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So what's the point of taxing unrealized gains specifically? Why not wait until the gains are realized, tax them then, and still collect on average the same tax

So what's the point of taxing unrealized gains specifically? Why not wait until the gains are realized, tax them then, and still collect on average the same tax income? This would result in the same yearly tax income for the government, except in the years immediately after implementing or increasing unrealized gains taxes. Is it just to force entrepreneurs to sell more stock and get more loans, as a gift to the financial sector? Edit: On second thought, taxing unrealized gains results in lower tax income - the financial sector will take its cut, and that cut has to come from somewhere.

M95D 16d ago
The problem this tax attempts to solve is that rich people's gains are never realized. Read about "Buy, Borrow, Die" scheme as an example of possibly dozens of methods to avoid having taxable realized gains.
atmavatar 19d ago
Because many of the wealthiest individuals de facto realize their gains in the form of collateral for loans that allow them to live without ever realizing their gains from the perspective of the tax code. If you do well enough, you never have to pay taxes on stock holdings. The very first sentence of TFA gives it away: Recently, my story as a Norwegian entrepreneur facing an unrealized gains wealth tax bill many times higher than my net income went viral Many who are in the position to control how their compensation is doled out (board members, C-level) will often take it exclusively (or nearly so) in stock, specifically so they never have to pay taxes on it. Famously, several have taken $1/year incomes - e.g., Mark Zuckerberg and Steve Jobs, while Elon Musk didn't even bother with the charade and took $0/year. * Side bonus: in the US, corporations paying out performance-based compensation like stock get additional tax breaks, so it's not just the executives which win the taxation game while doing this.
- like_any_other 19d ago
  > de facto realize their gains in the form of collateral for loans that allow them to live without ever realizing their gains from the perspective of the tax code. Can you explain how this works? I have my wealth in stocks, I use those stocks as collateral for a loan. To pay back this loan, I have to either get money from somewhere, or hand over the collateral to the bank. Let's say "get money from somewhere" is taxed (to avoid circular reasoning), so that leaves trade loan collateral for loan cash, which is on net no different than selling the stocks. This is not taxed? And wouldn't it be infinitely easier to close that loophole, than taxing the estimated profit for the next N years, which is what unrealized gains tax amounts to?
  - deleted 19d ago
    [deleted]
  - spelledwrong 19d ago
    > I have to either get money from somewhere Take out another (slightly larger) loan against the stock. As long as the stock grows faster than the interest rate, you should be able to chain loans together forever. You need to only borrow a portion of the value of the collateral to provide a buffer from volatility, but that should also mean the loan is very safe and thus at a low interest rate. To close the loophole you would need to be able to tax borrowed money which creates its own set of dangers.
    - atmavatar 18d ago
      Another way to close the loophole would be to amend the tax code to realize the gains for any stock used as collateral, since the person obtaining the loan is already de facto realizing the gains for the sake of the loan.
veeti 19d ago
Europe is a retirement home rigged to favor old people and old money. The thought that you could save on your own and enjoy compound interest is forbidden.
decimalenough 19d ago
> They took an investment of 70M at a valuation of 1000M, in a country that has a well-known 1% tax of valuation, but they failed to write payment of that tax into the funding papers and fled the country to dodge a 10M annual tax bill. The tax bill is 10M only if they control 100% of the shares. Given that they've taken funding from at least 15 investors/VCs, this is clearly not the case. https://tracxn.com/d/companies/dune-analytics/__XskUZos4lkfEOnTJIbC-1n9WdooVINLFPRtWW9pdZC4/funding-and-investors https://tracxn.com/d/companies/dune-analytics/__XskUZos4lkfE...
- like_any_other 19d ago
  That's unrelated to my question.

M95D 16d ago

The problem this tax attempts to solve is that rich people's gains are never realized. Read about "Buy, Borrow, Die" scheme as an example of possibly dozens of methods to avoid having taxable realized gains.

atmavatar 19d ago

Because many of the wealthiest individuals de facto realize their gains in the form of collateral for loans that allow them to live without ever realizing their gains from the perspective of the tax code. If you do well enough, you never have to pay taxes on stock holdings. The very first sentence of TFA gives it away: Recently, my story as a Norwegian entrepreneur facing an unrealized gains wealth tax bill many times higher than my net income went viral Many who are in the position to control how their compensation is doled out (board members, C-level) will often take it exclusively (or nearly so) in stock, specifically so they never have to pay taxes on it. Famously, several have taken $1/year incomes - e.g., Mark Zuckerberg and Steve Jobs, while Elon Musk didn't even bother with the charade and took $0/year. * Side bonus: in the US, corporations paying out performance-based compensation like stock get additional tax breaks, so it's not just the executives which win the taxation game while doing this.

like_any_other 19d ago
> de facto realize their gains in the form of collateral for loans that allow them to live without ever realizing their gains from the perspective of the tax code. Can you explain how this works? I have my wealth in stocks, I use those stocks as collateral for a loan. To pay back this loan, I have to either get money from somewhere, or hand over the collateral to the bank. Let's say "get money from somewhere" is taxed (to avoid circular reasoning), so that leaves trade loan collateral for loan cash, which is on net no different than selling the stocks. This is not taxed? And wouldn't it be infinitely easier to close that loophole, than taxing the estimated profit for the next N years, which is what unrealized gains tax amounts to?
- deleted 19d ago
  [deleted]
- spelledwrong 19d ago
  > I have to either get money from somewhere Take out another (slightly larger) loan against the stock. As long as the stock grows faster than the interest rate, you should be able to chain loans together forever. You need to only borrow a portion of the value of the collateral to provide a buffer from volatility, but that should also mean the loan is very safe and thus at a low interest rate. To close the loophole you would need to be able to tax borrowed money which creates its own set of dangers.
  - atmavatar 18d ago
    Another way to close the loophole would be to amend the tax code to realize the gains for any stock used as collateral, since the person obtaining the loan is already de facto realizing the gains for the sake of the loan.

veeti 19d ago

Europe is a retirement home rigged to favor old people and old money. The thought that you could save on your own and enjoy compound interest is forbidden.

decimalenough 19d ago

> They took an investment of 70M at a valuation of 1000M, in a country that has a well-known 1% tax of valuation, but they failed to write payment of that tax into the funding papers and fled the country to dodge a 10M annual tax bill. The tax bill is 10M only if they control 100% of the shares. Given that they've taken funding from at least 15 investors/VCs, this is clearly not the case. https://tracxn.com/d/companies/dune-analytics/__XskUZos4lkfEOnTJIbC-1n9WdooVINLFPRtWW9pdZC4/funding-and-investors https://tracxn.com/d/companies/dune-analytics/__XskUZos4lkfE...

like_any_other 19d ago
That's unrelated to my question.