No, it's wealth. There's a real issue here: asset prices can be volatile; someone can own a valuable house and not have enough to pay their groceries. But asset prices are not fictional. Typically, corporations report the value of their assets in their accounts.
AAPL is up 0.67% over yesterday. Let's pretend it's January 1st, and my net worth is tied up entirely in Apple stock. Should I pay taxes on that unrealized gain?
> Typically, corporations report the value of their assets in their accounts.
With the notable exception of feudal property taxes, we generally don't tax the mere possession of assets.
People sure do pay taxes on "unrealized gain" of the houses they live in when the real estate market heats up in their neighborhood, and the property tax assessor gleefully changes their assessment that year.
"But equities can go to zero!"
Sure, just as a house can go to zero (fire, acts of God-level insurance incidents).
"But those are covered by insurance!"
Sure, just as you are free to buy options to insure the equities.
I'm not really seeing strong arguments based upon some intrinsic property of financial instruments used at scale granting them capital gains treatment against taxing financial instruments like any other property / real asset. There is the whole "hold Grandma's retirement hostage" policy aspect that can be mitigated by a generous cliff and age means test perhaps, I haven't thought about that mitigation much, as well as capital gains at different scales. But at the policy level, capital gains treatment being so non-linearly favorable at scale compared to income tax treatment seems a reasonable topic to explore in public discourse. I'm not averse to capital gains continuing at smaller scales, even at millionaire scales, but I am curious what the economic rationale is to continue that treatment at the billionaire scales when it seems much like income on a more complex level.
There are also second order effects. Higher wealth taxation combined with clamp-downs on tax evasion, money laundering, and other illegal and semi-legal-for-now activities would stabilise money markets and keep Grandma's money safer.
Extreme losses are caused by the manic-depressive boom-bust cycle which is in turn caused by plentiful money chasing fraudulent opportunities that don't really exist. (See also, S&L crisis, securitisation failures, and many many more.)
Damping that cycle and turning it into an engine for national profit sharing would raise collective prosperity, increase social mobility, and create new opportunities.
Did you read the whole of my comment? Yes, there is a real issue here.
Nobody should be put in the position of having a tax obligation they can't afford. Equally, nothing good is achieved by closely tracking the day-to-day volatility of stocks. But in general I don't think there is a fact of the matter about the kind of "ought" question you are asking in isolation: a tax regime is a system that should be judged as a whole.
> we generally don't tax the mere possession of assets.
Sure, but that's not what people talk about when they talk about 'wealth tax;' the accepted definition is net, not property.
As proof, if we already had a wealth tax and people referred to it that way, the past year and a half wouldn't have had people arguing over whether or not we should introduce a wealth tax. It would be whether we should expand the wealth tax to cover new assets.
Also, I think it's quite common outside of the USA for property taxes not to be based on the current market price of the property and also not to be charged at a fixed percentage of the value, both of which make them rather different from any proposed wealth tax.
> AAPL is up 0.67% over yesterday. Let's pretend it's January 1st, and my net worth is tied up entirely in Apple stock. Should I pay taxes on that unrealized gain?
This isn’t actually an argument against the idea that you’re wealthier, you’re just arguing that society shouldn’t tax you yet. These arguments are orthogonal, one can admit that paper gains are real wealth while also maintaining that we should only tax realized gains for policy reasons.
Similarly, if my house doubles in value, then I’m richer. It might not be liquid yet, but the bank, the local property tax authority, and my account would absolutely treat me as significantly richer than before.
The issue in the above article isn’t that gains aren’t taxed until after the sale. The issue is that for the ultra wealthy they basically never sell. Instead their stock holdings are used as collateral for low interest debt that finances the lifestyle of these executives. In this case it sure seems like the gains are realized in every way other than for the IRS.
Personally, I’d tax the bejeesus out of this scheme, preferably by counting it as straight up income subject to normal tax rates. Take a salary or sell the stock and pay the gains tax, no other choices.
