It is already! Interest you earn from your accounts is taxed as ordinary income. Dividends from investments are classified as qualified or non-qualified, but both are still subject to taxation. When you take money from your IRA (non-Roth), it get’s taxed as income.
When it’s converted to income, sure. Of course, having a large sum of unrealized gains opens the doors to lots of loopholes. E.g., borrowing money using your investments as collateral and then not paying tax on it because it’s not “income.”
There’s an entire industry that exists to allow wealthy people to dodge taxes. This industry provides nothing of value to society, but its existing is the inevitable result of wealth disparity.
The government should not be in the business of picking “winners” and “losers,” and so I’m not comfortable with shutting down wealth advisors, CPAs, who participate in these practices. I’m also not in favor of “closing loopholes”, because playing whack-a-mole with legislation while trying to combat monied interests, lobbyists, corruption etc is a fool’s game.
The problem at it’s root is that people are allowed to amass so much wealth that they’re able to create whole industries that do not benefit society. That’s alarming.
I agree with everything you have said here. The upshot is that no matter how much wealth someone amasses, it never lasts forever, either the next generation or the generation after that squanders it. It eventually gets recycled into society at large. Anderson Cooper wrote a really interesting book on his mother’s Vanderbilt heritage and how all that wealth generated by Cornelius Vanderbilt and his son William Henry was so easily lost within 2 generations.
Which leads to the idea that maybe taxation should focus on wealth rather than income.
Elon Musk didn’t always have hundreds of billions of dollars. His wealth increased from a much lower value. That increase was, by definition, income. Musk has earned over a hundred billions of dollars of income over his life.
The only reason it’s not taxable income is that we as a society have decided that people like Musk shouldn’t have to pay their fair share. We can decide otherwise.
You have to pay back those loans, otherwise they are income. And You mean when I get a mortgage on my home, that should be income?
Or just keep on floating the loans until you die. Which’ll happen eventually.
And, of course, when that happens, your basis in all those shares of equity get stepped up to their current valuation, and the capital gains that would normally be generated by selling them go poof.
It’s not what’s illegal that’s the scandal.
Anderson Cooper noted for his life long poverty.
As of 2024, Anderson Cooper’s estimated net worth varies depending on the source. as reported by Yahoo Finance, Anderson has a net worth of $200 million. Contradictorily, Cooper has reported being the owner of a wealth amounting to $50 million as per Celebrity Net Worth.
Right, you take out loans to repay the loans. This is established as a thing the wealthy can do now, pretty much until they die.
Nobody is suggesting counting loans as income, which is silly and nonsensical. People are suggesting taxing wealth. That could mean taxing investment holdings or properties. Obviously this wouldn’t apply to reasonable levels of investments or, say, a primary residence.
I don’t want to defend Musk, but this simply isn’t true. He’s accumulated appreciated value in the stock he owns, but none of that is real until he sells that stock. He doesn’t have a hundred billion dollars in some Scrooge McDuck money bin.
That value is useful in many ways, certainly. He can use stock as collateral on loans to buy things, up to and including Twitter.
Loans are not income, though. They must (theoretically) be paid off with interest, but the economic assumption is that a loan will be used to generate enough income over time to pay off the loan plus interest. Mortgages use that logic and the government for most of the past century has encouraged homeowning, including ownership of rental properties, because of that.
A house isn’t money or income until it’s sold off. Not even then. The difference is treated as a capital gain. But houses can decline in value, and that gets treated as a capital loss. Businesses love capital losses; homeowners not so much. BTW, capital is not taxed at a lower rate than income, although people always talk as if it is. Capital gains taxes of (currently) 28% are higher than the income tax rates on the bottom 98% of filers. They do, however, therefore favor the rich.
Where does income fit into all this? For the wealthy, almost nowhere. A wealth tax would be required to part them with enough to hurt, one of many reasons why it will never happen. Yet, the relatively minor share of money that is termed income is so huge in ordinary terms that a few hundred billion might be collected in income taxes annually without disrupting the wealth patterns. One could call that a fair share. Just repealing the various Republican tax cuts would do the trick. In real terms they would never notice.
Which gets back to my question earlier about in this thread: can the federal government tax wealth, consistent with Article I, section 9, clause 4 of the US Constitution?
No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.
The 16th Amendment says that restriction doesn’t apply to income tax, but as people keep saying, wealth isn’t income.
Taxes on property are usually considered a direct tax. Since wealth is not necessarily allocated evenly amongst the states, wouldn’t a wealth tax be contrary to I:9:4 ?
I suspect a constitutional amendment would be needed. I don’t think wealth taxes are a serious proposal by any major political party and are only talked about by Bernie, AOC, etc. So we’re a ways off.
His wealth has increased, ergo he has received income. He can use that wealth, ergo his wealth is real. If someone were to give me stocks or a house, either of those gifts would be income to me, too.
Not as long as you don’t sell them. You can’t tax imaginary numbers.
It’s a bit more complicated than that, but no economist that I’m aware of defines that as income.
I get taxed on my wealth all the time. Why is it only some assets that get taxed?
What does this mean? Are you another who’s defining income and wealth as the same thing?
I have two houses. I get property tax bills based on their estimated worth every year. I don’t see that wealth until I sell them but I’m still taxed on them based on their imaginary numbers.
Actually, in my state of Indiana renters can do that - the state allows renters to deduct a portion of rent from their state taxes, analogous to the advantage mortgage holders get. So it is, in fact, possible to even out that perceived inequity. If there’s the will to do so. And, right now, it’s strictly state taxes, not Federal.
Likewise, although at present in the US it’s income that’s taxes it is possible to change the system to taxing wealth or assets instead. If there’s ever a will to do so. Which I think extremely unlikely.
By this standard, everything that’s taxed is imaginary numbers.
Non-cash income is taxed all the time, and if you’re not aware of any economists that know that, then you don’t know very many economists.