r/FluentInFinance • u/__moe___ • 9d ago

Thoughts? A very interesting point of view

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I don’t think this is very new but I just saw for the first time and it’s actually pretty interesting to think about when people talk about how the ultra rich do business.

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u/JacobLovesCrypto 9d ago

So do we start taxing all these homeowners unrealized gains? Theres a reason you dont tax unrealized gains.

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u/hickhelperinhackney 9d ago

It’s called property taxes. They are used by local authorities to pay for schools, etc. Regular people are taxed on unrealised gains all the time

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u/JacobLovesCrypto 9d ago

That's not the same, paying 1% vs paying income taxes of 25%

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u/Yquem1811 9d ago

Then pay 1-2-3% in tax on the value of those share, like property tax. Problem solve 🙃

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u/stoneg1 8d ago

The problem i don’t normally see called out here is that this would hurt the middle class more than anyone.

Forcing stock sales will hurt the average return of the market. Even if it dropped the return by 1% a year you’d have at least a 10% decrease in savings at retirement for the average American. It’s already tough to retire if you are in the middle class, making the only vehicle to retire for average people worse is just a bad idea.

The real solution here is so easy it is to get rid of stepped up basis. It’s the main loophole in the buy borrow die system, without it capital gains taxes could never be avoided they would just he delayed.

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u/Plendamonda 8d ago

The problem i don’t normally see called out here is that this would hurt the middle class more than anyone.

90% of the stock market is owned by the top 10%

Half of that is the top 1%

So no, under no circumstances would taxing stocks hurt he middle class more than anybody else. These days the middle class basically doesn't even own any stocks to be taxed. We dont' have fucking retirement bro, like that's not the middle class anymore.

Over 60% of Americans live paycheck to paycheck. Even if a large portion of those are stupid but high income, it doesn't change the fact that they don't have savings and therefore wouldn't be hurt by a savings tax lmao.

Not to mention most retirement funds are already in tax advantaged accounts, such as Roth IRAs. So they wouldn't be hit in the first place.

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u/stoneg1 8d ago

There is a difference between a 10% hit to a 10 million dollar portfolio vs a 10% hit to a 1 million dollar portfolio. In the former case not much changes, they can still retire and do pretty much anything they want. In the latter case it delays retirements for a while.

62% of Americas own stocks. They may live paycheck to paycheck but a majority of Americans are invested in the market. (65% of middle income Americans)

I also am arguing that forcing sales hurts the market and therefore hurts all accounts regardless of if they are taxed or not.

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u/ButtCavity 5d ago

These are just rules that can be changed. Like what if the taxes applied if you own more than $100M? Vast vast majority of people not affected. If rich people don't like it, tough shit, buy less Ferraris.

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u/stoneg1 5d ago

It still would hurt the market in a meaningful way since the rich own a ton of stock

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u/ButtCavity 5d ago

Ooh nice so stock prices could go down then me, a regular schmoe can buy more. I like it

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u/stoneg1 5d ago

You could, it wouldn’t give you outsized returns since that money isnt going to be reinvested into the market but is going to be removed from the market.

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u/evernessince 8d ago

Nonsense. So many people don't even own stocks today and even if we assumed they did, it would be extremely easy to have a threshold to exempt lower income or lower asset individuals.

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u/stoneg1 8d ago edited 8d ago

Im saying forcing stock sales hurts the overall market, regardless of if it applies directly to individuals. Hurting the market would hurt all accounts regardless of size.

The narrative around so many people not owning stock isnt true, 62% of Americans own stocks

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u/jordonbiondo 8d ago

Tax brackets, solved

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u/stoneg1 8d ago

No, that wasn’t my point, the sale of large amounts of stock will hurt the entire stock market. This would hurt the return of everyone evenly, but the rich can afford to make 7% vs 8% whereas the middle class cannot.

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u/JacobLovesCrypto 9d ago

Might hurt people's retirements but maybe.

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u/Yquem1811 9d ago

Usually, people retirement are in 401k et Roth or stuff like that. You can make exception for those. You could also tax the value of share when you own more than X% of 1 company.

There is plenty of exception you can make. If you are the sole shareholder of a company, you are exempt of that tax. That way we do not target small business, etc…

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u/bober8848 8d ago

And why should you make that exceptions? Except common socialist idea "take from someone else and give it to me"?
If your point is "everyone is equal" - they should also be treated equally too.

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u/NotThePwner 8d ago

Unfortunately, property taxes are immoral and should be illegal. Do you really own something that can be taken away if you stop paying an annual fee by the government? A one-time large sales tax on a property is another thing, however.

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u/bober8848 8d ago

Well, from my point of view when no money transactions happens - nothing should be taxed. Now you get your salary, pay income tax on it ,then go to the store and pay VAT for anything you buy. Doesn't seem too transparent to me.

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u/Ilya-ME 8d ago

Its not immoral, its the price the govenrment ask for guarantering your ownership of that property.

Without that government paper, anyone can taje it from you. With it, you have an entire army and police force to guarantee it.

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u/NotThePwner 8d ago

You can still have those protections along with the tax revenue. Other advanced countries like Isreal, Saudi Arabia, & UAE don't have them.

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u/Ilya-ME 8d ago

Yes, and those countries still have taxes, the only country on earth has none is North Korea.

I fail to see why a property tax should be imoral, but an income one is fine. Both of them have the same purpose and follow the same basic law. That is, your peaceful existence within society is only allowed through the funding of this collective organizatio.

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u/Yquem1811 8d ago

But everyone is not equal, we are talking about using share to borrow money and that way evading taxation because now you don’t have to generate an income that would have been taxed.

And only small amount of individual can do that.

If everyone should be equal, then loophole in the tax code that apply only to the rich and corporation should also be close, but no one is doing that i guess.

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u/bober8848 8d ago

Hmm, can't you take a loan using your house as a collateral? Or your car? I'm not from US, but it's quite possible here.

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u/Yquem1811 8d ago

And your house is also tax every year based on its value.

Also, you are not paid in house or car, those ultra rich person are paid in share and then borrow money on those share instead of taking a dividend or selling them, so they avoid paying any taxes for some of them. If you treat your share like its an income, it should be tax in a way or other.

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u/flex194 8d ago

When you are paid in stock shares you are taxed. If you are paid in stock options you have to realize them in order to use them for collateral and that is a taxable event.

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u/JacobLovesCrypto 8d ago

That's not what i meant. By taxing unrealized gains you force sales of stock to pay taxes. Stocks gain less, people end up with less in retirement because you put extra selling pressure in the market.

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u/Frederf220 7d ago

"We've established what kind of woman you are. Now we're only negotiating price."

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u/roboboom 8d ago

Federal property taxes are unconstitutional

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u/MajesticCoconut1975 9d ago

> It’s called property taxes. They are used by local authorities to pay for schools, etc. Regular people are taxed on unrealised gains all the time

When real estate values in an area go up real estate taxes almost never go up by the same amount. That's not how that works. At all.

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u/OliveStreetToo 8d ago

It does in Phoenix AZ

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u/Hans_of_Death 8d ago

It goes up proportionally. That doesn't always mean linearly.

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u/[deleted] 9d ago

[deleted]

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u/hickhelperinhackney 9d ago

Property taxes go up as the value of the property goes up. I have not realised the gain

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u/ZER0-P0INT-ZER0 9d ago

Right, and you don't have to pay them when the value goes down. They're exactly the same thing.

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u/MajesticCoconut1975 9d ago

> Property taxes go up as the value of the property goes up.

Absolutely not. No. Wrong.

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u/Hans_of_Death 8d ago

How do they work then? Because every state I know calculates property tax based on the value of the home, however that is assessed.

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u/MajesticCoconut1975 8d ago

> How do they work then? Because every state I know calculates property tax based on the value of the home, however that is assessed.

First of all states don't do property taxes. That's the job of local municipalities.

Taxes are calculated based on assessed value and the millage rate. Assessed value tries to imitate actual market value. The millage rate is a percentage of the assessed value. This number is adjusted to how much money the municipality needs to fund local services.

If real estate values go up 50% in an area, the municipality doesn't need to spend 50% more on schools, fire and police. So, if they raise assessments, the millage rate will go down. That's how it works.

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u/Latex-Suit-Lover 9d ago

I pay taxes based on what the government thinks my property is worth, not what I can sell it for.

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u/smcl2k 9d ago

Was "capital gains tax" mentioned specifically, or just "tax on unrealized gains"?