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Unrealized Gain - Or how the Uber wealthy pay little tax

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Galloism
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Unrealized Gain - Or how the Uber wealthy pay little tax

Postby Galloism » Tue Jun 08, 2021 5:18 pm

From this post:

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?
Last edited by Galloism on Tue Jun 08, 2021 5:28 pm, edited 2 times in total.
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Bombadil
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Postby Bombadil » Tue Jun 08, 2021 5:45 pm

I suppose the main challenge is that whoever does the valuations will be tied up in litigation for years, how do you correctly assess a painting, or a diamond necklace.. i can even see the value of property being squabbled over endlessly.

The second challenge would be putting up the cash against those valuations, I guess banks will be happy as they launch their 'low interest tax payment' scheme..

..I mean, I'm all for taxing the rich more..

The 25 richest Americans, including Jeff Bezos, Warren Buffett and Elon Musk, paid a “true tax rate” of just 3.4% between 2014 and 2018, according to an investigation by ProPublica, despite their collective net worth rising by more than $400bn in the same period.

..where to your point..

The billionaires are not accused of illegal activity. But the rates expose the failures of America’s tax laws to levy increases in wealth derived from assets in the way wages – the prime source of income for most Americans – are taxed.

“America’s billionaires avail themselves of tax-avoidance strategies beyond the reach of ordinary people,” ProPublica reported. “Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by US laws as taxable income unless and until the billionaires sell.”


Link

Is another way to front end it, so you pay a wealth tax on purchases over a certain amount, I don't mind a 100% tax on any purchase over $1M for example, so boo hoo.. luxury cars and diamonds will take a hit or something.. essentially useless vanity purchases.
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Galloism
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Postby Galloism » Tue Jun 08, 2021 5:50 pm

Bombadil wrote:I suppose the main challenge is that whoever does the valuations will be tied up in litigation for years, how do you correctly assess a painting, or a diamond necklace.. i can even see the value of property being squabbled over endlessly.

The second challenge would be putting up the cash against those valuations, I guess banks will be happy as they launch their 'low interest tax payment' scheme..

..I mean, I'm all for taxing the rich more..

The 25 richest Americans, including Jeff Bezos, Warren Buffett and Elon Musk, paid a “true tax rate” of just 3.4% between 2014 and 2018, according to an investigation by ProPublica, despite their collective net worth rising by more than $400bn in the same period.

..where to your point..

The billionaires are not accused of illegal activity. But the rates expose the failures of America’s tax laws to levy increases in wealth derived from assets in the way wages – the prime source of income for most Americans – are taxed.

“America’s billionaires avail themselves of tax-avoidance strategies beyond the reach of ordinary people,” ProPublica reported. “Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by US laws as taxable income unless and until the billionaires sell.”


Link

Is another way to front end it, so you pay a wealth tax on purchases over a certain amount, I don't mind a 100% tax on any purchase over $1M for example, so boo hoo.. luxury cars and diamonds will take a hit or something.. essentially useless vanity purchases.

Of course, things that don’t have a public market (paintings, etc) it’s hard to determine. But every person in this list (and many more) have the vast portion of their wealth - and far more than the $75 million needed to trigger the mark to market treatment - in securities that have what we call in the tax business “readily determinable value”.

As in, they’re publicly traded all day every day, and we know exactly what the market says they’re worth.

And since we’re not taxing wealth exactly, but using assets as a measure on when a person is required to use mark to market on their investment income, there should be very little litigation regarding whether they met/did not meet the 75 million line.

(As an aside, we do this for corporations when they hit a certain asset line - they must switch to accrual accounting. So it’s not really an unprecedented idea.)
Last edited by Galloism on Tue Jun 08, 2021 5:54 pm, edited 1 time in total.
Venicilian: wow. Jesus hung around with everyone. boys, girls, rich, poor(mostly), sick, healthy, etc. in fact, i bet he even went up to gay people and tried to heal them so they would be straight.
The Parkus Empire: Being serious on NSG is like wearing a suit to a nude beach.
New Kereptica: Since power is changed energy over time, an increase in power would mean, in this case, an increase in energy. As energy is equivalent to mass and the density of the government is static, the volume of the government must increase.


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Bombadil
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Postby Bombadil » Tue Jun 08, 2021 6:00 pm

Galloism wrote:
Bombadil wrote:I suppose the main challenge is that whoever does the valuations will be tied up in litigation for years, how do you correctly assess a painting, or a diamond necklace.. i can even see the value of property being squabbled over endlessly.

The second challenge would be putting up the cash against those valuations, I guess banks will be happy as they launch their 'low interest tax payment' scheme..

..I mean, I'm all for taxing the rich more..

The 25 richest Americans, including Jeff Bezos, Warren Buffett and Elon Musk, paid a “true tax rate” of just 3.4% between 2014 and 2018, according to an investigation by ProPublica, despite their collective net worth rising by more than $400bn in the same period.

..where to your point..

The billionaires are not accused of illegal activity. But the rates expose the failures of America’s tax laws to levy increases in wealth derived from assets in the way wages – the prime source of income for most Americans – are taxed.

“America’s billionaires avail themselves of tax-avoidance strategies beyond the reach of ordinary people,” ProPublica reported. “Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by US laws as taxable income unless and until the billionaires sell.”


Link

Is another way to front end it, so you pay a wealth tax on purchases over a certain amount, I don't mind a 100% tax on any purchase over $1M for example, so boo hoo.. luxury cars and diamonds will take a hit or something.. essentially useless vanity purchases.

Of course, things that don’t have a public market (paintings, etc) it’s hard to determine. But every person in this list (and many more) have the vast portion of their wealth - and far more than the $75 million needed to trigger the mark to market treatment - in securities that have what we call in the tax business “readily determinable value”.

As in, they’re publicly traded all day every day, and we know exactly what the market says they’re worth.

And since we’re not taxing wealth exactly, but using assets as a measure on when a person is required to use mark to market on their investment income, there should be very little litigation regarding whether they met/did not meet the 75 million line.

(As an aside, we do this for corporations when they hit a certain asset line - they must switch to accrual accounting. So it’s not really an unprecedented idea.)


So.. say you have an Enron, whereby assets are valued on 12/31 but within days massive fraud is uncovered and the stock value plummets.. I just feel that, to some degree, the government is held responsible for the false valuation - or who do people sue, not Enron as they'll get very little, perhaps the auditor if you can show they specifically participated in the fraud.. so the endless well of money is to say 'in taxing me on the valuation, the government had a responsibility to properly assess that value and if they'd done so they'd have uncovered the fraud before I paid huge tax on worthless value..'

Hence I wonder who is held responsible for the valuation, because that's where I see issues crop up.
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Postby Valentine Z » Tue Jun 08, 2021 6:05 pm

I always knew Uber drivers and the company are not the ones to pay taxes. :P


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Postby Galloism » Tue Jun 08, 2021 6:06 pm

Bombadil wrote:
Galloism wrote:Of course, things that don’t have a public market (paintings, etc) it’s hard to determine. But every person in this list (and many more) have the vast portion of their wealth - and far more than the $75 million needed to trigger the mark to market treatment - in securities that have what we call in the tax business “readily determinable value”.

As in, they’re publicly traded all day every day, and we know exactly what the market says they’re worth.

And since we’re not taxing wealth exactly, but using assets as a measure on when a person is required to use mark to market on their investment income, there should be very little litigation regarding whether they met/did not meet the 75 million line.

(As an aside, we do this for corporations when they hit a certain asset line - they must switch to accrual accounting. So it’s not really an unprecedented idea.)


So.. say you have an Enron, whereby assets are valued on 12/31 but within days massive fraud is uncovered and the stock value plummets.. I just feel that, to some degree, the government is held responsible for the false valuation - or who do people sue, not Enron as they'll get very little, perhaps the auditor if you can show they specifically participated in the fraud.. so the endless well of money is to say 'in taxing me on the valuation, the government had a responsibility to properly assess that value and if they'd done so they'd have uncovered the fraud before I paid huge tax on worthless value..'

Hence I wonder who is held responsible for the valuation, because that's where I see issues crop up.

That’s a fair point, although with a 75 million asset floor before a person is required to adopt mark to market treatment, you’d be talking very very few cases.

But we could create an NOL type treatment for mark to market securities in that case, and take the subsequent year’s losses backwards to set off against prior gains.
Venicilian: wow. Jesus hung around with everyone. boys, girls, rich, poor(mostly), sick, healthy, etc. in fact, i bet he even went up to gay people and tried to heal them so they would be straight.
The Parkus Empire: Being serious on NSG is like wearing a suit to a nude beach.
New Kereptica: Since power is changed energy over time, an increase in power would mean, in this case, an increase in energy. As energy is equivalent to mass and the density of the government is static, the volume of the government must increase.


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Postby Kowani » Tue Jun 08, 2021 6:12 pm

in a total shock and not indicative on anything, the feds are now looking into the release...on the ProPublica side

Federal officials are looking into the release of tax information for wealthy Americans, IRS Commissioner Charles Rettig said Tuesday, after a report said that a number of wealthy individuals paid no federal income taxes in certain years.

Rettig said at a Senate Finance Committee hearing that officials are looking into the ProPublica report, which cited information the outlet said was obtained from an anonymous source. The agency head said he understands the concerns about such information being leaked.

The IRS chief said there is an investigation "with respect to the allegations that the source of the information in that article came from the Internal Revenue Service." A Treasury Department spokeswoman separately said in a statement that "the unauthorized disclosure of confidential government information is illegal" and is being referred to multiple federal agencies for investigation.

"The matter is being referred to the Office of the Inspector General, Treasury Inspector General for Tax Administration, Federal Bureau of Investigation, and the U.S. Attorney’s Office for the District of Columbia, all of whom have independent authority to investigate," Treasury Department spokeswoman Lily Adams said. The IRS has systems where it tracks employees who obtain access to taxpayers' information and has fired workers before for having unauthorized access, The Wall Street Journal noted.
Rettig told lawmakers at Tuesday's hearing that employees and others who release such information to the public will face criminal penalties for their actions. [Cont'd]
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Postby Galloism » Tue Jun 08, 2021 6:16 pm

Kowani wrote:in a total shock and not indicative on anything, the feds are now looking into the release...on the ProPublica side

Federal officials are looking into the release of tax information for wealthy Americans, IRS Commissioner Charles Rettig said Tuesday, after a report said that a number of wealthy individuals paid no federal income taxes in certain years.

Rettig said at a Senate Finance Committee hearing that officials are looking into the ProPublica report, which cited information the outlet said was obtained from an anonymous source. The agency head said he understands the concerns about such information being leaked.

The IRS chief said there is an investigation "with respect to the allegations that the source of the information in that article came from the Internal Revenue Service." A Treasury Department spokeswoman separately said in a statement that "the unauthorized disclosure of confidential government information is illegal" and is being referred to multiple federal agencies for investigation.

"The matter is being referred to the Office of the Inspector General, Treasury Inspector General for Tax Administration, Federal Bureau of Investigation, and the U.S. Attorney’s Office for the District of Columbia, all of whom have independent authority to investigate," Treasury Department spokeswoman Lily Adams said. The IRS has systems where it tracks employees who obtain access to taxpayers' information and has fired workers before for having unauthorized access, The Wall Street Journal noted.
Rettig told lawmakers at Tuesday's hearing that employees and others who release such information to the public will face criminal penalties for their actions. [Cont'd]

I mean yeah, that was going to happen.

If this info came from the IRS database, whoever leaked it did something very very very illegal.
Venicilian: wow. Jesus hung around with everyone. boys, girls, rich, poor(mostly), sick, healthy, etc. in fact, i bet he even went up to gay people and tried to heal them so they would be straight.
The Parkus Empire: Being serious on NSG is like wearing a suit to a nude beach.
New Kereptica: Since power is changed energy over time, an increase in power would mean, in this case, an increase in energy. As energy is equivalent to mass and the density of the government is static, the volume of the government must increase.


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Postby Tinhampton » Tue Jun 08, 2021 6:21 pm

How can a prophecy sustain itself and why should this affect how much tax Jeff Bezos pays?
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Postby Bombadil » Tue Jun 08, 2021 6:22 pm

Kowani wrote:in a total shock and not indicative on anything, the feds are now looking into the release...on the ProPublica side

Rettig said at a Senate Finance Committee hearing that officials are looking into the ProPublica report, which cited information the outlet said was obtained from an anonymous source.


Government sure can move fast when it comes to finding out who released tax information on the wealthy..
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Galloism
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Postby Galloism » Tue Jun 08, 2021 6:26 pm

Tinhampton wrote:How can a prophecy sustain itself and why should this affect how much tax Jeff Bezos pays?

So basically, once you cross 50 million or so (as was explained to me by a couple of economists), the wealth essentially becomes self-sustaining where you don't have to do anything at all. You can do anything you want anytime you want, you can invest both well and badly, and the money just keeps rolling in as the good bets always outpace the bad ones due to the broad breadth of investing.

It's at this point it's essentially moving under its own power, and we should not be overly concerned with their gains and losses as true crashes in their worth would be exceptionally rare.

Basically, you can go bankrupt (and not Donald Trump bankrupt, really bankrupt) below 50 million or so. Above 50 million they basically never occurs, as the wealth perpetuates its own existence.
Venicilian: wow. Jesus hung around with everyone. boys, girls, rich, poor(mostly), sick, healthy, etc. in fact, i bet he even went up to gay people and tried to heal them so they would be straight.
The Parkus Empire: Being serious on NSG is like wearing a suit to a nude beach.
New Kereptica: Since power is changed energy over time, an increase in power would mean, in this case, an increase in energy. As energy is equivalent to mass and the density of the government is static, the volume of the government must increase.


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Postby Borderlands of Rojava » Tue Jun 08, 2021 6:27 pm

Kowani wrote:in a total shock and not indicative on anything, the feds are now looking into the release...on the ProPublica side

Federal officials are looking into the release of tax information for wealthy Americans, IRS Commissioner Charles Rettig said Tuesday, after a report said that a number of wealthy individuals paid no federal income taxes in certain years.

Rettig said at a Senate Finance Committee hearing that officials are looking into the ProPublica report, which cited information the outlet said was obtained from an anonymous source. The agency head said he understands the concerns about such information being leaked.

The IRS chief said there is an investigation "with respect to the allegations that the source of the information in that article came from the Internal Revenue Service." A Treasury Department spokeswoman separately said in a statement that "the unauthorized disclosure of confidential government information is illegal" and is being referred to multiple federal agencies for investigation.

"The matter is being referred to the Office of the Inspector General, Treasury Inspector General for Tax Administration, Federal Bureau of Investigation, and the U.S. Attorney’s Office for the District of Columbia, all of whom have independent authority to investigate," Treasury Department spokeswoman Lily Adams said. The IRS has systems where it tracks employees who obtain access to taxpayers' information and has fired workers before for having unauthorized access, The Wall Street Journal noted.
Rettig told lawmakers at Tuesday's hearing that employees and others who release such information to the public will face criminal penalties for their actions. [Cont'd]


Feds oppress the press. More at 9 if the DHS doesn't take us to a blacksite first.
Last edited by Borderlands of Rojava on Tue Jun 08, 2021 6:28 pm, edited 1 time in total.
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Postby Caurus » Tue Jun 08, 2021 7:47 pm

This mark to market proposal does sound like a good idea for closing up tax loopholes, but I have one concern about it. Maybe I don't fully understand it, but what would exactly fall under such a proposal? Securities and other financial assets in general are straight forward, but what else would be considered a taxable asset? Antiques, for example, gain in value over time as well. In 2005, the asking price for a Zenith K-412R portable radio was $99.00 (USD). The same model was valued around $185.00 in 2017. Would that be considered an unrecognized gain or would it be limited to only financial assets?

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Postby USS Monitor » Tue Jun 08, 2021 10:53 pm

Interesting idea. You might run into some snags as people look for ways around it, but it's not a bad thought.
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Postby Nevertopia » Tue Jun 08, 2021 10:56 pm

Galloism wrote:From this post:

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?

as a rich person what makes you think I cant pay for this problem to go away in my favour?
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Galloism
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Postby Galloism » Wed Jun 09, 2021 10:05 am

Caurus wrote:This mark to market proposal does sound like a good idea for closing up tax loopholes, but I have one concern about it. Maybe I don't fully understand it, but what would exactly fall under such a proposal? Securities and other financial assets in general are straight forward, but what else would be considered a taxable asset? Antiques, for example, gain in value over time as well. In 2005, the asking price for a Zenith K-412R portable radio was $99.00 (USD). The same model was valued around $185.00 in 2017. Would that be considered an unrecognized gain or would it be limited to only financial assets?

So to avoid much of the pain, I would say assets with "readily determinable value". This is a tax term that generally refers to "publicly traded assets", like stock and options and derivatives and all that stuff.

This would leave out things like art, antiques, and real estate for the most part, but would be flexible enough that as new financial products are invented and marketed and available for trade we could simply incorporate them as we go.
Venicilian: wow. Jesus hung around with everyone. boys, girls, rich, poor(mostly), sick, healthy, etc. in fact, i bet he even went up to gay people and tried to heal them so they would be straight.
The Parkus Empire: Being serious on NSG is like wearing a suit to a nude beach.
New Kereptica: Since power is changed energy over time, an increase in power would mean, in this case, an increase in energy. As energy is equivalent to mass and the density of the government is static, the volume of the government must increase.


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Galloism
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Founded: Aug 20, 2005
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Postby Galloism » Wed Jun 09, 2021 10:06 am

Nevertopia wrote:as a rich person what makes you think I cant pay for this problem to go away in my favour?

Obviously, this is a standard practice for the rich, to lobby against the paying of taxes and things of that nature.

But that's why we have to hold the line.
Venicilian: wow. Jesus hung around with everyone. boys, girls, rich, poor(mostly), sick, healthy, etc. in fact, i bet he even went up to gay people and tried to heal them so they would be straight.
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Caurus
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Postby Caurus » Wed Jun 09, 2021 10:26 pm

Galloism wrote:So to avoid much of the pain, I would say assets with "readily determinable value". This is a tax term that generally refers to "publicly traded assets", like stock and options and derivatives and all that stuff.

This would leave out things like art, antiques, and real estate for the most part, but would be flexible enough that as new financial products are invented and marketed and available for trade we could simply incorporate them as we go.

Yeah, that sound good to me.

That last part there, "incorporate them as we go", got me thinking though. How would we go about taxing cryptocurrencies given that they tend to work through pseudonyms and anonymity? Bitcoin, which, last I checked was valued around $37,000 per coin, ties accounts to specific addresses rather than persons. I know that the IRS considers Bitcoin to be subject to capital gains, but how do they go about tracking down users?

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Saiwania
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Postby Saiwania » Thu Jun 10, 2021 4:55 am

Galloism wrote: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?


If I own a lot of stock, I shouldn't have to sell my portfolio if I don't want to do so. Maybe most of my holdings are down in value and I want to take the risk of waiting until those companies go back up in value, because I'm a long term investor where the aim is to buy in low and sell when it is high enough to provide a comfortable enough return.

If I've made no income from capital gains, no taxes should need to be paid. Just as I shouldn't pay tax if I've earned no income via working for the year.

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Borderlands of Rojava
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Postby Borderlands of Rojava » Thu Jun 10, 2021 10:06 am

Saiwania wrote:
Galloism wrote: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?


If I own a lot of stock, I shouldn't have to sell my portfolio if I don't want to do so. Maybe most of my holdings are down in value and I want to take the risk of waiting until those companies go back up in value, because I'm a long term investor where the aim is to buy in low and sell when it is high enough to provide a comfortable enough return.

If I've made no income from capital gains, no taxes should need to be paid. Just as I shouldn't pay tax if I've earned no income via working for the year.


The thing is, the wealthy almost certainly made money from capital gains.
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Galloism
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Postby Galloism » Thu Jun 10, 2021 10:15 am

Saiwania wrote:
Galloism wrote: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?


If I own a lot of stock, I shouldn't have to sell my portfolio if I don't want to do so. Maybe most of my holdings are down in value and I want to take the risk of waiting until those companies go back up in value, because I'm a long term investor where the aim is to buy in low and sell when it is high enough to provide a comfortable enough return.

If I've made no income from capital gains, no taxes should need to be paid. Just as I shouldn't pay tax if I've earned no income via working for the year.

So, there's several problems with this post.

1) If your investments were down at 12/31, and you have assets greater than 75 million, it would actually pull your losses forward to the tax year they really occurred instead of those losses being suspended until you sell.
2) The notion that you have "no income from capital gains" doesn't really fit the reality we currently live in when stock and cash are essentially instantly swappable at a given market value. We even recognize such as capital gains for financial reasons - we just call them unrealized capital gains. We even do implied tax consequences of the gain on the financial statements if the position has moved enough for it to be material.
Venicilian: wow. Jesus hung around with everyone. boys, girls, rich, poor(mostly), sick, healthy, etc. in fact, i bet he even went up to gay people and tried to heal them so they would be straight.
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New Kereptica: Since power is changed energy over time, an increase in power would mean, in this case, an increase in energy. As energy is equivalent to mass and the density of the government is static, the volume of the government must increase.


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Saiwania
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Postby Saiwania » Thu Jun 10, 2021 2:17 pm

Galloism wrote:1) If your investments were down at 12/31, and you have assets greater than 75 million, it would actually pull your losses forward to the tax year they really occurred instead of those losses being suspended until you sell.
2) The notion that you have "no income from capital gains" doesn't really fit the reality we currently live in when stock and cash are essentially instantly swappable at a given market value. We even recognize such as capital gains for financial reasons - we just call them unrealized capital gains. We even do implied tax consequences of the gain on the financial statements if the position has moved enough for it to be material.


I don't see any problem with the first point. That is how stock market has always worked, you don't lock in your gains until you sell and you don't lock in any losses until you sell or the company goes bankrupt. In any case, someone shouldn't be forced to divest just because they kept their portfolio for too long. The entire point of long term investing is to hold onto stocks for a while if not accumulate equity in a company (regardless of how small or large that portion is) so that in the future- you'll maybe have a good return.

I don't disagree that money gained from investing can be taxed, but the point is that this shouldn't be until the shares are actually sold. If I get dividends that can be taxed. If its only on paper, it shouldn't count if I haven't yet physically gained or lost any money.

It isn't individual long term investors' fault that the mega wealthy don't earn income via wages/salaries but instead via Wall Street trickery. Find some other way to tax the mega wealthy at the rate they should be at, without interfering with the ability of individuals to manage their own portfolios as they see fit.

I'm not a day trader where I panic because the stock is plunging down in value, unless I believe the company is in danger of going bankrupt for real, I should be able to ride out the bottom of the market if that's what I want to do, and buy more shares of it in the mean time, if I believe in that company's future. It makes no sense to sell until it's at least at more than the price I bought the shares for, if not double or triple in value.
Last edited by Saiwania on Thu Jun 10, 2021 2:18 pm, edited 1 time in total.

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Galloism
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Postby Galloism » Thu Jun 10, 2021 3:19 pm

Saiwania wrote:
Galloism wrote:1) If your investments were down at 12/31, and you have assets greater than 75 million, it would actually pull your losses forward to the tax year they really occurred instead of those losses being suspended until you sell.
2) The notion that you have "no income from capital gains" doesn't really fit the reality we currently live in when stock and cash are essentially instantly swappable at a given market value. We even recognize such as capital gains for financial reasons - we just call them unrealized capital gains. We even do implied tax consequences of the gain on the financial statements if the position has moved enough for it to be material.


I don't see any problem with the first point. That is how stock market has always worked, you don't lock in your gains until you sell and you don't lock in any losses until you sell or the company goes bankrupt. In any case, someone shouldn't be forced to divest just because they kept their portfolio for too long. The entire point of long term investing is to hold onto stocks for a while if not accumulate equity in a company (regardless of how small or large that portion is) so that in the future- you'll maybe have a good return.


So, this isn't forced divestiture. It's just recognition of gain actually received as of 12/31. How they pay their taxes is up to them.

I don't disagree that money gained from investing can be taxed, but the point is that this shouldn't be until the shares are actually sold. If I get dividends that can be taxed. If its only on paper, it shouldn't count if I haven't yet physically gained or lost any money.


So, here's an interesting question for you.

What's the difference between dividend reinvestment and growth of capital of the stock? Let's have two companies, and we'll assume perfect symmetry for the purposes of this example.

John owns 1000 shares of company A, currently trading at $100 per share. Sally owns 1000 shares of company B, also trading at $100 per share. Each company has $10 per share of net positive cash flow.

Company A issues a $10 per share dividend. John receives $10,000, but does automatic dividend reinvestment and acquires 100 more shares. He has 1100 shares, valued at $100 per share ($110,000).

Company B retains the capital, the market reacts by recognizing the company has $10 more per share and the stock goes up by $10 per share. Salley's shares are now worth $110 each, but she still has 1000 shares (so... $110,000).

How was issuing the dividend meaningfully different than not issuing the dividend?

It isn't individual long term investors' fault that the mega wealthy don't earn income via wages/salaries but instead via Wall Street trickery. Find some other way to tax the mega wealthy at the rate they should be at, without interfering with the ability of individuals to manage their own portfolios as they see fit.


Again, this is a false claim. My proposal does not require the ultra wealthy (>$75 million) divest of their portfolios. It only requires them to recognize income by a different (and currently acceptable) accounting method.

I'm not a day trader where I panic because the stock is plunging down in value, unless I believe the company is in danger of going bankrupt for real, I should be able to ride out the bottom of the market if that's what I want to do, and buy more shares of it in the mean time, if I believe in that company's future. It makes no sense to sell until it's at least at more than the price I bought the shares for, if not double or triple in value.


And again, the proposal doesn't require anyone sell their shares. This is you failing to understand what mark to market is.
Venicilian: wow. Jesus hung around with everyone. boys, girls, rich, poor(mostly), sick, healthy, etc. in fact, i bet he even went up to gay people and tried to heal them so they would be straight.
The Parkus Empire: Being serious on NSG is like wearing a suit to a nude beach.
New Kereptica: Since power is changed energy over time, an increase in power would mean, in this case, an increase in energy. As energy is equivalent to mass and the density of the government is static, the volume of the government must increase.


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Saiwania
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Postby Saiwania » Thu Jun 10, 2021 3:50 pm

Galloism wrote:And again, the proposal doesn't require anyone sell their shares. This is you failing to understand what mark to market is.


I perhaps don't understand mark to market well enough, but I think I'd still oppose it because its associated with what Enron did to misrepresent their finances. If that situation went wrong partially because mark to market was used as opposed to historical cost accounting, doesn't this mean that the mark to market method is inherently no good when it comes to accounting?
Last edited by Saiwania on Thu Jun 10, 2021 3:59 pm, edited 1 time in total.

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Galloism
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Postby Galloism » Thu Jun 10, 2021 3:58 pm

Saiwania wrote:
Galloism wrote:And again, the proposal doesn't require anyone sell their shares. This is you failing to understand what mark to market is.


I perhaps don't understand mark to market well enough, but I think I'd still oppose it because its associated with what Enron did to misrepresent their finances.

Um, no, it isn't. Not at all. Not in any way whatsoever.
Venicilian: wow. Jesus hung around with everyone. boys, girls, rich, poor(mostly), sick, healthy, etc. in fact, i bet he even went up to gay people and tried to heal them so they would be straight.
The Parkus Empire: Being serious on NSG is like wearing a suit to a nude beach.
New Kereptica: Since power is changed energy over time, an increase in power would mean, in this case, an increase in energy. As energy is equivalent to mass and the density of the government is static, the volume of the government must increase.


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