Immortan Khan wrote:
While living off of lines of credit is, in my opinion, incredibly stupid even if one has a lot in assets as collateral to cover it, it's not really something that can be taxed. As for unrealized gains, how can one be taxed on something that has yet to be realized?
Also, while I hate to defend Bloomberg, it's clear well over half of his income was either donated or went towards paying taxes. I'm not sure what the point is on ragging on him unless they think paying foreign taxes or giving to charities isn't something that should be taken into consideration when it comes to how much a person owes.
This was posted in the American election thread. Basically, here’s the scenario.
You bought a few shares of Microsoft back in the 80s. They sat on a shelf in an envelope for the last thirty five years. But what happened to the value of those shares? They gained value and gained value, split a couple times, and now they’re worth a few thousands or tens of thousands. You made money!
Except you haven’t. Not yet. They’re still sitting on your shelf. So even though year after year after year you were making money, you didn’t pay tax on any of it, because you haven’t actually sold it.
If I come along and buy your shares from you, you’ll have to recognize that gain.
And this is where it gets tricky, how about if I loan you some money - far more than you paid but less than they’re worth - and use them as collateral? You haven’t sold them, so you have gotten the use of the money tax free, but owe me a very piddly amount of interest (after all, I have the collateral).
Now scale that up by millions of times. This is what the super wealthy do.
There’s actually a very simple patch we can put on this. I spoke with a couple economics friends and they suggested wealth becomes a self sustaining prophecy around 50 million in assets. I suggest at 75 million total assets, indexed to inflation, for two of the last five tax years, we require that people mark their investment securities to market.
What is mark to market?
Well…
https://www.irs.gov/taxtopics/tc429
Basically, if you are doing mark to market accounting (or, as per my proposal, were required to), you would be required to recognize all your unrecognized gain (or loss) at 12/31 based on market value on that date (currently, it’s market value at close, but we can discuss if that’s the best thing to do). This essentially would require those in the Uber wealthy category to recognize their securitized gains and losses in basically real time - instead of deferring them for years or decades.
What say ye, NSG? Require mark to market for the Uber rich?