# Democrats want to have a billionaire (non?)income tax **URL:** \ **Category:** Politics & Elections\ **Created:** [October 27, 2021, 1:27am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260 "2021-10-27T01:27:13Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [October 27, 2021, 1:27am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/1 "2021-10-27T01:27:13Z")
In the quest for more taxes, the Democrats are [considering a tax on billionaires](https://www.cnn.com/2021/10/25/politics/billionaires-tax-plan-capital-gains/index.html). Here’s the problem - it’s on unrealized gains. That’s right! If a billionaire’s assets increase in value they are liable for capital gains tax on it even if they don’t sell it. So a few questions: Is this even legal? IIRC we’ve discussed this before and there is a good argument that this would be a direct tax. The IRS can’t just collect a direct tax on the top 1%. Under the Constitution a direct tax must be apportioned to the states proportional to population. What assets will be taxed? Liquid (stocks, bonds, gold, etc.) or all (property, art, etc.)? Is it a good idea to tax unrealized gains? That is unprecedented. Plus taxes tend to fall down the slippery slope. So what is the lower limit going to be on taxation? 5 years from now? 10 years from now? ---
**Author:** ![mikecurtis](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mikecurtis/32/3284_2.png) [@mikecurtis](https://boards.straightdope.com/u/mikecurtis)\ **Post date:** [October 27, 2021, 1:49am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/2 "2021-10-27T01:49:10Z")
> [@Saint\_Cad](#): > > Is this even legal? Why wouldn’t it be? We already pay property taxes, which are based on the value of the property, in addition to capital gains when the property is sold. How would that be different if the wealth is from stocks or bonds or anything thing else? eta: > **[Wealth Tax - What It Is, Pros & Cons of Current Proposals](https://www.moneycrashers.com/wealth-tax/)** > > Wealth taxes can come in many forms, but there’s a lot of misinformation and misunderstanding about them. Find out how they work here. ---
**Author:** ![Folly](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/folly/32/3219_2.png) [@Folly](https://boards.straightdope.com/u/Folly)\ **Post date:** [October 27, 2021, 2:00am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/3 "2021-10-27T02:00:48Z")
> [@mikecurtis](#): > > We already pay property taxes, You’ll notice that is only to the state though. Any federal property taxes may be subject to the apportionment part of the constitution. ---
**Author:** ![Stranger\_On\_A\_Train](https://avatars.discourse-cdn.com/v4/letter/s/13edae/32.png) [@Stranger\_On\_A\_Train](https://boards.straightdope.com/u/Stranger_On_A_Train)\ **Post date:** [October 27, 2021, 2:05am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/4 "2021-10-27T02:05:29Z")
> [@Saint\_Cad](#): > > Is it a good idea to tax unrealized gains? That is unprecedented. Plus taxes tend to fall down the slippery slope. So what is the lower limit going to be on taxation? 5 years from now? 10 years from now? From another thread: > [@Should the progressives hold out?](https://boards.straightdope.com/t/should-the-progressives-hold-out/953200/16): > > > The problem with just raising the income tax on upper brackets is that for the very rich—those whose income is primarily in the form of dividends, divestments and compound speculation—can quite easily and legally shield themselves from that by effectively having no ‘income’ in the form of paychecks or personal revenue. Their personal ‘operating funds’ are all loans on which they owe interest, which can reduce net income to less than zero (although the interest is paid by taking out other loans), all of which are based on assets owned by trusts that exist primarily to provide them with access to capital without directly owning it. Very wealthy people are essentially ‘cash poor’ and may even be technically “asset poor” even though they control hundreds of millions or billions of dollars of what is _de facto_ personal wealth, and can even use this status to qualify for entitlements in the form of government subsidies, guarantees, loans, incentives, tax rebates, et cetera that dwarf the ‘welfare’ reluctantly doled out to those below the poverty line, all benefits inaccessible to ‘working class’ or even upper middle class people whose primary assets are a few pieces of personally owned real estate, small business assets, and a healthy retirement fund. Pretty much everything the ultrawealthy “own” are “unrealized gains”, often in the form of assets and investments held in trusts or other instruments to make them appear legally cash and asset poor which they have unique access to by virtue of their wealth. If these people can afford multiple superyachts and private space programs, they can afford a few percent of their total wealth to pay for all of the infrastructure, public services, and security that fundamentally allows their businesses to enjoy economic success. Stranger ---
**Author:** ![mikecurtis](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mikecurtis/32/3284_2.png) [@mikecurtis](https://boards.straightdope.com/u/mikecurtis)\ **Post date:** [October 27, 2021, 2:07am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/5 "2021-10-27T02:07:18Z")
The American Bar Association believes it’s constitutional. [https://www.americanbar.org/groups/taxation/publications/abataxtimes\_home/19aug/19aug-pp-johnson-a-wealth-tax-is-constitutional/](https://www.americanbar.org/groups/taxation/publications/abataxtimes_home/19aug/19aug-pp-johnson-a-wealth-tax-is-constitutional/) > The Founders believed in the wealth tax. Apportionment was designed to reach wealth by taxing states according to a proxy for relative wealth, using the best measurement of wealth that was then available. To turn a requirement designed to make it easier to tax wealth into a rule exempting wealth from taxation is to turn the Founders’ meaning upside down. The progressive idea of a wealth tax, like the estate tax, is clearly constitutional. ■ ---
**Author:** ![ThelmaLou](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thelmalou/32/390_2.png) [@ThelmaLou](https://boards.straightdope.com/u/ThelmaLou)\ **Post date:** [October 27, 2021, 2:13am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/6 "2021-10-27T02:13:28Z")
The obvious thing is that if we want enough funds to run the country, we have to tax the ultrawealthy. Why? To quote Willie Sutton, **"because that’s where the money is!"** ---
**Author:** ![TheGunIsMightierThanThePen](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thegunismightierthanthepen/32/2981_2.png) [@TheGunIsMightierThanThePen](https://boards.straightdope.com/u/TheGunIsMightierThanThePen)\ **Post date:** [October 27, 2021, 2:23am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/7 "2021-10-27T02:23:50Z")
Why not make the loans that the wealthy obtain using their assets as collateral, subject to the same income tax percentages that everyone else pays? Are there some hidden potholes (besides Republican opposition, duh) to this simplistic approach that I’m not aware of? ---
**Author:** ![mikecurtis](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mikecurtis/32/3284_2.png) [@mikecurtis](https://boards.straightdope.com/u/mikecurtis)\ **Post date:** [October 27, 2021, 2:32am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/8 "2021-10-27T02:32:11Z")
If you tax a specific means of wealth increase, those who are affected will likely just move to another means. It’s the main reason why the ultra wealthy have little or no income to tax. If you tax their “worth”, by whatever means they arrive at it, it’s harder to avoid the tax. ---
**Author:** ![TheGunIsMightierThanThePen](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thegunismightierthanthepen/32/2981_2.png) [@TheGunIsMightierThanThePen](https://boards.straightdope.com/u/TheGunIsMightierThanThePen)\ **Post date:** [October 27, 2021, 2:59am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/9 "2021-10-27T02:59:37Z")
Ok, if a wealthy person needs day-to-day spending money, there are three ways they can get it, as far as I understand: 1. From their regular salary. This is covered by income taxes. 2. Sell off some of their assets. This is covered by capital gains taxes. 3. Get a loan using their assets as collateral. My proposal would close off that loophole. Are there are other means of (legal) financial wizardry they can employ to get cold hard cash? ---
**Author:** ![Stranger\_On\_A\_Train](https://avatars.discourse-cdn.com/v4/letter/s/13edae/32.png) [@Stranger\_On\_A\_Train](https://boards.straightdope.com/u/Stranger_On_A_Train)\ **Post date:** [October 27, 2021, 2:59am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/10 "2021-10-27T02:59:55Z")
> [@TheGunIsMightierThanThePen](#): > > Why not make the loans that the wealthy obtain using their assets as collateral, subject to the same income tax percentages that everyone else pays? Are there some hidden potholes (besides Republican opposition, duh) to this simplistic approach that I’m not aware of? Because ‘wealth’ is fundamentally different than ‘income’. If you taxed ‘wealth’ at, say, 20% per annum, it would be reduced geometrically, and unless you think that complete ‘redistribution’ of wealth is the ideal (instead of a catastrophic undermining of a market economy) it doesn’t make sense to just kill the goose. The reality is that a very marginal amount of “unrealized gains” invested into the overall economy rather than into speculative ‘investing’ (much of which aren’t even properly investments in any capital sense but are essentially gambling on future valuations or hedges) are completely adequate to upgrade and transform infrastructure, provide necessary public services, and virtually eliminate abject poverty, all without making any measurable impact on the ability of capital to grow the economy and providing returns outpacing any marginal level of taxation. Setting aside all the handwaving about Laffer curves, taxation on wealth (versus income) is actually more equitable in terms of overall distribution of the burden, and an eventual benefit in allowing for economic growth to fund all of the necessary resources and infrastructure that allows for industrialization. Stranger ---
**Author:** ![TheGunIsMightierThanThePen](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thegunismightierthanthepen/32/2981_2.png) [@TheGunIsMightierThanThePen](https://boards.straightdope.com/u/TheGunIsMightierThanThePen)\ **Post date:** [October 27, 2021, 3:06am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/11 "2021-10-27T03:06:06Z")
My proposal _isn’t_ taxing their wealth though. It just redefines those loans as “income”. So if a billionaire gets a $5 million loan on his assets, he will have to pay $1,814,427 in taxes (assuming 2020-2021 federal income tax rates), spread out over the lifetime of the loan, in addition to whatever interest they are obligated to pay their lenders. This wouldn’t reduce their wealth geometrically, and it would also be a much more fair amount for them to contribute back to society. ---
**Author:** ![mikecurtis](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mikecurtis/32/3284_2.png) [@mikecurtis](https://boards.straightdope.com/u/mikecurtis)\ **Post date:** [October 27, 2021, 3:20am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/12 "2021-10-27T03:20:26Z")
There’s 2 downsides I see to your solution. The first I’ve already stated: if you start to tax collateral based loans as income, the wealthy will just stop using these loans. And the banking system will come up with some other way of doing basically the same thing, but just different enough to avoid the taxes. And, #2: how much “actual cash” do they really get this way? Even the most extravagant lifestyle only needs a couple million in cash each year. So that’s still leaving 99% of their wealth untaxed. ---
**Author:** ![nate](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/nate/32/13085_2.png) [@nate](https://boards.straightdope.com/u/nate)\ **Post date:** [October 27, 2021, 4:18am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/13 "2021-10-27T04:18:41Z")
You can’t just say the banks will figure out some other way to give the already wealthy money to spend without giving a hint of what that could be. I happen to like TheGunIsMightierThanThePen’s idea in general… if there is actually a loophole with the whole “borrow money to live on and somehow never have to pay it back because risky assets always go up in value” scheme that seems to be making all the rounds, let’s just close that loophole. The whole idea of taxing unrealized stock gains is absurd. ---
**Author:** ![mikecurtis](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mikecurtis/32/3284_2.png) [@mikecurtis](https://boards.straightdope.com/u/mikecurtis)\ **Post date:** [October 27, 2021, 4:19am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/14 "2021-10-27T04:19:37Z")
> [@nate](#): > > …is absurd… To you. ---
**Author:** ![nate](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/nate/32/13085_2.png) [@nate](https://boards.straightdope.com/u/nate)\ **Post date:** [October 27, 2021, 4:25am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/15 "2021-10-27T04:25:53Z")
If Elon Musk’s Tesla stock drops and his wealth goes down $50 billion over a single year, the gov’t would cut him a check for the same amount of tax he paid when it went up $50 billion over a single year? ---
**Author:** ![mikecurtis](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mikecurtis/32/3284_2.png) [@mikecurtis](https://boards.straightdope.com/u/mikecurtis)\ **Post date:** [October 27, 2021, 4:28am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/16 "2021-10-27T04:28:45Z")
If your house depreciates from one year to the next does the govt give you money back? ---
**Author:** ![nate](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/nate/32/13085_2.png) [@nate](https://boards.straightdope.com/u/nate)\ **Post date:** [October 27, 2021, 4:45am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/17 "2021-10-27T04:45:46Z")
Does selling part of my depreciating house that further lowers the value of my house to pay for this tax seem like it’s good for my children? Wtf analogy is that to selling stocks to cover taxes of stock that is losing value? Any downturn in the market would just accelerate and everyone loses. ---
**Author:** ![DMC](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dmc/32/18049_2.png) [@DMC](https://boards.straightdope.com/u/DMC)\ **Post date:** [October 27, 2021, 5:25am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/18 "2021-10-27T05:25:07Z")
> [@TheGunIsMightierThanThePen](#): > > Ok, if a wealthy person needs day-to-day spending money, there are three ways they can get it, as far as I understand: > > 1. From their regular salary. This is covered by income taxes. > 2. Sell off some of their assets. This is covered by capital gains taxes. > 3. Get a loan using their assets as collateral. My proposal would close off that loophole. If we implemented your proposal, the super wealthy would all just use option 2 above, since capital gains is going to be much lower than income tax rates. If you’re suggesting we implement your solution AND tax capital gains the same as income, then it might work, but I’m guessing that’s not what you are advocating. Correct? ---
**Author:** ![BigT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bigt/32/12044_2.png) [@BigT](https://boards.straightdope.com/u/BigT)\ **Post date:** [October 27, 2021, 5:45am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/19 "2021-10-27T05:45:01Z")
> [@nate](#): > > Does selling part of my depreciating house that further lowers the value of my house to pay for this tax seem like it’s good for my children? Wtf analogy is that to selling stocks to cover taxes of stock that is losing value? Any downturn in the market would just accelerate and everyone loses. The analogy is simply that the government does not give back money that it is given. If your property loses value, you pay less in the future. But you don’t ever get money back. Perhaps there is some logic for why you think the government should have to give that money back when the property is stocks rather than a home, but it doesn’t seem you have made such an argument. You likewise haven’t seemed to say more than one sentence about why you think the idea of taxing unrealized stock gains is bad. I may not know a lot about finance, but surely your ideas need more explanation. I seriously doubt that this became an actual proposed idea by the Democrats if the concept was absurd on its face. Surely there must be something you are assuming that they are not. So why not lay out all of your premises that lead to your conclusions? ---
**Author:** ![TheGunIsMightierThanThePen](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thegunismightierthanthepen/32/2981_2.png) [@TheGunIsMightierThanThePen](https://boards.straightdope.com/u/TheGunIsMightierThanThePen)\ **Post date:** [October 27, 2021, 5:53am UTC](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/20 "2021-10-27T05:53:22Z")
> [@DMC](#): > > If we implemented your proposal, the super wealthy would all just use option 2 above, since capital gains is going to be much lower than income tax rates. Yeah, I can see why the wealthy would all flock to option 2. But the long term capital gains tax rate is 20%, assuming they are selling off more than $441,451 in assets during a year, and that is a lot better than the 0% that the government is receiving currently. Moreover, it forces the wealthy to hold the assets for a minimum of one year, assuming the resulting meta-game is wealthy people bouncing assets off each other like a game of hot potato, lest they want to pay the higher short term capital gains rates. If they _really_ wanted to, they could sell all of it at once and live off the lump sum for a while, but that accomplishes a side goal of getting them to divest themselves from their assets. > [@DMC](#): > > If you’re suggesting we implement your solution AND tax capital gains the same as income, then it might work, but I’m guessing that’s not what you are advocating. Correct? That would be the more socially equitable option, but I fear it would be too controversial, at least initially. It would be like bringing European-style healthcare to the negotiating table when the ACA was first being hammered out. Baby steps, man, baby steps. Edit to add: perhaps long term capital gains can be taxed the same as income, only if the person’s assets are valued over a certain amount. [Next page](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260.md?page=2)