I’m attempting to work out if I’ve ever heard as much nonsense in such a brief time period as I’m hearing without delay in regards to the Biden-Harris plan to tax unrealized capital gains.
Under the plan, an increase in the worth of an asset could be taxed as income, even when the owner hasn’t sold the asset. Without delay, these so-called paper profits aren’t taxed.
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Never mind that this proposal is nothing latest — and is nowhere near getting passed into law anytime soon, anyway.
Or that it could only apply to the tiny number of people that have a net value of over $100 million.
Or that it could be created to repair a really specific problem, which is that most of the superrich actually pay almost no income tax in any respect.
Even after I put all that to 1 side, almost each thing I’m hearing against the proposal is improper and an insult to our intelligence.
I’m not even especially liberal. I’m a registered independent, an investor and a capitalist. But these arguments are so bad they make me wish to hoist the hammer and sickle and start singing the “Internationale.” Low-tax conservatives and Republicans needs to be cringing in embarrassment.
First, let’s start with all of the arguments being made against this policy which might be just arguments against taxes on the whole — for instance, that if we tax unrealized gains, it’s going to mean persons are being penalized for owning assets, or for saving money.
By that measure, I’m being penalized for working for a living, because I actually have to pay income tax. I’m also penalized for owning a house, since it is subject to property tax. I’m penalized for inheriting money if I actually have to pay inheritance tax. I’m penalized for shopping after I pay my state’s sales tax.
What’s left? Er … nothing.
Look, I get it. These people don’t like paying taxes. No one does. But government money has to come back from somewhere. If I would like to live in an untaxed anarchy with no government, I can probably move to one in all the world’s failed states and take my possibilities.
These persons are no different from left-wing extremists who also want something for nothing. They deserve one another.
Then there are the complaints that taxing unrealized gains is one way or the other unfair since the investment hasn’t been sold yet, or because it could be too logistically difficult to tax it before a sale.
Phooey.
Why should I actually have to sell something before it’s taxable? My city taxes my home on its assessed value every 12 months. It feels no obligation to attend till I sell it.
My mutual funds and exchange-traded funds charge me a fee based on the whole value of my investment. They don’t just bill me for the funds I’ve sold. I pay a percentage of the whole value, including all of the unrealized gains.
If you’ve a financial adviser or portfolio manager, they are going to do the identical thing.
They are going to not charge you a fee based on realized gains. They are going to charge you a fee based on total assets.
Amazing, really, on condition that such a calculation is alleged to be totally unattainable.
I actually have never heard anyone arguing that is unfair or a improper technique to do business.
Once upon a time, taxing unrealized capital gains probably would have been logistically unattainable. Imagine all of the paperwork involved, back in the times before computers.
Not.
I’ll bet your broker tracks your total portfolio value by day, hour and minute, even in the event you are only a daily customer with a web based account. Doing the mathematics on these items now is simple.
My favorite criticism about taxing paper gains comes from those within the hedge-fund and private-equity rackets whose businesses could be most affected. These are individuals who make their gazillions by charging their clients hefty fees … on their total assets under management.
No, not only the realized gains, but additionally all of the unrealized gains.
The everyday manager charges clients about 2% a 12 months on the worth of their investments, only for respiration, plus 20% of the profits (if any). It’s known — widely — because the 2-and-20 model.
Neither of those ludicrous fees is levied only on realized assets. Hand $1 million to a hedge fund or private-equity fund they usually start charging 2%, or $20,000, a 12 months from Day 1 — often before they get around to investing your money.
And in case your portfolio one way or the other goes up, say, by 50%, they’ll skim one other 20% of that — $100,000 — in extra fees. No, they won’t wait till any of those gains are realized, or “crystallized,” or whatever term they use. You’ll be paying those fees quarterly, if not monthly, because the supposed performance occurs.
If the investments then tank, even before you’ve realized a nickel of non-public gains, do you’re thinking that they’ll give that a refund? How big a sucker are you?
And these are the identical people pretending to be shocked — shocked! — by the very idea of levying a charge based on asset value or unrealized gains: “What sort of Soviet tyranny is that this?”
Pass the hankies.
It’s not as if these guys have any grounds to complain in regards to the tax code. They already get a full-service massage from the IRS every 12 months.
Hedge-fund and private-equity managers profit from the so-called carried-interest loophole, which could higher be described because the two-Ferrari tax break.
This can be a special tax break, only for them, that’s so outrageous that nonexperts simply refuse to imagine it once you tell them about it.
It means they pay taxes at special low rates. And so they get to defer their tax bills for years.
Try doing that at home.
It’s not at the same time as in the event that they are creating value. As Warren Buffett has identified, these funds, over time, generate worse returns for his or her investors than low-cost index funds.
Personally, I believe we must always levy a special tax on all hedge-fund and private-equity managers. How about 2% of their personal assets per 12 months, plus 20% of your gains — realized and unrealized?
Outrageous? Larcenous? Grotesque? Sure. We learned from the very best.