Comment by cogman10
15 days ago
> No, it's not "easier" because it's hard-if-not-impossible to accurately and objectively judge the present-value of many types of assets. Even the case most-familiar to working-class folks, property taxes, nobody really likes/trusts the outcome.
You can easily get within 10% of the "real" value on most assets. And, in particular, assets like stock have a built in ticker to tell you their exact current value.
This sort of evaluation happens all the time privately. For example, car insurance companies have gotten extremely good at evaluating the value of a car to determine when to simply total it.
The only thing that really makes it tricky is hidden assets or assets with no market value.
The likes of the richest people, who I think most of the "tax wealth" people are thinking of, have the majority of their wealth in equity. It's easy to tax the majority of their wealth.
This does not need to be a perfect system to be very effective at generating revenue and redistributing wealth.
The main counterargument:
You buy 1 BTC at $60k in 2024. In 2025 it’s valued at $100k, so you pay taxes on $40k gain.
Now it’s 2026 and you finally decide to sell the BTC for the original price of $60k.
Except you’ve paid taxes on $40k in paper gains that disappeared before you sold the asset.
How do we solve that?
(Replace “bitcoin” with “startup stock option” if you really want to illustrate the problem - imagine having to pay taxes on stock options you decide to never exercise)
That's capital gains, which we currently recognize on realization events (selling the asset or trading it). With current capital gains, if you sold in 2025 you'd pay the taxes on 40k at ~15% (depending) so 6k. If you repurchased it at $100k and then sold at $60k, you can claim the losses.
People advocating for a wealth tax aren't pushing for a tax on gains and losses but rather the total asset value. I've seen 1% and 2% bandied about.
So in 2024, you'd pay $1.2k in taxes (at 2%). In 2025, you'd pay $2k. And in 2026 you'd pay $1.2k
Though, usually, there's also a minimum wealth paired with the tax. Again, I usually only see it for things like individuals with over $100M in assets.
For options, it'd still be the same thing. If the strike price is $1 and the actual price is $60 and the option is vested then you'd be taxed on the $59 per option you hold.
This only gets difficult if you are talking about options in a privately held company. But, again, that's not really the case for a lot of the most wealthy who the wealth tax is targeting.
okay, another example:
You hold Enron stock. You’ve been taxed 5% annually on the holdings for the past 5 years. To pay the tax, you decided to take out a loan instead of selling shares to pay the tax (you want to stay invested).
Someone discovers Enron is a fraud, the stock goes to $0 and you go bankrupt because you can’t repay the loans you took out to pay the tax on a (now worthless) asset.
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>You buy 1 BTC at $60k in 2024. In 2025 it’s valued at $100k, so you pay taxes on $40k gain.
Right, and at this point in the argument it’s also worth asking ”pay taxes with what?” which also quickly makes the idea of taxing valuations obviously absurd.
It would force any value creator to sell his creation, which basically destroys the mechanism from which all welfare for anyone in our societies currently originates.
In Canada you can carry back capital losses up to (I think) 3 years. Of course you lose the time-value of that loss. Can carry forward losses too.
Similar things happen with (on the way to) "bankrupt" corporations that have large tax losses that can be applied to future profits.
A wealth tax would be like 5% of the $100k, nothing to do with the gains.
Yikes. So even if I store my wealth in cash, you want it to deflate by 5% annually?
How do you handle your neighbor who discovers he has a $2m Pokémon card in his closet? Is he forced to sell it to pay the 5% if he doesn’t have the cash on hand to pay the tax?
It’s a messy proposition. I’ve yet to hear a clear proposal that doesn’t have sticky edge cases.
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