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Old 09-04-2019, 09:07 AM
Wrenching Spanners is offline
Join Date: Jun 2011
Location: London
Posts: 538
Hereís the question again:
Originally Posted by Wrenching Spanners View Post
What is the liberal position on taxing unrealised wealth? Are you in favour of it, or against it?
Originally Posted by GIGObuster View Post
Well, as an economist at Bloomberg reports it, you are too late:
Your Bloomberg cite doesnít answer the question. It also doesnít distinguish between realised and unrealised gains, except for inheritance tax.

From Bloomberg:
The U.S. already has various wealth taxes that go by other names, but they work badly. Federal taxes on income from capital ó in the form of profits, dividends and capital gains ó and taxes on inheritance are varieties of wealth tax. Many state and local governments tax houses and other property as well.

The federal taxes are poorly designed and riddled with loopholes. One big channel of avoidance is the so-called step-up basis for capital gains at death. This lets assets pass to heirs at current market values, with any previous unrealized gains simply erased for tax purposes. That means huge accumulations of unrealized capital income escape capital-gains tax altogether. Combine this with a leaky inheritance tax, and wealth can be passed from generation to generation with little or no tax owed.

A theoretical case, based on restrictive assumptions, can be made for not taxing capital at all ó but as a practical matter, on grounds of fairness and efficiency, itís hard to deny that wealth and the income it generates are under taxed in the U.S. relative to income from labor. The question is whether a wealth tax like the one Warren is suggesting is a better remedy for these defects than fixing the taxes the U.S. already has ó say, by taxing capital income at the same rate as labor income, taxing unrealized capital gains at death, and/or making the inheritance tax harder to avoid.

Income from capital ó in the form of profits, dividends and capital gains Ė is taxed if itís realised. If I buy a million shares of stock worth $50/share at the beginning of the year, and $60/share at the end of the year, Iíve made $10 million in unrealised capital gains. If I sell 100,000 shares, Iíve realised capital gains of $1 million and I should and will pay taxes on that. If before the sale, a cash dividend of $1/share is issued, Iíll receive another $1 million in income and pay taxes on it. No oneís arguing against that. The question is what do I owe based on the 900,000 shares worth $60/share I still own? Warren says I owe somewhere between $40,000 and $1,620,000 on that stock, even though I havenít sold it. I disagree. I should pay taxes when I sell the stock, but not have my investments whittled away simply because Iím a successful investor. (Not that Iím ever likely to own $54 million in stock.)

Originally Posted by GIGObuster View Post
And... that is not a problem, otherwise no tax base would be available, so not what I was talking about; and my cat's breath smells like cat food...
Maybe your catís breath wouldnít smell so bad if you stopped feeding it garbage?