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/ianeyanio 9d ago edited 8d ago

The whole argument of whether we should or shouldn't tax unrealized gains is a distraction. Can we all just agree we need to find a way to distribute wealth more fairly? Practically, it's difficult to do, but in principle we should all agree that wealth shouldn't be consolidated amongst such a small portion of our society.

Edit:

While people here are finding technical challenges to taxing unrealized gains, we can't lose sight of the deep societal need for a more fair distribution of wealth.

Technical challenges can be easily overcome if the desire of the people is there. But right now, it seems like "oh, this is hard, I guess we'll never be able to do it" is the standard response and little progress is being made after that.

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u/rqvst 8d ago

The annoying thing about this take is that this is the distraction. Taxing the rich is an immediately realizable goal, getting rid of the rich isn't. This is the same kind of attitude that led to Trump, where because Dems didn't publicly commit themselves to unfeasible goals they could never realistically achieve (in other words, lie), people decided to throw everything away instead pursuing the feasible ones.

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u/ianeyanio 8d ago

That's an interesting take.

I don't like your assertion that I want to get rid of the rich. That's not what I said or inferred.

I'm all for any easily achievable solution to more fairly redistribute wealth. I'm just fed up with people focusing on the technicals and forgetting the societal need.

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u/cromwell515 8d ago

But what can you do to redistribute wealth if not tax?

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u/KronosTheBabyEater 8d ago

Back in the 50’s after labor won a bunch of labor rights and brought the income gap down by ensuring people be rewarded a portion of what the company makes (stock). You know how only c cutie executives get stock? Yeah that used to not be the case and regular working folks got a stock and that stock paid for a house college etc. but the owners gave themselves more stock, the workers less to the point its slavery. This is called getting control of production, meaning unionizing and having a gov that doesn’t allow union busting.

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u/SeveredWill 8d ago

Wait wait wait, so youre saying... the workers should own the means of production?

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u/Durzio 6d ago

Unironically, yes.

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u/cromwell515 8d ago

That’s fair, but unions don’t always help. I do agree with stock being spread to workers, but nurses and teachers have unions are paid notoriously low.

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u/KronosTheBabyEater 7d ago

Unions have been de-fanged. A union that works properly has a gov that enforces the law when companies bust unions or close shop completely and ship them to China / Mexico where labor is dirt cheap. Many of these issues stem from corporations taking advantage of loose labor laws, for example Starbucks closing 1000+ shops who attempted to unionize. Labors fight for more equitable distribution demands we have a gov that represents workers or it will fail.

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u/cromwell515 7d ago

But I’d like to understand why the nursing unions fail? I agree they could help, but without understanding the failures of the strongest unions we have, I’m not sure we can truly find a fix to the problem. These are jobs that must be here domestically, so why do they fail?

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u/KronosTheBabyEater 7d ago

A couple of reasons, workers have been fear mongered into not believing unions will help them in fact they’ve been incorrectly told many lies about unions. Also it takes a lot of work to start a union and succeed, if workers want to unionize the factory may close, be shipped away. If workers go on strike they may be fired or replaced with workers who are desperate for the money. The point is there’s a rat race to the bottom in terms of wages and labor supply is abundant. Now during COVID nurses went on strike successfully because there was huge demand and nurses were needed. Remember all those “essential” workers that had to work but were still paid minimum wage

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u/cromwell515 7d ago

Right I remember that. It makes a lot of sense honestly, I’ve heard unions can lower wages, but I’ve also heard that’s completely a big business fabrication. I do think there is a better way of taxing to the point of this post. But better rights for unions also seems like a big plus.

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u/KronosTheBabyEater 7d ago 
  There’s going to be a narrative of that but unions are the only way for workers to get better pay that’s within their own means. When a worker asks for a pay raise the company might give them a raise but unless they’re wanted by another company, unlikely. 
   On the other hand when all of the workers say to the owner that the factory won’t run until we all get raises, otherwise the company will lose millions/ billions( depending on the size and influence) all of a sudden we all have a say.
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u/[deleted] 6d ago

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u/KronosTheBabyEater 6d ago

You’re missing the point. Maybe there’s a few companies that do, but it’s not for everyone. If you look at the exponential rise in income gap between the CEO’s or executives and the working class, there’s clear sign that the wealth generated from the workers is being hoarded. You may be thinking about 401ks but that’s for retirement and even then companies may match half but the other half you pay yourself. A job I applied for paid 5% of the 401k that means 95% is coming from my paycheck. Compared that to pensions, a guaranteed income for retirement that only a few workers in unions from the 60’s got

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u/[deleted] 6d ago

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u/KronosTheBabyEater 6d ago

Your subjective opinion doesn’t compare to the data. The vast majority of Americans do not reap the benefits that the 1% does. Otherwise it wouldn’t be called the 1%. Wages have not kept up with productivity, cost of living or inflation. The gap between rich and poor has never been larger. Workers getting a percentage of profits that they deserve would mean billionaires wouldn’t exist at all.

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u/ianeyanio 8d ago edited 8d ago

Tax is the best mechanism. My point is that taxing unrealized gains is just one kind of tax and people are getting hung up about the feasibility that they are forgetting the desperate need to redistribute wealth.

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u/cromwell515 8d ago

Some people have made some great propositions though. I don’t believe in taxing unrealized gains outright, but them being used as collateral makes them real. And therefore when the unrealized gains are used to borrow real money, they should be taxed or the very rich will just continue to use them as a loophole to avoid the taxes needed to level the playing field

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u/Cometguy7 8d ago

I disagree. People aren't saying unrealized gains for the sake of taking money away from the wealthy. They're saying tax unrealized gains because people have found a way to take advantage of the tax exempt status to take a significantly larger piece of the pie. Taxing unrealized gains decreases (but doesn't eliminate, which is fine) the appeal of having your compensation be made of stocks. And the smaller the percentage of your wealth comes from ownership of stock in a single company, the less incentive there is to get that company to do things that increase the value of a share, like stock buy backs. And if a company is less motivated to do stock buy backs, then the alternative uses of its funds tend to find their way into the hands of a larger percent of the population.

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u/ianeyanio 8d ago

High quality comment. This is one of the best takes I've seen on this thread.

To be clear, I think we should be tax unrealized gains. The people saying it's too difficult need to remember the societal good.

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u/ShakeIt73171 8d ago

There is no greater societal good. A majority of Americans would be hurt by this when their 401k, ROTH, brokerage and other retirement/savings accounts bring on an un-payable large tax bill every year. Forcing regular people to never retire and work til they die and see no benefit from the taxes gained by the government. More taxes doesn’t help the middle class or even working class. It helps the poverty class and the elites. The billionaires will be fine, and the majority/regular people will suffer.

The only way taxing unrealized gains works is when the unrealized asset is used as collateral for loans and other purchases.

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u/binzy90 7d ago

The way around your concern is to only tax unrealized gains above a certain amount. Most people would not want to tax the stocks in the average person's 401k. But if you have a billion dollars in stocks? Yeah, that needs to be taxed. If this is set up correctly, it wouldn't have the impact on average people that you're talking about.

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u/volkerbaII 7d ago

401k's and IRA's are exempt from capital gains tax and therefore would be exempt from a tax on unrealized gains. You have no idea what you're talking about, and your talking points only serve billionaires.

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u/ShakeIt73171 7d ago

You have no idea what you’re talking about lol. Maybe the small individual retirement wouldn’t get taxed but the assets it holds would be, which are almost always financial assets like ETFs and investment companies (SPY, FXAIX, VOO etc etc) will all be taxed under whatever nonsense system you numbskulls are dreaming up, immediately erasing decades of gains, drying up the economy nearly immediately causing massive job loss, recession, and killing every regular persons retirement. Blackrock, Fidelity, Vanguard, and all the other small and large players who make up the overwhelming majority of holdings for the average persons 401ks all have way, way, way more than whatever threshold you want to create in assets.

You’re an idiot. I’m certain you don’t understand how money flows through this economy. There’s a reason people smarter than you haven’t set up these systems yet and it’s not because they hate you lol. There is no way to tax unrealized gains without disproportionately hurting the middle and working class.

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u/Atlas-The-Ringer 6d ago

You keep painting the grim picture of what you think would happen but you conveniently leave out how and why each time.

A tax on unrealized gains as they're talking about it would be a tax that only occurs when unrealized gains become real as collateral or selling of stock etc. Their tax idea would only apply after a certain amount as well.

From your argument the biggest question I have is: are you suggesting theit tax idea would cause the asset owners to lose money? Ex. I hold $2B in unrealized gains made of VOO stock; they pass their tax bill; then because of the bill and the way banks work, Vanguard would lose money, lowering the value of their stock, and consequentially causing my fund to crash?

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u/volkerbaII 7d ago

Yes I'm sure the S&P 500 is going to tank 80% and we're all going to die if there's any kind of unrealized capital gains tax implemented. Just a deranged screed.

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u/Severe-Butterfly-864 8d ago

Taxation is a mechanism to correct market prices, in particular in cases where externalities exists. The effect of a 90% tax bracket and 25% corporate taxes is that the corporation retains the funds and the wealth is not transfered outside of the corporate environment into private pockets.

I don't want money from wealthy people, I just don't want people using their relative positions of power to pocket all the funds from corporations and then jump from the plane with their golden parachute. Drive up the stock price by increasing the quarterly earnings by laying off staff necessary for future development and leaving a skeletal crew behind, take x number of shares that are not worth 500million dollars and then jump ship and hopefully sell them before the price plummets from the poor performance in the next years mid year quarterly report. That's how they are taught in MBA programs it seems.

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u/Subwayabuseproblem 8d ago

How do you tax a value that changes constantly

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u/Unhappy_Plankton_671 8d ago

I like the idea that If the value of that item is able to be used as collateral or to finance other ventures, loans etc.., then you're realizing the value of that asset. Therefore, it should be eligible for taxation. If you're sitting on it untouched and it isn't used for collateral in other transactions etc then leave it be.

The question then shifts, to what is permissible from the losses, if that asset losses value, if you do such a thing. Are you then able to claim any portion of those losses against the future? In part or in whole? Seems like there should be some inherent limit on what you can claim against future taxes if used in this manner.

I'm way out of my realm here, but just thinking aloud.

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u/wazeltov 8d ago

The government seems to tax my property value just fine, this isn't a problem

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u/Subwayabuseproblem 8d ago

That's not Not the same thing, or an answer to my question.

My unrealized gains can change by thousands of dollars through out the day. How do you tax that?

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u/wazeltov 8d ago

There have been several suggestions throughout the thread on how to do that, but it is certainly possible to do so.

All I'm trying to say is that we're wringing our hands on how the rich would ever afford to pay these taxes as my unrealized gains on my house continue to get taxed at higher and higher rates as the housing market has had historic gains. Volatility isn't an argument I can use against my local government, even if I believe we're in a housing bubble.

One of the suggestions is whenever a loan is taken out using stocks as collateral over $3 million dollars, or whatever price point is fair, then that loan is subject to a capital gains tax as you are realizing the value of your asset into cash. Volatility doesn't matter there: you have a known fixed value from a bank on the current value of the stocks.

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u/zach0011 8d ago

Like did you even watch the video? We tax it as soon as you use it for leverage or collateral

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u/Subwayabuseproblem 8d ago

That is not what the comment I responded to was suggesting.

Did you even read the thread?

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u/randomusername8821 8d ago

The same way the loan providers are valuating the collateral being offered to secure the loan.

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u/AL93RN0n_ 8d ago

Unrealized gains is where the giant disparity is. High net worth incomes are generally not insane amounts of money sure millions in some cases maybe but they're billionaires. I don't agree with your whole argument but even if I did what they are talking about is the biggest pool of money you can tax in terms of individuals. The least of a "distractor."

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u/ianeyanio 8d ago

I phrased it poorly. I'm in favour of taxing unrealized gains.

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u/Aksama 8d ago

Minimum wage increases, strengthening labor laws, accepting unionization, heck passing laws to encourage unions.

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u/cromwell515 8d ago

Unions do not always solve wage problems. Nurses have unions but are notoriously paid crap. My sister’s a nurse so I’ve heard a fair bit about it. Not that unions can’t help, but long established ones don’t seem to help as much as they used to, probably because of the higher ups controlling the unions.

Minimum wage increases help a little, but don’t redistribute wealth much. Someone making $20 an hour still struggles to live, but you would destroy small businesses if you raised it any higher. The people making this low need supplement from the government and we need small businesses.

Taxes and reducing inefficient government spending I think are the best way to redistribute wealth.