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April 2, 2019
Sen. Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee, announced today that he would soon release a proposal to eliminate massive tax breaks enjoyed by the wealthy on their capital gains income. If successful, the proposal would ensure that income from wealth is taxed just like income from work.
His plan, which he has promised to flesh out in a white paper in the coming weeks, would tax the appreciation of assets owned by the very wealthy as income each year, an approach known as mark-to-market taxation. It would also subject that income to ordinary tax rates rather than special, lower income tax rates that apply to capital gains.
https://itep.org/sweeping-reform-would-tax-capital-gains-like-ordinary-income/
https://www.wsj.com/articles/top-democrat-proposes-annual-tax-on-unrealized-capital-gains-11554217383
(Score: 2, Informative) by Anonymous Coward on Sunday April 07 2019, @02:20AM (10 children)
If you invest money in assets, you only pay the CGT when you sell an asset at a profit. The rules for selling an asset for a profit is that you liquidate the asset (sell it for cash or cash equivalents). An "unrealized capital gain" is when the asset has increased on paper, but has not been liquidated. The reason why some people propose the UCGT is that many of the really wealthy own assets and then hold them forever. Therefore, most of their wealth won't have a taxable event until the asset is worthless, until their death, or the ILC, RIET, ILIT, etc. terminates (which can literally be never).
(Score: 0) by Anonymous Coward on Sunday April 07 2019, @09:57AM (1 child)
And what is the problem with that?
(Score: 0) by Anonymous Coward on Sunday April 07 2019, @06:52PM
I'm not saying there is or isn't a problem with it; I'm just explaining what the CGT is, what the UCGT is, and why some people want them.
(Score: 4, Insightful) by theluggage on Sunday April 07 2019, @11:48AM (4 children)
In which case the owner never received any actual money from the "asset" - so what are you taxing?
Probably they got some indirect, intangible benefits from having an inflated "net worth" - it would certainly "open doors" shall we say - but how do you put a value on that? Anyhow, the people who know how to leverage their net worth in that way are the same people who will take 5 whole minutes to find an end-run around any new tax. Maybe liberals should be concentrating on stopping discrimination against people based on "net worth" - I dunno, like some way of getting non-negligible interest if you have less that a quarter of a million bucks to invest, or lenders taking a fairer share of the risk on loans?
Meanwhile, a tax like this will affect your pension fund, drive up your insurance costs and affect anything else in your life that indirectly depends on equity investments (even if you don't know it). I wouldn't want to guess what effect it will have on property prices and rents - but anything that changes the balance of investor behaviour will affect property (even/especially if property itself is excluded from the tax) and its the little guy who is always on the losing end of that deal.
There's also the catch that the very existence of these 'unrealised gains' depend on a lot of people not realising them. If too many people try, those gains will just evaporate. So this proposal is taxing money that doesn't actually exist - so at best its another way of printing money (with all that entails), at worst it turns the economy into even more of a pyramid scheme that it already is...
(Score: 0) by Anonymous Coward on Sunday April 07 2019, @04:29PM
Are you sure that isn't the goal. Almost all the policies of the republicrats seem geared towards keeping the ponzi going, which means growing it to ever more absurd levels.
(Score: 1) by khallow on Sunday April 07 2019, @06:47PM
Sounds like a bluff I'm willing to call. My take is that it'll have the very opposite effect. Attempts to realize the gains on pyramid schemes (that is, when the marks start heading for the exits) are a very quick way to end the pyramid scheme.
(Score: 0) by Anonymous Coward on Monday April 08 2019, @02:23AM (1 child)
Is it possible to access the value of that asset without paying taxes against it? Like collateralizing a low interest loan against the value of the asset? Some searching suggests that this can be accomplished with a transfer-of-title loan (from this page [stocksloan.net]):
(Score: 2) by theluggage on Monday April 08 2019, @03:07PM
Yes, that's the sort of thing I meant by 'opening doors'. But what sum are you proposing to tax? Lets say you bought shares for $1M, the value rose to $1.5M, and you then used that as collateral to get a loan at 1%. Your only "gain" will come from the difference between that 1% interest rate and some hypothetical, higher, rate that you might have got with only $1M in collateral. That's going to be impossible to calculate or police. If there's some way to exploit that mechanism to (effectively) cash in your shares without cashing them in then there has to be a bit more to it (I wouldn't be surprised - e.g. what happens if you default on the loan - if you can walk away, and the lender keeps the shares without CGT getting paid then, yes, you have a tax dodge)
...and, always remember before shaking down Richie Rich for some extra cash, this might also be the sort of thing that Mrs Miggins' pension fund manager does to manage their cashflow.
(Score: 0) by Anonymous Coward on Sunday April 07 2019, @08:11PM (2 children)
Doesn't that screw over frugal people who invest as much money as possible so they can retire early, though? You'd have to have progressive UCGT tax brackets.
(Score: 0) by Anonymous Coward on Monday April 08 2019, @07:53AM (1 child)
Depends on how they invest. Most people would probably use a 401(k), 403(b), employer-provided DBP, IRA, ILIT, Roth accounts, (and a few other limited instruments), or a combination of the above. They are already exempt from CGT or have all sorts of special rules already for when they can be taxed. The UCGT would only hit assets owned outside of them; and other than real estate and certain other property (which already has a yearly value tax, let alone a CGT) most people only own a small amount of assets that would be subject to a CGT, realized or otherwise.
(Score: 0) by Anonymous Coward on Monday April 08 2019, @06:11PM
"Most people would probably use a 401(k), 403(b), employer-provided DBP, IRA, ILIT, Roth accounts, (and a few other limited instruments), or a combination of the above."
most sycophantic slaves...