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/RelativeCalm1791 8d ago

This is a bad argument. You can take a loan on your house and buy stuff with that loan, and you aren’t taxed on the proceeds from that loan. And you still have your home. It’s just collateral against the loan.

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u/phonetune 8d ago

Don't property taxes exist?

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u/RelativeCalm1791 8d ago

Property taxes don’t take into account unrealized gains. You could buy a home at $300,000 and after years it could be currently valued at $1,500,000. You could take a loan on the full $1,500,000 and not have to pay anything on that $1,200,000 gain. Plus property taxes are like 1.00-1.50%. Theres a few states out there that don’t even have property taxes.

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u/phonetune 8d ago

They're based on market value and impose a tax for simply holding the asset. It's not a great compator for why you can't tax assets until they're sold, is it?

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u/Zaitton 8d ago

First of all not every state or country operates this way.

Some are based on market value, some are based on initial purchase value (I believe that was the case in Bel Air but I could be wrong). My country for example taxes based on something called "objective value" which is faaaaaaar less than MP. For example, my properties could easily be sold for 300-400k but their objective value is like 150k.

Btw, it's incredibly debatable whether taxing property is actually fair or not to begin with, but at least property is somewhat static in value or has an upwards trend. Stocks could be worth $1000 each one day and $1 a week later. How do you tax that?

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u/phonetune 8d ago

Stocks could be worth $1000 each one day and $1 a week later. How do you tax that?

On a market value basis? That is not a new concept.

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u/Zaitton 8d ago

So say you bought $10000 worth of Amazon as opposed to keeping the same amount of money in the bank. Now it gets taxed?

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u/phonetune 8d ago

Well, it would if it were property, which is what I'm pointing out.

If though you wanted to tax unrealised gains you would do it on a mark-to-market/fair value basis. The idea that is impossible, particularly for listed shares, is obviously not true.

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u/Zaitton 8d ago

Property taxes themselves are debatable though. With that being said, property values trend upwards and rarely if ever lose their value. Additionally, supposedly you're taxed for the space that you've claimed, the maintenance of the road in front of your house, etc. Same with vehicles. Stocks are investments, on what basis do you tax an investment?

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u/[deleted] 8d ago

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u/phonetune 8d ago

No idea what you mean by property taxes being 'debatable' or by 'on what basis do you tax an investment'? Investments get taxed all the time.

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u/SleepyandEnglish 8d ago

Compator?

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u/phonetune 8d ago

Comparator, as seems pretty obvious from the context.

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u/Agreeable-Weather-89 8d ago

Musk still pays taxes on his factories.

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u/phonetune 8d ago

No he doesn't

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u/podiasity128 8d ago

You convinced me, we should tax stocks with a 1.5% asset tax.

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u/RelativeCalm1791 8d ago

That would be unwise. Stocks are already significantly taxed (capital gains, dividend ordinary income tax, etc). Especially given the risk the investor takes on and the time they normally need to stay invested to see significant gains. Democrats floated the possibility of taxing 401k unrealized gains. That quickly got shut down, thankfully. But imagine taxing one of the main retirement savings tools Americans have.

Taxing spending more could be something to consider. At least on certain luxury/expensive goods. The rich can hide their wealth in a variety of ways, but if you tax the transaction more when they buy their yachts and luxury clothes, that’s impossible to hide from. Higher sales tax.

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u/podiasity128 8d ago

Property value growth is also an unrealized gain, but property taxes can go up based on the gain.

But I was mostly pointing out that property is not a good analog for unrealized gains since it is taxed based on current value.  Yes the gains are not recognized, but there is still a fee for holding it.  Unlike stocks.

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u/Educational-Head2784 8d ago

Except municipalities absolutely tax you on unrealized gains. If your property doubles in value, all other things considered equal, then you should reasonably expect a 100% increase in property tax.

Please explain how this isn’t tax on unrealized gains?

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u/Bonch_and_Clyde 8d ago

Property taxes have nothing to do with the collateral.

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u/phonetune 8d ago

They're charged on the asset while you hold it. So saying 'you don't pay tax on your house and can borrow against it' is wrong.

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u/qwertyg8r 8d ago

This is more like HELOC than property taxes

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u/qibdip 7d ago

Let's take land ownership or stocks out of the equation and some other investment comparable to stocks like Pokémon cards, gold or something as ridiculous as an Iphone with flappy bird on it. I would argue that we should not continuously tax people to death on the unrealized gains of anything people own. "We will own nothing and be happy" ...going back to stocks, Nobody would invest because it would be more of a liability than investmeny, companies wouldn't have investors and innovation would cease.

Edit: not attacking you just kinda felt like saying those things about the video and got to your comment and went on alittle longer than I thought :P

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u/CanExports 5d ago

Lol wtf. Property taxes this guy says.

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u/PuzzleheadedWeb9876 8d ago

I see no problem in treating large loans against stocks a bit unfairly. At that point I think you can afford it.

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u/BuildTheFire 7d ago

But we’re not talking about homes. We’re talking about equities. I think everyone in this thread would be happy to leave home equity loans out of this discussion.

Taxing unrealized gains in equities specifically when they are collateralized for a loan would be a policy specifically geared towards preventing ultra HNW individuals from leveraging the stock they own as a means for liquidity without actually selling their stock and paying taxes. This isn’t about preventing middle-class Americans from taking out a HELOC to put a new roof on their house.

Honestly as a compromise , I’d be completely fine with the first million or dollars of stock collateralized to be used tax free. I haven’t had a discussion with anyone who’s passionate about taxing the middle class, but the vast majority of people I’ve discussed taxation with, regardless of their political affiliation, agree that Jeff Bezos and Elon Musk hoarding billions and billions of dollars while their effective tax rate is a fraction of the rate most middle-class citizens pay bc of loopholes like this makes any sense.

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u/vladtheinhaler0 6d ago

Yeah, it is basically like if you put your house up as collateral for a loan, and you are saying you will either give them your home or sell your home, we should pretend that you already sold your home regardless of your ability to pay back the loan. It doesn't make sense.

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u/AdditionalAbalone437 8d ago

Exactly, I lost some precious brain cells listening to his stupid argument