This is a tax on wealth. Since many wealthy people don’t want to share their money, maybe it’s reasonable for some of it to be taken away from them and redistributed. That’s the real issue.
As Pikkety pointed out, vast fortunes distort the democratic process, because a few rich people can manipulate politicians to pass laws that favour them. Moreover, the growth rate for investments is always greater than the growth rate of wages, so exponential growth means that wealth inequality will only worsen with time. One way to reduce inequality is to tax wealth more than income.
Taxing unrealized gains is a terrible idea, but I do think we need to expand the definition of realizing a gain.
0.1%ers borrowing against stocks and others assets and paying little more than minimum interest is a system-breaking loophole that has exploded the wealth gap. It needs to stop. Taxing unrealized gains isn't the fix. Leveraging an asset needs to be a realized gain.
People should be paying capital gains on the delta between book value vs the asset valuation at loan time. They are gaining from the asset appreciation to have access to more leverage and that gain should be taxable. This would re-set the book value so people don't pay capital gains multiple times on the same gain, but they shouldn't be able to defer the gain forever while using debt to avoid tax.
There should probably be a lifetime exemption of around $1 million to allow the middle class to leverage their home and other key assets in a way the richest have benefitted from for so long, but once you use up your exemption no more tax-free leverage.
Just to be clear: there are people who sat in a room and decided that it was normal to introduce a tax, at the end of each fiscal year, of 36% on unrealized gains.
In a country where the income tax rate begins at 35% too and quickly goes to 49%. Then on the money you have left you pay 21% VAT on every single thing you buy. I'm not going to list every single additional tax (inheritance tax 20% to 40%, etc.) but there are many.
And then they decided that should you invest some of what you have left, you'd have to pay 36% annually on unrealized gains.
It's pure insanity: thankfully they're rethinking this madness.
Since 2001, Netherlands used to have a "Box 3" tax. It took you wealth, assumed a 4% capital gains rate, and taxed this somewhat fictional income at 30%. (I guess it was pretty much mathematically a 1.2% wealth tax.)
In 2021, the Dutch Supreme Court rules the tax illegal and against human rights, because it taxes fictional income.
Since then, the Dutch government have been "missing" about 3 billion euros of tax income every year. So they have been somewhat desperate to reinstate some version of the "Box 3" tax back. This was their first version, and maybe they worked on it too hastily so the proposal is not good enough to pass.
This is a tax on wealth. Since many wealthy people don’t want to share their money, maybe it’s reasonable for some of it to be taken away from them and redistributed. That’s the real issue.
As Pikkety pointed out, vast fortunes distort the democratic process, because a few rich people can manipulate politicians to pass laws that favour them. Moreover, the growth rate for investments is always greater than the growth rate of wages, so exponential growth means that wealth inequality will only worsen with time. One way to reduce inequality is to tax wealth more than income.
Earlier development 2 weeks ago:
"Dutch Lawmakers Approve a 36% Tax on Unrealized Crypto, Stock, and Bond Gains"
https://news.ycombinator.com/item?id=47008391
But now the Dutch are maybe backing away from it.
Taxing unrealized gains is a terrible idea, but I do think we need to expand the definition of realizing a gain.
0.1%ers borrowing against stocks and others assets and paying little more than minimum interest is a system-breaking loophole that has exploded the wealth gap. It needs to stop. Taxing unrealized gains isn't the fix. Leveraging an asset needs to be a realized gain.
People should be paying capital gains on the delta between book value vs the asset valuation at loan time. They are gaining from the asset appreciation to have access to more leverage and that gain should be taxable. This would re-set the book value so people don't pay capital gains multiple times on the same gain, but they shouldn't be able to defer the gain forever while using debt to avoid tax.
There should probably be a lifetime exemption of around $1 million to allow the middle class to leverage their home and other key assets in a way the richest have benefitted from for so long, but once you use up your exemption no more tax-free leverage.
[dead]
Just to be clear: there are people who sat in a room and decided that it was normal to introduce a tax, at the end of each fiscal year, of 36% on unrealized gains.
In a country where the income tax rate begins at 35% too and quickly goes to 49%. Then on the money you have left you pay 21% VAT on every single thing you buy. I'm not going to list every single additional tax (inheritance tax 20% to 40%, etc.) but there are many.
And then they decided that should you invest some of what you have left, you'd have to pay 36% annually on unrealized gains.
It's pure insanity: thankfully they're rethinking this madness.
Since 2001, Netherlands used to have a "Box 3" tax. It took you wealth, assumed a 4% capital gains rate, and taxed this somewhat fictional income at 30%. (I guess it was pretty much mathematically a 1.2% wealth tax.)
In 2021, the Dutch Supreme Court rules the tax illegal and against human rights, because it taxes fictional income.
Since then, the Dutch government have been "missing" about 3 billion euros of tax income every year. So they have been somewhat desperate to reinstate some version of the "Box 3" tax back. This was their first version, and maybe they worked on it too hastily so the proposal is not good enough to pass.