Comment by dragonwriter
6 months ago
> The unrealized values are a fiction.
Then instead of taxing the gains, you'd accept the government nationalizing the assets by eminent domain and paying fair compensation that was significantly less than the "fictional" unrealized value?
Or if someone unlawfully deprived you of the asset, you'd accept as restitution or seek as civil damages for the loss something significantly less than the "fictional" value?
Or, when it was no longer an excuse to avoid fair taxation, would that "fiction" suddenly be a lot more real to you?
It would be much better to tax the benefits of the unrealized gain that a person realizes.
It’s much easier to do because there is no disputing the assessment since the person implicitly agrees to the valuation. And it allows people to forgo realizing any benefit from the unrealized value at all to avoid taxation.
Say take x% of the top of the money lent to someone who uses their unrealized gain to secure a loan. Make the money paid count against any tax they owe if they sell the asset later.
"uses their unrealized gain to secure a loan" sounds impossible to define with enough precision that you could base taxes off of it.
Have you taken out a secured loan in the last year over x amount?
Take the value of the asset assessed by the bank and the price paid for the asset to find the total value that is unrealized gain.
Divide that by the total value to get percent of collateral that is unrealized gain. Multiply that by the loan value. Then multiply that by the tax percentage.
All you need is for banks to report secured loans to the IRS and it’s easy.
4 replies →
You are basically making my case for me. It is widely recognized that replacement value differs materially from notional value. In such cases you may be required to pay much more than notional value because you have to pay for liquidity costs that only exist when transactions are forced to occur. The act of transacting can intrinsically change the asset value, sometimes by a large factor.
Are you oblivious to the extensive litigation that occurs in cases like eminent domain because there are substantial differences of opinion on even the notional value, never mind the realizable value?
Notional valuations are fiction, everywhere and at all times. Treating them as some kind of objective reality is just enabling a lot of abuse and motivated reasoning.