News Article: Billionaires Income Tax Proposal

[Bamaro]

In part, in order to pay for the Dems trillion+ plan currently before congress, there is a lot of talk on taxing billionaires. The devil is in the details, how to do it. It seems to center around how to tax unrealized earnings on investments. Here is one proposal explained by the WSJ:

Here’s how the Wyden plan would work.

It would start in 2022 and apply to people who have a net worth of $1 billion or annual income of $100 million for the three prior consecutive years—2019, 2020 and 2021 to start. They would remain in the new tax system unless they had three straight years in which their assets and income fell below half of those thresholds.

First, as the new system starts, affected people would have to pay a tax as if they had sold their publicly traded assets. So someone who bought $2 billion worth of stock in 2010 that is now worth $20 billion would have $18 billion added to their income, taxed at the top long-term capital-gains rate of 23.8%. That $4.3 billion initial tax could be paid over five years.

Then, each year, they would have to pay a tax on the gain in value for that year. Unrealized losses could be carried forward to offset future gains or backward up to three years to offset past gains and claim refunds.

A different set of rules applies to nontraded assets such as real estate and closely held businesses. Those gains wouldn’t be taxed each year, avoiding the difficulty of assessing value annually.


Instead, they would be taxed as capital gains when sold or transferred or when the person dies. Without any other change, that rule would create a tax preference for such assets over annually taxed publicly traded stock because the tax on real estate and businesses could be deferred. The Wyden plan includes an interest charge on nontraded assets such as real estate, and that is designed to equalize the burden on those assets with the burden on publicly traded assets.

The proposal would add the interest charge to the regular tax rate but cap the total tax at 49% of the gain in value. That cap plus the way the interest is calculated could give people an incentive to shift to nontraded assets. But the rules for losses are less generous than for publicly traded assets.


The Wyden plan includes a series of rules designed to limit billionaires’ ability to escape the tax, and they would be tested quickly as the well-financed taxpayers battled with the Internal Revenue Service over what they owe.

For example, gifts and bequests, except to spouses, would be considered as triggering a capital-gains tax. Donations to charity wouldn’t.

Many trusts would be subject to this tax system if they had at least $100 million in assets or $10 million in income; those lower thresholds are aimed at preventing billionaires from splitting their assets among trusts to avoid the tax.

The plan also has rules limiting how billionaires can use trusts, deferred compensation, annuities, life insurance, tax-advantaged small-business stock and the tax breaks in low-income “opportunity zones” created in the 2017 tax law.

How the Billionaires Income Tax Would Work - WSJ

 

[dtgreg]

My plan is called the Divorce Tax (I guess some might call it the Putin Tax, ironically). I want HALF. NOW.

 

[Jon]

In part, in order to pay for the Dems trillion+ plan currently before congress, there is a lot of talk on taxing billionaires. The devil is in the details, how to do it. It seems to center around how to tax unrealized earnings on investments. Here is one proposal explained by the WSJ:


How the Billionaires Income Tax Would Work - WSJ

I don't love the concept of taxing unrealized gains but outside of forcing stock sales and then taxing the realized gains I am not sure what else to do.

 

[Chukker Veteran]

I don't love the concept of taxing unrealized gains but outside of forcing stock sales and then taxing the realized gains I am not sure what else to do.

I understand. And what happens if the account with the unrealized gain takes a catastrophic loss one year?
Sounds like an aggressive move to tax the top income bracket, and I'm of the point of view that says it's about time.

 

[Jon]

I understand. And what happens if the account with the unrealized gain takes a catastrophic loss one year?
Sounds like an aggressive move to tax the top income bracket, and I'm of the point of view that says it's about time.

we are in agreement, we need to do something. Sounds like there is a provision for losses in the plan

 

[92tide]

i was for this in the before times, but these 7-800 or so folks made out like bandits during the pandemic.

if we tax the crap out of them, they are still going to be insanely rich and powerful despite the crocodile tears from fox news that will inundate us

 

[GP for Bama]

Why should the government confiscate unrealized gains on investments? These investments in Apple, Google, Tesla or whatever create massive amounts of jobs and new technology.
Give that money to the government and it goes into the giant blackhole of government spending.

 

[Bamabuzzard]

Maybe I overlooked it, but if unrealized gains on investments are taxed, then will they be taxed again when sold and the gain becomes realized? If so that would be double taxation because the increase or "gain" has already taxed.

 

[tattooguy21]

Maybe I overlooked it, but if unrealized gains on investments are taxed, then will they be taxed again when sold and the gain becomes realized? If so that would be double taxation because the increase or "gain" has already taxed.

Yes, they will be. And taxing unrealized gains......it's pure insanity. There's no other cute word for it. Definitely not fiscally ethical (I just made that phrase up). It's like there's a whole thing about not counting chickens before they hatch.

Hit with taxes before you sale, but with taxes after you sale. I'm actually pulling for those richest to put there money in banks that don't share info with the IRS. I'm ROOTING for them. Investments through nameless shell corporations in Georgia and the like.

Tax code needs to be rewritten, agreed. Unrealized gains.....never.

 

[Bamabuzzard]

Yes, they will be. And taxing unrealized gains......it's pure insanity. There's no other cute word for it. Definitely not fiscally ethical (I just made that phrase up). It's like there's a whole thing about not counting chickens before they hatch.

Hit with taxes before you sale, but with taxes after you sale. I'm actually pulling for those richest to put there money in banks that don't share info with the IRS. I'm ROOTING for them. Investments through nameless shell corporations in Georgia and the like.

Tax code needs to be rewritten, agreed. Unrealized gains.....never.

I don't want it passing because it will be nothing more than a "trial run" that will ultimately lead to the same thing being done to the middle class and their investments.

 

[jthomas666]

If I understand the various articles I've read, The uber-rich are using the unrealized gains as a tax shelter. They take out loans based on that value of the unrealized gains, the unrealized gains keep growing.

 

[Jon]

If I understand the various articles I've read, The uber-rich are using the unrealized gains as a tax shelter. They take out loans based on that value of the unrealized gains, the unrealized gains keep growing.

Exactly what they do and no one has even mentioned how people like Musk got a half a billion dollar bailout in 2008 when he was on the ropes or the multiple billions he is getting out of the feds for SpaceX and now want to complain about actually having to help pay for it all.

 

[tattooguy21]

I'm just impressed that the the Democratic party is finally being honest about their feelings on the economy. They want it wrecked. If it's wrecked then you get to say, "see.....capitalism bad." From the article and post of OP

"That cap plus the way the interest is calculated could give people an incentive to shift to nontraded assets."

Cause why would you want people investing in the stock market? Right? I'm glad good feelings and a a dangerous lack of understanding of basic economy are comforting.

 

[tattooguy21]

If I understand the various articles I've read, The uber-rich are using the unrealized gains as a tax shelter. They take out loans based on that value of the unrealized gains, the unrealized gains keep growing.

Then penalize the bank. If they are willing to accept that as collateral, that's on them. That's the risk THEY take inherent to the deal.

What happened to "private businesses can do what they want"?

 

[tattooguy21]

Exactly what they do and no one has even mentioned how people like Musk got a half a billion dollar bailout in 2008 when he was on the ropes or the multiple billions he is getting out of the feds for SpaceX and now want to complain about actually having to help pay for it all.

That's just more federal gov't mistakes. Same guys trying to tax their way out of problems they created with this EXACT example.

Since the 08 housing market collapse guess what banks have gotten back into the last 5 years or so....

 

[92tide]

If I understand the various articles I've read, The uber-rich are using the unrealized gains as a tax shelter. They take out loans based on that value of the unrealized gains, the unrealized gains keep growing.

silly rabbit, understanding details is not a part of the whaddabout game

 

[Go Bama]

Yes, they will be. And taxing unrealized gains......it's pure insanity. There's no other cute word for it. Definitely not fiscally ethical (I just made that phrase up). It's like there's a whole thing about not counting chickens before they hatch.

Hit with taxes before you sale, but with taxes after you sale. I'm actually pulling for those richest to put there money in banks that don't share info with the IRS. I'm ROOTING for them. Investments through nameless shell corporations in Georgia and the like.

Tax code needs to be rewritten, agreed. Unrealized gains.....never.

When your home gets reassessed and you have to pay increased property tax, is that not taxing unrealized gains?

 

[jthomas666]

"That cap plus the way the interest is calculated could give people an incentive to shift to nontraded assets."

Cause why would you want people investing in the stock market? Right? I'm glad good feelings and a a dangerous lack of understanding of basic economy are comforting.

That's one of the right's favorite arguments, and it simply makes no sense. "If they raise taxes, people won't invest." It's a patently specious argument. If I make money through investments and that income is taxed, I'm still making money. And if I'm making enough money to trigger these proposals, 1. I'm making a LOT of money, and 2. I'll still have a LOT of that money after taxes.

If I don't invest, I'll have less money than if I do invest, even if my earnings are taxed.

 

[crimsonaudio]

All this will do is drive investors out of the market. The government might as well be trying to stay ahead of hackers - the uber-wealthy will always find a way.

That said, I'm 100% against taxing 'unrealized gains'.

 

[Bamabuzzard]

When your home gets reassessed and you have to pay increased property tax, is that not taxing unrealized gains?

If you wouldn't mind, can you use another example that wasn't one of legalized theft? LOL! The tax assessor's office "assessing" property for the determination of property taxes is like the fox guarding the henhouse. We've been homeowners for 21 years and every time after a "reassessment" I've made a trip to the tax assessor's office and explained to them that the value they've assigned my house is a value that is grossly unrealistic on the open market. In other words, I couldn't sell my house in the current market for the value they've assigned. Most people never even read the property tax assessment letter they get each year and just blindly pay the tax based on a value the fox determines.

I have other thoughts about property taxes but I've run out of bourbon in order to civilly discuss.