this post was submitted on 15 Jan 2024
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[–] bitwaba@lemmy.world 3 points 11 months ago (2 children)

It's income, not assets. Anyone who's house increases value from 9 million to 10 million wouldn't have to pay it.

[–] MacNCheezus@lemmy.today 6 points 11 months ago (1 children)

Unrealized gain is by definition not income, that's what "unrealized" means.

Let's say you buy a house for $300k and the value goes up to $400k. But you don't sell it because you want to keep living there. Too bad, now you have an unrealized gain of $100k and you owe taxes on that. At the current rate, if your regular income is between $47k and $518k, this would cost you 15 grand. Not to mention you'd have to pay this tax every year that your house appraises for more than you bought it for.

Still sound like a good idea?

[–] bitwaba@lemmy.world 1 points 11 months ago (1 children)

Yeah, you don't magically have to pay income tax on unrealized gains. You pay income tax on income. That's why it's called income tax.

Too bad, now you have an unrealized gain of $100k and you owe taxes on that.

You owe property taxes on it, if it's an asset property, and your location has property taxes. If it's stocks and bonds, you wouldn't have the same problem.

[–] MacNCheezus@lemmy.today 3 points 11 months ago

Yeah, you don't magically have to pay income tax on unrealized gains. You pay income tax on income. That's why it's called income tax.

This was a hypothetical, because thread OP was suggesting a tax on unrealized gains. I was just trying to explain the possible consequences of such a tax.

In order to tax unrealized gains, they WOULD have to be treated as income, even though they really aren't, because if you didn't sell an asset, you didn't make any money. Unless you rented it out, of course, but rental income is already treated as such.

As far as stock or bonds go, it's the same. Imagine you buy some stock to hold for the long term. Well, if it goes up, and there's a tax on unrealized gains, you'd be owing taxes on every dollar it has gone up from the purchase price, EVERY YEAR that you hold it. It would almost be like having to pay rent on something you already own, and of course that would make long term investing extremely unattractive, not to mention it would basically eliminate any chance that normal people have at building any wealth whatsoever.

Also, if long term investing becomes unattractive, that means people would likely just try to sell everything the same year they bought it, meaning there'll be a lot more short term trading (and thus rampant speculation) going on. Even if you put generous exemptions in place to avoid penalizing the lower and middle classes with this, taxing unrealized gains would lead the super rich to engage in more short term speculation, which means the markets would become much more unstable. It's literally the dumbest idea anyone could think of unless their goal is to just cause as much pain and chaos as possible.

[–] abraxas@sh.itjust.works 1 points 11 months ago (1 children)

I think you lost the thread. The grandparent post here said "There would need to be a mechanism to tax unrealized capital gains"

We're talking about someone thinking we ought to be taxing things that aren't income. What is currently true is not relevant to that discussion.

[–] bitwaba@lemmy.world 1 points 11 months ago (1 children)

Sorry, I didn't realize the comment changed direction from the OP meme.

[–] abraxas@sh.itjust.works 1 points 11 months ago