Biden Proposal Would Eliminate Tax-Free Treatment for Much of Wealthiest Households’ Annual Income | Center on Budget and Policy Priorities

  1. It looks like this post may have political content. Remember that this subreddit is for sharing and discussing economic research and news from the perspective of economists. Please focus on the economic content of the link and avoid off-topic discussion.

  2. I think any assets used as collateral or backstop for loans should be taxed accordingly. If they’re used in lieu of cash, they’re cash equivalents and should be treated as income. If they just sit on them and never leverage the unrealized gains, it should be left alone.

  3. Regular folks do this as well just not at the same scale. When you borrow against your home, it's the exact same thing. Depending on how risky your portfolio is, some will loan you a certain amount with a calculation based on the risk involved. The better thing to do would be to limit the amount one can hedge their portfolio and borrow with. But at the end of the day, this is a financial tool available to every individual.

  4. I would like to see a tax free treshold. Like 50k in a new registered margin account. Im not sure if this would create more complexities then what its worth but would allow people a little flexibility on the lower end without realising gains and create an equal/standard playing field.

  5. Nah, even if you just sit on it, I think it should be taxed if you're above a certain net worth threshold because otherwise you could still use those things you're just "sitting on" as tax shelters to transfer wealth via inheritance. We have property tax for homes and cars, so there's no reason we can't also tax other properties such as stocks. Just make it so that if you have to sell any of it to pay for the property tax, you don't also get hit with capital gains tax on top of it being taxed as property tax.

  6. This is a stupid idea. HELOCs and even goingto a pawn shop to get a payday loan could be taxed. Imagine having to pay “capital gains tax” if you put your guitar in hock for a 30 day loan. This would destroy poor peoples ability to extract cash from things they own. What if the value goes down like in the 2008 housing crash. Do you get a refund?

  7. Wait. Taxing unrealized capital gains? Will they give money back if those gains come from a stock and it goes down in the following years? What happens when they actually sell?

  8. You just compute year-over-year gains and losses, same as if you sold and repurchase them (without the wash sale rule). You are taxed on gains, and presumably could carry forward losses into future years.

  9. You understand that the IRS already has multiple mechanisms to give back money when tax was overpaid, right? That the NOL roll back in corporate taxation is already effectively doing what you’re describing as a problem.

  10. Unrealized capital gains are not liquid enough to pay taxes, but also somehow liquid enough to buy social media companies for $40B. Just ask Elon.

  11. I really don’t understand why we just can’t be more aggressive with brackets on long-term capital gains taxes. Oh yeah, that’s right, it would actually make a difference and would affect the very people who make these laws.

  12. Lol yeah that's what I was thinking and how that would work out. I don't even know how that mechanism would work and this could have huge increases regarding pricing and inflation. Taxes are usually always passed on to the consumer.

  13. It’s year on year. But, I absolutely agree with putting this only on unrealized gains on assets you are using as collateral against leverage.

  14. This article is written in a ridiculously biased manner. It also gets basic definitions wrong such as mischaracterizing unrealized gains as income. Furthermore the proposal just makes no sense. Trying to tax unrealized gains is a fools errand. If you want to tax the wealthy a simple wealth tax is far simpler. Trying to characterize unrealized capital gains as income runs into too many problems as markets go up and down.

  15. It really doesn’t. Ask any tax accountant about mark to market, available for sale securities, and NOL lookbacks. Every mechanism involved for this already exists and is used. For some reason whenever tax is involved we get people like you coming out of the woodwork pretending to be authorities.

  16. There are no problems levying property taxes for unrealized gains on 150 million individual homeowners, you think they can’t manage to tax a few million high net worth individuals? Laughable statement.

  17. This creates a problem where someone who has all their wealth tied up in their business will eventually have to sell off the controlling stake in the business.

  18. This is my biggest issue with taxing unrealized gains (outside of the fact it's moronic). Eventually, someone would have to sell out their stake of their own company to the point where they no longer own it, and that's absurd to me. Severe overreach.

  19. If the business produces cash then they can take cash out of it. If the business does not produce cash I question how it’s valuation is increasing so much.

  20. Not necessarily. Founders frequently own a different class of shares that provide additional voting power relative to their cash value. If you knew you were going to have to sell, then you could issue voting shares as part of your comp package

  21. Government needs to end big finance and return to direct-investment, R&D, and real value generation. Some real, long term thinking.

  22. This is insane. It gives the government the ability to tax on hypothetical rather than real value. If that is true then where does the government stop? I agree wealthy should pay more but this isn’t the right way.

  23. The middle class households’ majority of net worth are held as unrealized asset valuation gains in their primary residence, upon which they pay annual property taxes. This proposal is recognizing that the upper class households’ majority of net worth are outside their primary residence, and leveling the unequal asset treatment.

  24. You may dislike ProPublica as a source but their data isn't theirs it's from the IRS. Also there are several other sources that cover the strategy.

  25. I think it’s high time something like this or this exact thing is implemented. It’s completely unfair and ridiculous that multi millionaires and billionaires do not pay their fair share as they seek out ways to not get paid wages which are taxable or sell stock which would create capital gains. No, no instead these corporate welfare assholes actually think what they are doing is ok and has no effect on anyone else….except it does! The system worked fine up until 1980. When that crappy President Reagan took power and started skewing income to the wealthiest and creating massive amounts of billionaires. So stupid and has made us much weaker as a country.

  26. Property tax on mortgaged property? Or does leveraged property that is unrealized only get taxed when its middle class and poor people?

  27. All you need to do is put a ceiling on the amount of tax- free step up at death. Tie it to the estate tax/ gifting exemptions. First $24m (-ish) is stepped up tax free to the next generation, after that its normal capital gains as it passes generationally (not between spouses).

  28. Private companies have less fluctuation that public ones. Why wouldn't billionaires make their companies private so they don't have huge tax swings.... then all of us investors, retirement plan participants, pensioners, don't get to participate in the growth of large companies. Our greatest investment ability could be a 5 year CD at 1%. Sounds like a punishment to the rest of us.

  29. Most very wealthy people don't have anywhere close to the level of income some politicians claim they do. Their wealth is mostly tied up in assets which make money only to be rolled over into more wealth. They only dip into their wealth when they wish to rebalance their portfolios or acquire other assets. Even if this is true, it's not going to be a very effective policy.

  30. Don’t loans have to be repaid at regular intervals not just upon death? Income (taxable) of some sort would need to be used. You can’t pay a debt with unrealized gains.

  31. So this becomes law, the wealthy supposedly pay a bunch in extra taxes, and then the market crashes in some once in a lifetime recession where it drops 20% or more in a year… and the government which is now hurting for revenue through reduced taxation and reduced imports and GDP and everything else, is supposed to refund the money that the government took before it was actually income?

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