And all that finger pointing and laughing at what the communists in China are doing as far as “common prosperity”. Whats the difference between over there and here? Heck, at least the commies will actually grow the middle class unlike here. LOL
Webej
2 years ago
Dems have a dozen ways to tax the rich that raise no serious const’l issues (higher rates, stepped-up basis repeal, closing estate tax loopholes & lowering exemption, etc). Why do the one thing for which constitutionality actually isn’t super-clear?
Bingo. Ding. Ding.
Dems only need to appear to be doing something about the wealthy.
Having their attempt struck down by the judiciary absolves them.
A winning strategy (at least according to their political calculus and internal contradictions in their party).
I agree. But that means all our serious governance issues all come down to trickery, poseurs, actors/actresses, and con-jobs. This is where our republic is at.
I live in Northern VA, a Biden stronghold. A lot of Youngkin yard signs, not so many for McAullife. If he can’t win overwhelmingly in NoVa I see a very very solid Youngkin win. Youngkin actually comes across as a real person. McAuliffe: “hey, vote for me. I kept the seat warm last time and how bad was it?”
We already have asset taxes. Real estate is taxed every year based on what the local government thinks it’s value is. People pay it without having to sell their home. They could implement something similar to equity holdings.
I think a better solution is to treat long term capital gains as income and change inheritance law so less is inherited tax free.
Either way, whatever is implemented will end up hurting the upper middle class the most. It’s always that way. Enough money to target and not enough money to bribe politicians.
Everyone pays real estate taxes directly or indirectly. The tax is not directed at just a few individuals. Real estate taxes have become onerous in many places. Proposition 13 was a revolt against rapidly escalating real estate taxes. A tax on unrealized gains will trigger massive selling causing market fluctuations. Valuation is extremely time sensitive for financial assets. The whole concept of taxation targeted at a small part of the population is tyranny of the majority. Taxes should be broadly based as it is in Europe. The free lunch proposed by Democrats will crash the economy.
shamrock
2 years ago
So what is the constitutional authority to tax an estate? That is not income either.
Most states have laws that cover this. the administrator of the estate has to report the holdings of the estate with estimated values within 3 or so months. For non trivial items, they have to have supporting documentation like tax statements or blue book values. Taxes are based on the net amounts distributed. There’s usually a lower cap like the first one million isn’t taxed. The next 4 million is taxed at 10%, etc…
Corvinus
2 years ago
Any time the political class says they are “going after the Billionaires” what they really mean is that they are coming for you.
Tanner 0
2 years ago
A tax on gains sounds good on the surface. But what caused those gains? Inflation?
If you are so lucky to be perfectly protected against inflation, the gov will tax your gains equal to inflation. You thereby still loose 35% of the inflation rate of your wealth per year. They really hurt the savers.
Its already unfair that savers get hit by inflation. Now they are offering to tax you if you are clever enough to combat the inflation. Sure their eyes are on bigger fish with bigger gains, but history shows how this plays out. Big fish are clever and have big resources to protect themselves.
I don’t think the gold standard is coming back….but I’d guess this new proposed policy would surely drive people into owning physical gold, since it would be one of the last semi-decent inflation hedges left, at that point.
rojogrande
2 years ago
There is precedent for taxing unrealized gains under the alternative minimum tax (AMT). Under the AMT, when an incentive stock option (ISO) is exercised the difference between the option price and the value of the stock when exercised is income under the AMT regardless if the underlying stock is sold. During the dot com bubble, many people exercised their ISOs but didn’t sell the stock waiting to get capital gains treatment under the regular income tax. When many of the stocks went to zero the employees were left with large income tax bills under the AMT.
I expect legal challenges because I’m not sure if the Supreme Court ruled on the issue. However, since the AMT is simply a parallel income tax system, what is legal under that system should also be legal under the regular income tax. Therefore, I suspect Yellen is right and this can be done since it has already been done. I’m not commenting on whether it’s good policy or not.
I remember this very well. When the stocks went to zero, in some cases, the employees were able to square it all up by using some kind of a special “worthless securities form” where they could sell the stocks to a brokerage for $0.00000000001 per share or something like that. This way, they were able to show zero gain (or even a small loss) and were able to avoid the tax.
It was crazy times around the end of 2000. The entire Thanksgiving and Christmas season were spent by so many people in the Valley desperately trying to get themselves out of that mess.
whirlaway
2 years ago
“It “ONLY” applies to billionaires.
Excuse me for asking “For How Long”?”
As long as the Republicans (and their corporate DONORcrat buddies) don’t extend it to non-billionaires. Keep in mind that Reagan increased taxes on the middle-class not once, not twice, but 18 times.
LostNOregon
2 years ago
It would seem easier and more equitable if we got rid of Long Term Capital Gains rates. ALL of my income is from capital gains now that I am retired. There’s no logical reason why my income is protected (to an extent), and people who are still working are fully taxed. This may remove an incentive for people to hang onto a stock position, but I don’t see that as a barrier.
The increases AMT proposal by someone earlier also seems to make sense. Unrealized Capital Gains Taxes makes no sense.
The reason for a different tax rate is that the corporation (stock) already pays taxes. If the rate is not lower, it is double taxation. The argument seems less strong with real estate.
In my experience the main reason people hold on to positions in stocks or real estate past what would be reasonable is because of the stepped up basis at death. I think it would be more reasonable to remove the stepped up basis and the estate tax. Just treat death as a taxable event, so the gain is realized at death. Then there is no reason to wait.
I am in a similar position, and would agree with you if, and only if, I get to adjust my basis for inflation. Otherwise I’m paying taxes on the Fed’s incompetence.
Bungalow Bill
2 years ago
Ugh, you mean the other party is now showing a total disregard for the Constitution after the previous party in power walked all over it?Tell me it isn’t so…
heh. The problem is spending the dollars they don’t get via taxation.
tbergerson
2 years ago
An easy way to do this is to deem loans to the ultra rich secured by the assets with the value that has not been realized as income. This is how many people manage their cash without selling the assets. Imputed income. That would fall within the 16th Amendment. And I would tax it at ordinary rates, not some watered down rate.
I believe it is also justified, given the political class has set up of our economy to create massive asset inflation which enriches the rich and increases the income gap to higher than 1920s levels. Just ask Fink. If we continue on the present course, social unrest will follow.
You DO need to ensure it only operates above high levels. The fear of it going all the way down the income scale as income taxes did is a real one
Of course if we DO have a real change in the inflationary backdrop it will not matter as a good third of that unrealized gain will disappear.
If fedgov bent on bailing out the rich no matter what…
Yes. The solution is complex. More guv spending to even out probably not it. Am writing a book in which this is one of the themes.. As for not being enough, you are right. But to me as I comment below in reply to Eddie_T it isnt about revenue raise but fairness
What about retired people who need a HELOC to live out their last years in dignity and solvency? The problem is when the idea doesn’t produce the expected revenue (which it won’t) and they then decide that it isn’t just the nasty billionaires who need to be taxed, it’s also the paper millionaires who are just trying to build a retirement nest egg.
The general public thinks anybody with two nickels to rub together is rich. “Tax the rich” sells well in a country with more than 50% too broke to even pay ANY net income tax.
All good points. I would exclude anyone with net assets less than some very large amount (couple hundred million). To me it isnt about revenue raising as you are right it will raise little. It is a point of fairness. Corporate execs have been enriching themselves by substituting debt for equity with persistent low inflation and buybacks. Founders with shares worth billions who borrow against it to avoid tax can pay some tax
Then again I would tax corporations at 0% and tax their beneficial owners at ordinary rates. No special cap gains rate (it would be adjusted for inflation of course) and no special dividend rate either. Tax income earned by capital the same as income earned from labor. But to do that you must not tax at he corporate level. Would need some rules to prevent perpetual buildup of capital or cash in the corp.
Tony Bennett
2 years ago
“If there is a billionaire tax on unrealized gains, some or even many of these billionaires will have to sell portions of their asset holdings to pay taxes due”
…
Really?
They’ll just BORROW against their holdings … just like they do NOW for consumption … currently borrowing won’t trigger a taxable event.
Having said that none of this will come to fruition as 2022 comes into play. Good luck to any member voting for a tax increase in an election year. Sure, Democrats in very secure districts will go along … but Democrats in moderate districts? What needs to happen is for the end to constant bailout of the markets which is primary source of (long term) inflation that is wrecking the lives of the bottom 50%.
The problems start when taxing the billionaires doesn’t create ENOUGH new tax revenue, and the bar drops lower to catch more money. Not everybody with assets can get instant credit against it, especially when we hit one of these tight credit periods which we see from time to time.
thimk
2 years ago
Go for the low hanging fruit, like carried interest/Bermuda reinsurance (used by hedge funds/private equity ) . these guys are sharks in the water , asset stripping great companies . Think I’ll send a memo to Nancy .
Casual_Observer2020
2 years ago
The AMT is a better way. You could easily have an AMT of 7% on all billionaires and companies with profits of over a billion. And make it based on not where headquarters are but where they do business. Also you could make a taxable event if a billionaire uses an asset to take out a loan. Leveraging an asset could easily be considered a legal taxable event.
Eddie_T
2 years ago
Put me down as being in agreement with Spike Cohen
FYI: an “unrealized gain” is when something you own gains value, but you don’t sell it.
You know, like your house. Or your retirement fund.
So now you have to sell it, to pay the taxes.
This is a war against the remaining middle class people who still own things.
There has to be a better way to make billionaires pay more tax than this shite.
I’m no fan of eliminating the stepped-up basis either. In both cases, it forces a sale of assets just to be able to pay taxes, which is flat wrong, imho.
For those (like me) worried about losing the stepped-up basis for my kids inheritance, it now looks like if Biden manages to pass it, that assets held in trust will still be protected for the short run.
I also think markets will react bigly to this steal. Once it’s not just billionaires having their wealth confiscated, there will be hell to pay. It affects anybody with a retirement account, anybody with a house, and anybody who owns any kind of risk asset held for capital appreciation.
Savers are already f**ked. Now investors will be equally f**ked.
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“If you can’t dazzle them with brilliance, baffle them with bullshit”
W.C. Fields
It was crazy times around the end of 2000. The entire Thanksgiving and Christmas season were spent by so many people in the Valley desperately trying to get themselves out of that mess.
Excuse me for asking “For How Long”?”
As long as the Republicans (and their corporate DONORcrat buddies) don’t extend it to non-billionaires. Keep in mind that Reagan increased taxes on the middle-class not once, not twice, but 18 times.
Ugh, you mean the other party is now showing a total disregard for the Constitution after the previous party in power walked all over it?Tell me it isn’t so…
It was 62% last year that paid no income tax.And rising every year.
You know, like your house. Or your retirement fund.
So now you have to sell it, to pay the taxes.
This is a war against the remaining middle class people who still own things.