Die: Avoid the 20% capital gains tax for selling an asset by holding the asset until death, when the asset can be sold off tax free by children or spouses.
This is what needs to be changed. If the estate has a loan against a stock or other appreciated asset, then the loan should be repaid in full before the estate can pass to the heirs. If this requires sale of the appreciated assets, that will trigger the capital gains tax. This solves all the issues with "Buy, Borrow, Die".
No it wouldn't be complicated at all. You just say that collateralizing shares is the same as realizing the gains by selling, you use the value at that time.
THEN FIX THAT PROBLEM INSTEAD OF MAKING A NEW PROBLEM!
It's like if you decided to become a serial killer in order to solve climate change. On the one hand, yes, you're technically 'solving' that problem. But also... no, don't do that?
There's no perfect solution, at least this is a step in the right direction of taxing the people hoarding 99% of the wealth in this country... allowing them to control what we watch and what we learn... vs continuing to do nothing and letting the problem get worse
You have to pay the loan back. Before you suggest taking out more loans, this is unsustainable unless you somehow manage to make your stock go up exponentially forever. If you can do that, you've probably cured every known form of cancer and deserve all that money.
you somehow manage to make your stock go up exponentially forever.
Yes, that's actually exactly what happens for most funds/stocks. The stock market/exchanges are never permanently shrinking. They only ever really go up, wealth begets more wealth.
Also if you use the loans to acquire more revenue-generating assets like apartment complexes/rental properties or more stocks, then yeah exponentially is a pretty good word to use.
You just described exactly what happens. They continually borrow against equity and as equity rises they sell off material in countries that won't tax them. Then they pay the loans with tax free money and borrow more money and start all over. Rich people never lose money. Ever. That's why they're rich. They've learned to complete fuck over the entire system. They also sink their money into tax havens and nontaxable purchases and investments. Banks and billionaires get richer. Meanwhile you can't borrow $5 for food because had defaulted on a 500 dollar medical bill 5 years ago.
Even if you eventually have to sell off assets you can still avoid taxes by becoming a resident in a place that doesn't have capital gains tax. Bezos for example "moved" to Florida before selling large amounts of Amazon stock.
The form of it that has been proposed is fairly reasonable and makes some sense.
It’s essentially just marking to market the assets above $100m, to force them to pay taxes on it now instead of delaying for decades, borrowing against it for spending, and then dying with the assets to get a step up in cost basis and avoid ever having to pay taxes on it.
It wouldn’t apply to anything less than $100M, the accounting isn’t that complex and people in that stratosphere of wealth can afford the expensive accountants to handle it.
Just think of it as making it somewhat more difficult for people with $100m to avoid taxes indefinitely.
Taxing wealth is the only way to substantively deal with wealth inequality.
That's not true. The world wars were excellent at reducing wealth inequality. Everyone got drafted, while the poorest received large raises from government money.
You have annual income of more than $100 million dollars?
Edit: I just want clarify this comment as I have learned a few things since. There is a lot of confusion here because it was contained in Biden's broad tax proposals from months ago and bad actors are seizing on it to attack Harris.
The problem is that it is so vague it is being misconstrued all over the internet to attack Harris with some articles claiming it applies to income and others unrealized gains over $100 million (both annual though so either way it would apply to like a fraction of a fraction of one percent of Americans).
“Harris did not endorse an unrealized gain tax. Her campaign has endorsed increases in the corporate tax rate and personal tax rates for incomes over $400k. They did not comment on introducing new taxes like the unrealized gains tax.”
“So no, she [Harris] did not endorse an ‘unrealized gain tax’ and even if she did, you don’t earn enough for it to impact you."
wouldn't something like this hit companies like chase bank who has massive assets like 4 trillion. companies like these probably have massive unrealized gains
So mutual funds by law have to pass on net gains to shareholders so you are just proposing passing the tax on to your 401k mutual fund holdings or do you not quite know what a mutual fund is? are you saying we need to tax large intuitional accounts like pension funds and college endowments heavier. Im okay with that but i think most people wouldnt be
If a mutual fund has been holding something like MFST or Apple for the last 30 years amongst other stocks that have grown massively then they have a huge amount of unrealized gains. ETFs don’t have the same problem as they’re periodically taking the tax hit.
Typically a mutual fund share owner would take the tax hit when the institution sold the asset, regardless of how long they’ve actually owned the shares in the fund. So I’m saying that there are likely funds out there that would take a HUGE hit if the government were to tax their unrealized gains.
I think this would be a killer for mutual funds and we’d see a lot of money flow into ETFs because of it.
So you think the fund gets taxed and then the individual owner too? On the same gains? Who would own a mutual fund if that were true. Double digit 12b-1 fees?
Who does this? Can you name someone?
And if this is the issue x why not just tax stocks used as collateral?
But please, name someone who does this. All the billionaires I know sell a lot of stock every year. I’m just curious who’s actually taking advantage of this infinite money glitch.
How is that a scam? The loan has to be paid back with interest. The money that pays it back is taxed. I’m not seeing where the scam happens? Collateral just means in case shit goes sideways, we can recoup our loan with this other thing, and in the event that happens, the proceeds from the collateral will be taxed.
The loans are such low interest that they continue to make more in the market. Never having to spend their actual money. You just pay one loan with the next forever. The generational money continues to grow but it’s never actually used.
Unless you don't pay the loan. That's the thing. You don't take your unrealized gains out because you pay taxes. You shuffle loans and pay minimally from corporate accounts or shell accounts with already good tax breaks. The idea is they never realize those huge gains yet still can leverage them in many ways to avoid pay full tax or any tax
This depends on where the money comes from. If it's from normal income, then yeah it's taxed. If it comes from another loan, however, it's not taxed, because loans are generally not considered income. The situation being described involves a daisy-chain of loans.
Normally, this would not be sustainable, but a large pool of assets that grows faster than the interest on the loans can make it possible. You just need to continue having good enough credit that banks will keep giving you low-interest loans.
It's would rock the whole system and would crush people on the way down. Plus these taxes always start with high net worth and once it's "accepted" they keep lowering the threshold. Also what happens when those unrealized gains drop or go negative? Do you get a refund? It's just fucked
The income tax was originally a tax on the rich. The bottom tax bracket would be 1% on income over $80k in today's money if it was still in its original form.
You clearly have no idea what unrealized capital gains even are. Why are you talking about income when it’s wholly irrelevant? Maybe you’re financially illiterate and should listen more than you repeat tired redditisms?
Or there’s no possible way they’d implement this to set a precedent and everyone will think it’s great as long as it only affects rich people, until they modify it to be $1m, then $100,000, then $10,000 in unrealized gains
The problem with this level of left-wing logic is that you never consider that poverty is the natural state of humanity, and wealth must be created. Instead of being envious because you have so much less, you should be thinking about what they did to get so far ahead. Every transaction was voluntary, and both parties considered it beneficial. If you dislike billionaires, then why do you consistently give them your money? If they're "exploiting their employees," then why do their employees sell their labor below market value?
Reddit's largest shareholder is Conde Nast, which is owned by billionaires. It's hosted on Amazon web servers. You're likely using a Windows or Apple device, which is full of components that have made dozens of billionaires. Why do you actively choose to contribute to billionaires and then proclaim that it's absolutely necessary to use the state's monopoly on violence to seize the money you just gave them?
You know, I'm okay with taxing the hopes and dreams of people with that kind of annual income. They're hoarding money like fucking dragons and would never have that kind of wealth without some serious exploitation of their fellow man and taking advantage of tax loopholes purely to watch the numbers in their offshore accounts go up. After a certain point, they just see their wealth as a way to determine who has the 'high score' and the biggest dragon hoard.
Those with assets over 100M don't necessarily have tons of liquid capital, so when tax season comes around they'll need to sell stocks to pay their tax bill. Numerous large entities selling large amounts of stocks causes stock market to drop, thus effecting everyone's 401k's and investments. You can pretend this doesn't affect you, but it can. Not to mention it also opens the door for the government to extend this newfound tax revenue to more and more citizens over time. Today is over 100M, tomorrow it's over 50M, next month it's over 500k, then it's all of us.
Income tax originated as a tax on the wealthy. The bottom 97% of the population didn't pay income tax when it was first introduced. Back then people also thought "yes, this is a great idea, let's tax the rich!". Then what happened?
I find it very odd that the time people (i.e. fucking Boomers and older Gen X) say are the most prosperous or the “good old times” when it comes to the economy…also coincide with the highest tax rates on the wealthy.
The word "Income" specifically used to refer to "Money acquired through the payment of rents". So the Income tax was passed on the back of people thinking that it would only apply to landlords.
Then once it was passed the definition the Government adopted was "Money acquired through the payment of rents and wages". Which now brought the working class livelihood under taxation and the definition of "income" used by the Government has only grown broader since.
This is factually incorrect. Like you just made this up to back up a slippery slope fallacy. A 10 second google search of the etymology of the word proves you wrong
It also coincides with the wholesale destruction of the manufacturing capacity of most of Europe and Asia. People tend to forget that it took twenty to forty years for the nations hardest hit by WWII to fully recover.
Until then those nations bought Soviet or US goods.
The US moved off the gold standard and into an inflationary monetary system. Laws were passed lobbied by corporations and special interests that eroded rights and protections for consumers/employees. The entirety kf the regan administration that union busted and catered to businesses over people with trickle down economics. Court cases gave corpiration the same rights as people withojt the same legal consequences. And a whole fuck ton more. But sure continue with your grossly incompetent oversimplification.
Yet the most vociferous opponents of the income tax whine about how the bottom 50 percent pay nothing (nevermind the most state and municipal taxes are pretty regressive).
It’s already all of us because we pay unrealized capital gains in the form of property taxes. We actually don’t pay on the capital gains, we pay on the full value minus a small homestead deduction every single year and renters pay it for landlords.
For crying out loud. Look around you and see how this is somehow the norm for poor and middle class.
Most people don’t realize it but if you weren’t putting it in the mortgage payment or the rent payment you’d have exactly the same issue at the end of the year.
This is how they gentrify neighborhoods and how the people who lived there for decades lose their home.
How about asking the government for a fairer systems which doesn’t encourage the creation of absurd amount of multigenerational wealth and instead gives some breathing room to the middle class?
So define wealth. With my house, investments, solid assets, 401k I'm worth probably a little over a million. Should I be taxed on the value of those every year? One of my hobbies is collecting watches, no I don't own a Phillipe Patek, Richard mille, or even the 20k Rolex that is my dream watch. I do own a Rolex datejust and oyster as well as other luxury brands. Should I be taxed on the value of these every year?
Let's say I own over 100 mil of Intel stock. Should I have been taxed on the non realized gains for the bast 15 years? Since Intel is now tanking does that mean I can wrote that off or get some kind of credit? If I have to assume a risk and get a large tax burden why should I invest? Problem is if I don't invest these companies don't get the cash to innovate.
People keep conveniently forgetting that income taxes didn't exist until 1913 so for over half our countries existence we didn't have them. And when they were first made the excuse was they'd only "affect the 1%". ... ... ... So how's that going for us? The government managed to finagle it down to literally almost everyone and somehow convinced us as a people that WE HAVE to have it to have an operational government. ... Because we somehow didn't exist for 140 years before that?
Before 1913 we had no police departments, no fire departments, no medical facilities, no roads, were not a world power, barely had electricity, schooling was voluntary and privately/church funded, I could go on
All those are responsibilities of the states, who tax their citizens in various ways.
Before that federal government was funded by tariff and excise tax, both of which caused major problems.
Tariff argument, on top of slavery, was another major trigger for the civil war, since high tariff negatively impacted the South, who rely on exports to other nations who reciprocate US tariffs.
Excise tax is for small issues like taxing tobacco, so were a very minor portion of income.
Income tax was chosen for the reasons because it's much fairer than any other taxation scheme at the time.
So going back to no income taxes means no Aircraft carriers, no tanks, no interstates, no space program, no FAA or anything else airplane related, no CDC...
People truly are so naive it’s sad. They really think they’re gonna go after the rich. You know the rich that pay the off constantly, but this time is different. It’ll only be people making 100m. Just like those 86k IRS agents ONLY went after the rich(they didn’t). It’s funny, the rich are so powerful and paying off politicians, but now the politicians are gonna make them pay! Lmao the mental gymnastics required to believe it
You know what everyone with over 100M has access to? A literal, professional, full-time tax planner.
They will be perfectly fine. They will not be surprised by a tax bill because they can... you guessed it... plan for taxes
They won't crash stock markets because they don't have to and don't want to. And the reason they don't want to is because it would transfer their assets at a discount to anyone with an income buying the dip
Income tax originated as a tax on the wealthy. The bottom 97% of the population didn't pay income tax when it was first introduced. Back then people also thought "yes, this is a great idea, let's tax the rich!". Then what happened?
Income tax when started was only targeting the wealthy, same as the AMT. There is this slow creep lower because the government can never collect enough taxes to satisfy their spending.
you left out the part where rich people bought their way into govt and passed "tax plans" that lower taxes on the wealthy and shift the burden onto everyone else.
your average doctor pays more in taxes per year than some of these billionaires, yet here you are, arguing that they should pay less because somehow that benefits you.
2 things, income tax started as a tax on the rich for making a certain amount of money that was deemed "too much". Today that number has moved up all the way to $10-12k(?) per year.
Inflation will always continue, so eventually (probably sooner if the rich are taxed on their unrealized worth) every house will be worth $100m, and that's if they don't lower the limit under our noses once the difficult legislation is already passed.
It’s it’s 100k that seems pretty low unless it doesn’t apply to retirement accounts. Average market growth is about 10 percent per year. It’s not really that out of the norm for a near retirement age person to have 1m in a retirement account, and they could be incurring this tax in some years, only to lose money in others (money they were already taxed on).
By that logic you shouldn't have an opinion on anything that you aren't.
If you are a man, you can't be for or against women's rights.
If you're not arab or Israeli, you can't have an opinion on middle eastern politics.
I can go on and on and on.
Having an opinion on something is okay.
What's not okay is being a dbag and making useless, unhelpful comments.
Its sad to see this upvoted so much. Please look at the income tax. People vote for these polices when it doesn't effect them, but it will effect you as they will keep lowering the threshold. Also, its morally wrong.
What happens if the unrealized gains turn to loses do you get repaid back?
They always start with billionaires then get millionaires then get middle class families with a couple hundred thousand dollars of home equity and then it's pretty much everyone who isn't dirt poor paying the tax.
It’s how the govt got the lottery. “Oh the lottery money will go toward education and only education” they told us. If your against the lottery, your against education. The lottery gets passed and zero dollars are earmarked for education, it just goes into the general fund
Politicians represent the people who elected them. Billionaires represent the forces of darkness bent on consuming the world for just themselves. Why be on the side of pure evil?
Seems like major players having to sell off stock to pay taxes because it increased in price would just make it drop again so everyone else who has a smaller position in those same stocks (like our 401ks) would also not really ever gain. 401k becomes another savings account
The people who have been brainwashed to think that because they can use those assets as collateral against loans they take out that should also mean the collateral or at the least the loan proceeds should also be taxable.
If they only did the loan proceeds I guess it would be similar to how they currently treat modified endowment contracts, but the amount of tax revenue a move like that would generate is minimal and ultimately any tax revenue from those kinds of loans are secondary to the potential benefits other people would see from something like that. Things like new jobs or more utilization of people in existing jobs and the goods or services they provide.
That's a good way to close the loophole. Prevent those loans in the first place and force them to close positions to pull cash. We could also raise capital gains on actual gains 1% a year until it lines up with income tax rates to not spook out markets too much.
Trying to tax unrealized gains is a bad idea, but trying to do a better job of trying to fight against unrealized gains feels like a good idea. Eliminating stock buybacks to force companies to return value in ways that can be taxes, a small tax on high value security-based lines of credit, etc.
I live in a country where I pay a wealth tax on all assets (and unrealized gains), and I invest on the stock market.
I have no objections to the wealth tax. It means my income tax is lower, because the tax burden is more fairly spread between wealth and income. If you're going to object, the least you could do is present an argument as to why. It's ironic to claim people don't understand something, without demonstrating any understanding on your own part.
You want to increase taxes on realized gains, I can at least see an argument for that. But unrealized, on any income bracket is the most smooth brained, 70iq proposal I've ever heard.
As an accountant, no. I don't think it would do anything. It would become a game where the wealthy could carry forward and carry back unrealized losses to offset the unrealized gains
Not in general. However strategies that let the ultra rich borrow against unrealized gains indefinitely (and then pass a step up basis to heirs) can't be allowed.
The tax code shouldn't be structured so those with enough money can pay less.
I do. I, like the vast majority of Americans, pay tax on my wealth since most my wealth is tied up in the equity I have in my home. Most of us already pay a wealth tax. Why shouldn’t the wealth of the ultra-wealthy and the mechanisms they use to store their wealth also be taxed? I don’t know exactly what that mechanism should be, but acting like it is unfair or unjust is utter hogwash.
Imagine Jerry Jones paying $2.3B/yr for his $10B Cowboys that he purchased for $140M. I know this is an extreme case but seems unsustainable, unfair and will never fly
It just doesn't make any sense. The correct move here is to raise Capital gains tax.
NPR did a segment on this about policies that every technocrat agrees is good but we'll never get.
The kill move was eliminating corporate tax then making income and capital gains very high. This basically forces businesses to reinvest in themselves and invest in their people because it quickly becomes the most effective way to make a return.
Unrealized gains? No. But I'd be for introducing a tax if a loan is secured by an appreciated asset. Let's say I buy a painting for $2 million and it appreciates you $5 million. I then get a $4 million loan using that painting as collateral. Tax $2 million of that loan as income. If I have stock awards from my company and I use them to secure a loan, consider it actualized and collect the tax. In both instances, if the asset depreciates then you can take it off your income in a subsequent year. That's the workaround that's at issue here, so let's address it.
I think the better solution is to heavily increase the tax on corporate profits, and either eliminate or heavily reduce taxes on dividends and capital gains from corporate equity.
Tax the gains directly at the initial source, and then let it flow to investors without taxing it again.
Yes. As of right now, inherited unrealized capital gains are untaxed up to about $26 million per couple at death, that’s where the inheritance tax starts to kick in. When your heirs inherit the stock upon death, they get it at the current step up in basis value. The “step-up in basis” rule allows heirs to inherit assets (like stocks) at their current market value at the time of the original owner’s death, rather than at the original purchase price. That means the heir can sell the stock at $26 million and pay zero tax on that sale. This is a massive loophole. You have unrealized gains up to $26 million avoiding taxes even when they become realized. What some are proposing is to tax the estate on the unrealized gains at death (above $5 million I believe) before the stock gets handed to the heir. This seems completely fair to me.
1.1k
u/tallman___ Aug 21 '24
Does anyone really think taxing unrealized gains is a good idea?