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2020 Democratic Presidential Nominees

gotta keep it super complicated or his livelihood disappears
 
There are multiple ways to account for that, right? From the piece:

So, say I have a $200K unrealized gain at the end of the tax year and then the market tanks and wipes out that profit. Even if I can carry back that loss, I won't be able to do it until the end of the next tax year.

I still owe taxes on that $200K unrealized gain in the meantime.

You are forcing people into entering recognition events in order for them to pay their taxes which could include such things as distressed sales.

There is a reason that taxation follows the cash. You have to have it to pay the taxes.
 
gotta keep it super complicated or his livelihood disappears

I don't really do individual returns, but this mark to market idea would be a bunch of extra work for them. Somebody has to account, report and reconcile it for tax reporting and compliance.

If I own 10 non-dividend paying stocks and don't sell them for 10 years, it has no tax reporting requirement. Under mark to market, there would be yearly tax reporting.
 
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Would this apply only to publicly traded assets with a determinable market value or are you going to have to get appraisals every year? How about assets that you can't sell a portion to generate your tax liability?

Under this plan, you would have to sell the portion of your portfolio to satisfy your tax liability or speculate with Uncle Sam's money. It would kill lifetime return %s on investment portfolios.

It has the potential to exasperate corrections/recessions.
 
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There is a reason that taxation follows the cash. You have to have it to pay the taxes

This is the most important part to me. Not to mention all the other complications which arise from harder to price assets and having to determine valuations every year. This would be tons of complicated extra work and fees for lawyers, consultants and accountants. So IMO reform the way we tax the transactions so fix something with capital gains rates, estates and the like. That requires little extra work, effort or complication and will raise revenue.

Disclaimer: I’m not a tax accountant or lawyer, just a guy who does his own taxes and investing
 
Under this plan, you would have to sell the portion of your portfolio to satisfy your tax liability .

Will try to respond to other parts later, but I think that this is a good thing.
 
Will try to respond to other parts later, but I think that this is a good thing.

I think for some holdings that’s easier said than done. Selling some of your apple stock to pay the tax - easy

Selling some of your private company shares - hard. How do you value those shares to determine your annual capital gain or loss? You’d need to know the value of the company then apply that to your % ownership. So I guess you hire a valuation firm? Does everyone use the same valuation firm or can you have competing valuations? Who pays for that valuation, it’s not cheap (big windfall for consulting firms). What are the standards for these firms, how can I as the govt trust that they don’t have their thumb on the scale for various assumptions that go into the valuations to keep the value stable? So maybe it should be the same firm that conducts their financial statement audits, to make sure there’s some professional standards applied to them and they’re consistent with the message in the point in time financials (huge win for accounting firms). But there’s no mandate for private companies to have audits on any sort of defined timetable so who knows when those results will be available. Likely after April 15th that’s for sure. So everyone in this boat files extensions and don’t figure out their tax liability till October. Right before the next years process starts.

Ok by some miracle we got a valuation by October. Company had a good year so you have unrealized capital gains to pay taxes on. You don’t have enough cash for that so you have to sell these shares. How? There’s no market. You can’t sell them on a stock exchange because they’re not publicly traded. A private sale? Maybe. Better save your records for tax time though. And who’s going to pay full price for those illiquid albatrosses. Or what if the company has had a shit year in the ten calendar year months while you were getting a valuation.
 
Otherwise how does this guy dispose of private company shares in the current environment and what are the tax consequences? And how can we fix those tax consequences? Someone else that is a tax guy can correct where I’m wrong.

1. Sells shares and pays capital gain tax - fix this by increasing capital gains rates
2. Gifts shares, no tax paid but basis transfers to giftees - no change needed here as giftee pays tax on one of the other scenarios
3. Dies and heirs get step up basis which is a big tax dodge on capital gains accrued - fix this by changing step up basis to make it closer to gifting
4. Puts it in a trust - I don’t know how trusts work but presumably there’s something that can be fixed here to prevent parking wealth here indefinitely. Seems like trust holdings would be exempt from the MTM stuff anyway, not sure if that idea addresses trusts. That’s where the big whales have their assets anyway
 
I think for some holdings that’s easier said than done. Selling some of your apple stock to pay the tax - easy

Selling some of your private company shares - hard. How do you value those shares to determine your annual capital gain or loss? You’d need to know the value of the company then apply that to your % ownership. So I guess you hire a valuation firm? Does everyone use the same valuation firm or can you have competing valuations? Who pays for that valuation, it’s not cheap (big windfall for consulting firms). What are the standards for these firms, how can I as the govt trust that they don’t have their thumb on the scale for various assumptions that go into the valuations to keep the value stable? So maybe it should be the same firm that conducts their financial statement audits, to make sure there’s some professional standards applied to them and they’re consistent with the message in the point in time financials (huge win for accounting firms). But there’s no mandate for private companies to have audits on any sort of defined timetable so who knows when those results will be available. Likely after April 15th that’s for sure. So everyone in this boat files extensions and don’t figure out their tax liability till October. Right before the next years process starts.

Ok by some miracle we got a valuation by October. Company had a good year so you have unrealized capital gains to pay taxes on. You don’t have enough cash for that so you have to sell these shares. How? There’s no market. You can’t sell them on a stock exchange because they’re not publicly traded. A private sale? Maybe. Better save your records for tax time though. And who’s going to pay full price for those illiquid albatrosses. Or what if the company has had a shit year in the ten calendar year months while you were getting a valuation.

Most proposals call for the mark to market tax only for publicly traded assets, which as you said is much easier. For illiquid assets like privately held business, the programs (like Senator Wydens) call for a retrospective accrual tax, in which you get taxed only at the point of sale, but adds an deferral charge to account for the benefit of deferred tax payments on gains. Here's an example from the working paper I'm pasting below that has a lot of nice info about different options for taxing the rich:

For example, suppose a wealthy investor purchases a resort for $100 million and it appreciates by
$5 million each year for 10 years at which point she sells it. Under a retrospective accrual tax, she
would be taxed at the point of sale, but as if she was paying back taxes due, with interest, on her
$5 million gain in each of the 10 years. Her tax liability would be higher than under our current
realization-based system, which would also tax her on a $50 million gain, because of the interest
charge

They have a long section with revenue projections based on various assumptions, benefits and limitations of such an approach, which are worth a read if interested, but don't want to paste a wall of text.

https://poseidon01.ssrn.com/deliver...0022030127114090121123117098115064084&EXT=pdf
 
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lol
 
 
Most proposals call for the mark to market tax only for publicly traded assets, which as you said is much easier. For illiquid assets like privately held business, the programs (like Senator Wydens) call for a retrospective accrual tax, in which you get taxed only at the point of sale, but adds an deferral charge to account for the benefit of deferred tax payments on gains. Here's an example from the working paper I'm pasting below that has a lot of nice info about different options for taxing the rich:



They have a long section with revenue projections based on various assumptions, benefits and limitations of such an approach, which are worth a read if interested, but don't want to paste a wall of text.

https://poseidon01.ssrn.com/deliver...0022030127114090121123117098115064084&EXT=pdf

Makes more sense to do it that way for the illiquid stuff. Hopefully they’d intend to just straight-line the gains over time and charge back tax interest that way, rather than trying to come up with separate values for each year they held the asset. That’d be way more simple.

Come to think of it, just do it this way for the publicly traded stocks as well. Charge back tax interest at point of sale for as long as you’ve held it. Way simpler as it’s based on information that already exists. Avoids a lot of the complications Chris mentioned due to the forced sales.

And you could still change other stuff like I mentioned to close opportunities for stepped up basis or untaxed gains.
 
Just to be clear, I’m not defending the status quo (and don’t think Chris is either). There are things that can and should be done to tax wealth but a straight up wealth tax is not simple and will require incredible complexity, which will require lawyers and accountants and invariably loopholes and dodges can be snuck in over time due to the complexity.

Keep it simple, work with information that already exists. Apologies if this is all summarized in that paper I haven’t read yet.

Also not lost on me that Republicans will use similar arguments to preserve the status quo because their generational wealth donors like it. I do want changes to the status quo though.
 
Makes more sense to do it that way for the illiquid stuff. Hopefully they’d intend to just straight-line the gains over time and charge back tax interest that way, rather than trying to come up with separate values for each year they held the asset. That’d be way more simple.

Come to think of it, just do it this way for the publicly traded stocks as well. Charge back tax interest at point of sale for as long as you’ve held it. Way simpler as it’s based on information that already exists. Avoids a lot of the complications Chris mentioned due to the forced sales.

And you could still change other stuff like I mentioned to close opportunities for stepped up basis or untaxed gains.

Doing it that way would also work and be a big improvement. In the paper they specifically address that point too, but it's a quibble:

Some have suggested applying a retrospective accrual regime to both publicly-traded and nonpublicly-traded assets (Grubert & Altshuler, 2016; Shakow, 1986). This would ensure that gains
publicly-traded and non-publicly traded assets were taxed identically and would certainly be an
improvement over the current system. However, it would not eliminate one reason that asset
holders might defer gains: waiting for a reduction in rates or repeal of the retrospective regime. As
a result, we view a combined system as a better approach
 
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