No matter what I said prior, did not matter. It was Joes Treasury Secretary's statement about taxing unrealized capital gains. Only crazy people actually say things like this, whether or not it happens. He got that. Then I showed him a picture of the health secretary, and he just looked and said.... maybe I should have listened to you (fake chuckle).
Comments (263)
sorted by:
I think this was based on Ron Wyden's (D-OR) idea a few years back to mark to market unrealized cap gains and tax them as income. It'd be income and wealth based (so prolly kicks in at many millions) and not include primary residence or 401ks (per the original proposal).
California had a similar proposal to tax wealth at some % that kicks in above 15m (30m if married... I guess you need to go halfsies with the wife :)) but it probably won't ever happen cause it's not very popular except on the far left.
The theory is that super rich people get most of their wealth from unrealized gains which are taxed low, whereas normal people get most of their "wealth" from income which is taxed much higher. Also, when you die the tax basis of holdings is reset so you effectively never pay taxes on those gains.
So as an example, if I give my kid a $5m trust with a bunch of stock. They borrow against it and get, say, 150k/year (3%) and essentially have "no income." Then they just sell the holdings at the best time to pay off the margin but keep the amount low so the LT cap gain taxes stay reasonable (15% ish). If they do this for 30 years and their 5m goes to 15m and they give that to their kids; the tax base on the stock resets and the 10m capital gain from 5m-15m is never taxed (estate taxes for married people kick in at 23.4m in 2021).
I don't think it's a good idea and there's always a slippery slope with taxes (i.e. AMT), but I think that's what Yellen is responding to.