taxed as income and they’re allowed to spend endlessly with. Capital gains taxes mean nothing if the wealthiest never have to actually realize a capital gain. Really that entire system needs to be completely outlawed or we need to treat debt secured by equity in a company as income.
Multiclass share structures should just be flat out illegal. It defeats the whole self correcting aspect of the market.
Yes, much more aggressive enforcement would be helpful, but the problem isn’t really that the SEC is toothless (though it is). It’s the fact that the market has been treated as the only thing that matters since Regan and the law has been warped to support it. A rule banning stock buybacks would be a good idea, a law explicitly overturning citizens united and sharply restricting political donations and PACs would probably be another
PickledPokute | 10 days ago
What points specifically did you disagree with Richard Holden and how were his opinions wrong?
GhostofBeowulf | 10 days ago
This is similar to stakeholder primacy theory.
I personally do not think we need to totally dismantle the current system, just shift incentives. 3 things in particular, that can be accomplished together actually. 1. Create a SWF funded by capital and not labor wages, combining a fiduciary interest with democratic co production. This will lead to a shifting of incentives and a stakeholder relationship with the localities and municipalities who own and administer these funds. Then we include cost of externalities into market price. Finally, due to public ownership and administration of these funds we begin shifting to stakeholder primacy. We could also implement elements of a circular economy to bring wastes and byproducts to their highest value uses.
ShortKey380 | 10 days ago
Ah yes, let’s find one specific weird econ argument as we plug our ears and scream to avoid the Pikkety of it all. There’s a hundred artful solutions to end this democracy-preventing wealth disparity, tradeoffs about and something has to give.
SuspiciousArt7316 | 10 days ago
Tax on basis would actually make things pretty straight forward. It would capture if you buy a massive property with a loan on other assets.
So just a general wealth tax. 0.5% of taxable basis would be a good start.
If you have billions in unrealized gains, then you would be missed, but as soon as you do anything with it it is captured.
PickledPokute | 10 days ago
There's a lot of top level comments here, but few discussing any specific points of the article other than the title.
Can someone else summarize the article since it's behind a paywall for me?
sp0rkah0lic | 10 days ago
...says the wealthy people looking to avoid taxes.
Look, seriously, fuck off. If you have enough money to be investing in a serious way, you're doing better than 95% of us and the economic case is "people are going without medical care, food, and other essentials." Your ass is getting taxed.
I'd be perfectly ok exempting 401k or IRA or whatever. Or even saying any holdings under a threshold, say, 100k. Past that? Cry me a river. Your ass is getting taxed.
keninsd | 10 days ago
"There is no economic case for taxing work and investment the same" Personally, I'd like some data with your whine. This is just the "Don't tax me" business defender crowd making it personal against some Aussie pol who's saying something important and not showing how his argument fails.
It's economics, boys, build the charts, show your work.
OtherwiseCoat5329 | 10 days ago
I get to capitalize on all the infrastructure because it existed when I was born so fuck you why should I pay taxes
Says every asshole rent taker
reelznfeelz | 10 days ago
Shout out to Gary's Economics youtube on this topic. Probably not considered "serious" here as he's not really a full academic, but he's well educated and works in finance. That guy has educated me so much on these things, and when it comes to "tax wealth not work", I'm a believer for sure. Otherwise, you concentrate wealth to much and diminish government budgets so badly, and remove assets from working people to such an extent, that society WILL basically turn into neo-feudalism. I mean, we see it already. Assets since the Reagan era of thinkers have moved form public institutions and working people into large corporations and the ultra-wealthy at a startling pace. I don't think most people are OK with that.
pewpewtopeepee | 11 days ago
Loses me the when they complain about wealth destroying taxation. We already have taxes against the assessed value of real estate, we can tax fungible assets as well. We can tax fungible assets valued over say $50 million at 5% and it would not impact the median nor average person. I do not give a flying fuck how it impacts the 1% of the 1% who’ve been bleeding the working class for decades. While we are at it lift the payroll tax cap as well.
rainman_104 | 10 days ago
If you tax assets over $50m you're taxing commercial real estate. Those taxes are usually paid by leaseholders anyways. You aren't taxing the landlords in commercial real estate.
Lesee pays more tax, lesee raises prices.
It's a whole other world commercial real estate.
pewpewtopeepee | 10 days ago
I said fungible assets—paper. Also we already tax real estate via property taxes. The horror.
Bosfordjd | 11 days ago
Well he's right, they shouldn't be taxed the same. Investments are a risk, they should be taxed at an inordinately higher % and a certain percent of holdings over 5 million should have to be liquidated every year. The liquidation percent and tax percent should be progressive based on the amount over 5 million you hold.
Snlxdd | 11 days ago
Would cause a lot of companies to go/stay private rather than deal with sky high market valuations that have no connection to book value.
In aggregate, that’s going to hurt future economic growth, and squash investment opps for the middle-upper classes.
Bosfordjd | 10 days ago
Wrong. it would hurt u due influence of large scale investors and tame the casino, and push compensation to taxable income, as well as balance work vs. capital, AND provide greater opportunity for competition vs consolidation.
Snlxdd | 10 days ago
You didn’t really address my points.
If you evaluate based on market cap you will absolutely reduce incentive to publicly list a company by making it a tax liability. Founders will want to keep it private where they control the evaluation and tax liability and they’re not at the mercy of others.
That will increase the sway of large scale investors as smaller investors won’t even be possible.
Definitely an argument that it promotes competition as it’ll be harder for companies to raise capital at scale. But don’t think that benefit is gonna outweigh the downsides of hamstringing the stock market
Fit_Salamander_2814 | 10 days ago
Duh. You tax investment lower, because the people investing are taking a bigger risk with their money than sticking it in the bank (so they should keep more of the reward for higher risk), and that investment helps the company with its own financing, which drives the economy.
Electrical_Stay_2676 | 10 days ago
They haven’t even done that though, otherwise income taxes would be starting at 30%. I didn’t know Jim Chalmers tried to tax unrealised gains, obviously wasn’t paying attention at the time but that is genuinely insane. Also it’s interesting Paul Keating is his hero, because his reforms were genuinely pro market. This is nothing of the sort.
This policy is the biggest foot gun I’ve seen in my time following politics. The liberals were completely irrelevant up until budget night and now Labor have opened the door to them. If they had of limited the changes to property the pushback would’ve been way less.
LA2EU2017 | 10 days ago
Just seize every asset over 500m and put it in a democratically controlled national wealth fund and be done with it.
So tired of this entitled, egotistical, narcissistic bs about how their magical monied powers are god given and not to ever be questioned.
cqm | 10 days ago
if your argument is "why aren't we getting screwed equally" instead of "why are we getting screwed at all" then I genuinely have nothing to discuss
fix your state's spending problem and stop voting for expensive bandaid measures during referendums
sajnt | 10 days ago
Let’s tax neither! And while we’re at it cut taxes on spending. We can tax the use of finite resources to encourage their efficient use as well as things that are bad for oneself and/or society.
If the government needs more money after that, then they can print it or make cuts. Hopefully it ends up being a surplus can pay down debt and then get distributed.