People advocating for a wealth tax aren't pushing for a tax on gains and losses but rather the total asset value. I've seen 1% and 2% bandied about.
So in 2024, you'd pay $1.2k in taxes (at 2%). In 2025, you'd pay $2k. And in 2026 you'd pay $1.2k
Though, usually, there's also a minimum wealth paired with the tax. Again, I usually only see it for things like individuals with over $100M in assets.
For options, it'd still be the same thing. If the strike price is $1 and the actual price is $60 and the option is vested then you'd be taxed on the $59 per option you hold.
This only gets difficult if you are talking about options in a privately held company. But, again, that's not really the case for a lot of the most wealthy who the wealth tax is targeting.
You hold Enron stock. You’ve been taxed 5% annually on the holdings for the past 5 years. To pay the tax, you decided to take out a loan instead of selling shares to pay the tax (you want to stay invested).
Someone discovers Enron is a fraud, the stock goes to $0 and you go bankrupt because you can’t repay the loans you took out to pay the tax on a (now worthless) asset.
But yeah, if you take out a loan against your home and the housing market collapses and you lose your job (ala 2008) you can end up destitute. The stock market is always a gamble and this doesn't make that better or worse.
Right, and at this point in the argument it’s also worth asking ”pay taxes with what?” which also quickly makes the idea of taxing valuations obviously absurd.
It would force any value creator to sell his creation, which basically destroys the mechanism from which all welfare for anyone in our societies currently originates.
Similar things happen with (on the way to) "bankrupt" corporations that have large tax losses that can be applied to future profits.
How do you handle your neighbor who discovers he has a $2m Pokémon card in his closet? Is he forced to sell it to pay the 5% if he doesn’t have the cash on hand to pay the tax?
It’s a messy proposition. I’ve yet to hear a clear proposal that doesn’t have sticky edge cases.
Generally speaking, that's the point. The wealth tax is trying to combat wealth inequality and the only way for such a policy to be effective is if those with considerable assets wealth decreases with time.
> How do you handle your neighbor who discovers he has a $2m Pokémon card in his closet?
Usually that's handled by having a minimum asset requirement before the wealth tax kicks in. 100M is what I've seen. It'd be a pretty easy tax to make progressive.
> It’s a messy proposition. I’ve yet to hear a clear proposal that doesn’t have sticky edge cases.
I've given the proposal I've seen in a different comment. Perhaps you didn't see it? But in any case, taxes are always messy. It's not as if you can't refine them with more and more amendments to address different scenarios as they come up. I don't think the "messiness" should be what keeps us from adopting such a tax system. There will almost certainly be a game of cat and mouse between the regulators and the wealthy regardless the proposal.
Don't let perfect be the enemy of the good.
In From 1965 to 1995 the richest man in the world had about $30-40b in today's money. This was more than the 1945-1965 era, but way less than the mess pre-war thanks to aggressive action to limit wealth.
Today the richest man in the world has $300b, Rockefeller levels before the 1929 crash.
I think it's more like 800B right now.