Proposed Capital Gains

[Beersheba]

Not intending to begin a partisan political conversation here. There are plenty of blogs if one is interested.

The latest taxation plan to "soak the rich" is one which taxes appreciated stock (and other property) even if it is not sold. Purchase 200 shares of GE stock at $15, $3000 total investment. Stock is now worth $40, or valuated now at $8000. There are $5000 in capital gains which are not realized, so they are currently not taxed unless sold.

Biden administration proposes taxing this guy for $5000 in LT Capital gains. And of course, if he makes sufficient money, the Obamacare tax of 2.9% is added.

Here is what would happen:

1. The increased equity in the stock would be taxed one time only. In the next year, the GE stock would NOT double/triple, so they can only milk that cow only one time.
2. Would such a law provide for what happens if the stock goes down in value? That would be a real boomerang to the big spenders.
3. What about stocks/securities tied up in a 401k or other pension plan? Political suicide. The "soak the rich" turns into "soaking the working man."

Another money-grubbing idea is to increase the Obamacare tax. The additional investment income/compensation tax was passed along with the Affordable Care Act. That money was not earmarked for Healthcare or any other provision of the ACA - it was meant to go into the general fund with no special tags as to how it would be spent. This idea has none of the downsides mentioned above in the capital gains on increased equity proposed lately.

There are two separate topics mentioned above. Corollaries to what is going on in congress can create an endless thread. I hope we can restrict it to the two topics mentioned.

[New York Enrolled Agent]

Basically it’s a fool’s errand to comment on “proposed” tax legislation. There are a gazillion (somewhat exaggerated) proposals in every year - why have any serious conversation on what might be?

[Beersheba]

Don't disagree with this - certainly can be redundant. But Kiplinger makes money doing this, and nearly all the proposed 2017 legislation did happen. Of course, congress (not the president) bought into the tax breaks at the time.

[Twin Turbo Z]

I personally do not see it happening. Too many variables, ones you pointed out and others. Would be a nightmare. Solution... If you tax unrealized gains then its only fair to remove any loss limitations. Common sense says this will not pass. If it does... It will be the tip of the iceberg and we are all F$%^!D

[Rapid Robert]

If you tax unrealized gains then its only fair to remove any loss limitations.

Fairness is irrelevant. Look at capital gains on personal-use property: in some housing markets, a long-time homeowner could have $1M of taxable gain on sale of their primary residence, but an otherwise identical taxpayer needing to sell their home at a loss gets no tax deduction. Or consider any household items you sell at a garage sale: any gains are taxable, any losses are not. Ditto for selling your personal-use vehicle.

Remember, this would only apply to really wealthy people. I think it would be very easy to recognize current unrealized investment capital gains while at the same time only recognizing losses when they are realized. Also remember, the purpose is not "soak the rich", it is to minimize the tax loophole many uber-wealthy people use, which is get their spending money by borrowing against their unrealized assets instead of having to actually sell them first, like ordinary people. See following news report from Business Insider.

When Jeff Bezos was worth $18 billion, he claimed a $4,000 tax credit intended for families earning less than $100,000