Sure, it’s easy to tax “wealth”. Except most wealth today is of the type where Alice owns 10 million Y and Bob decided to pay $1000 for one Y. Alice cannot possibly sell her Y for near that price, but now she will be taxed on “wealth” of $10 billion.
If someone takes a loan out against an unrealized gain, that should immediately trigger a tax event.
The real solution though is for the legislative branch to not be beholden to those same people and be able to quickly and effectively close tax loopholes as they are discovered.
That would instantly wipe out most leverage from the stock market, and from a casual bystander perspective, it would be a great thing.
> If someone takes a loan out against an unrealized gain, that should immediately trigger a tax event.
How does that work when a house is used as collateral on a loan? Or artwork?
The loans are just a symptom, the problem is in the Estate Tax, and those loans are being used as a tool to wait out the clock and then dodge dynastic taxes entirely.
Remove the final loophole, and they'll stop playing weird games to get there all on their own. Plus it'll be way less-disruptive to everyone involves in regular loans for regular reasons.
There is not a loophole. When you die your loans get paid off first. The money to pay off these loans would be taxed. It could delay paying taxes until you die, but you can't escape it.
> There is not a loophole. When you die your loans get paid off first. The money to pay off these loans would be taxed.
You're missing the loophole, it's the the "step-up basis" rule, which dramatically affects the amount of tax on that liquidate-to-repay event.
1. Repaying 1 day before the owner dies: Liquidate $X, of stock, which 90% of it are capital-gains, heavily taxed.
2. Repaying 1 day after the owner dies: Liquidate $X of stock, which is now considered ZERO gains, almost no tax.
This massive discontinuity also applies when it comes to the transfer of stock to inheritors, and any taxes they might pay for liquidating it. A day before, they get a stock that "has grown X% in Y years." A day later, they get a stock that "has grown 0% in 0 days."
> It could delay paying taxes until you die, but you can't escape it.
But they did escape the taxes, or at least the "gains" portion of them! For decades, the unrealized gains in growing assets were "eventually" going to happen someday... Until, poof, all gains have been forgotten.
Agreed. This would get rid of borrow against gains to spend tax free. But also just get rid of the income tax, it is the worst way to tax, and do a land value tax.
There's a very simple solution to that problem. Tax Alice in Y rather than in $.
How would this work with real-estate? Probably the Y that should be taxed the most when we're talking about wealth.
A lien on the property? Although almost all jurisdictions already have property taxes, so it hasn't been an insurmountable problem so far
So it would fix false valuation shenanigans too? I see that as a win/win.
Maybe we need a debt jubilee then.
you can tax stock without taxing inventory.
Also the term "asset" exists and is used in accounting
> you can tax stock without taxing inventory.
How? What is the difference between "stock" and "inventory"?
Many countries have figured out a wealth tax, so this isn't an impossible problem.
France had it for a very long time, it was very costly to recover, incentivized a lot of tax-evading behaviors, and mainly benefited tax specialists. Overall it was another useless, populist measure that did more harm than good.
Who says you need to tax the whole wealth if it in form of Ys?
We all know that 10 million Ys maybe not sold for $10 billion dollars but it gives you enough leverage to buy a social network and name it Y
Only in a system where the buyer sets the price.