The 2022-23 Economic Crisis Megathread

[Syt]

Rich individuals and corporations can use their monetary power to influence public and political opinions - see SuperPACs, or see corporations downplaying the effetcs of tobacco or climate change despite better knowledge for decades through media campaigns and influencing politicians.

[Admiral Yi]

If it's that accessible why isn't it taxed as such? Serious question. Don't really get the unrealized status. Maybe not at full pop, but why no tax at all?

The same reason your bank account isn't taxed.

[HVC]

If it's that accessible why isn't it taxed as such? Serious question. Don't really get the unrealized status. Maybe not at full pop, but why no tax at all?

The same reason your bank account isn't taxed.

It was when I earned the money, and when I gain interest. When stocks appreciate in value (analogous to interest I think) nothing gets taxed.

Billionaires will never realize all their worth, so it'll go u taxed. Trusts and loopholes ensure their kids won't pay either.

Side question, how are loans attained with unrealized assets as collateral taxed? I assume they're not.

[HVC]

I guess it wasn't much of an issue when stocks were the pasttime of a few bored rich people. But for example in 1960 the NY stock exchange was worth 23 billion. Worth 25 trillion now.

[The Brain]

Rich individuals and corporations can use their monetary power to influence public and political opinions - see SuperPACs, or see corporations downplaying the effetcs of tobacco or climate change despite better knowledge for decades through media campaigns and influencing politicians.

I think non-state actors with the material resources to influence public opinion is a strength. In general, but maybe especially in the rise-to-total-power phase of the Orbans and Putins of the world. There is no guarantee how the non-state actors will use the strength, just like with democracy where there is always the risk that the people will vote for Hitler.

[Sheilbh]

The wealth they "capture" is the wealth they create.  Taylor Swift is not an oligarch.  Get real.

So wealth should go to the people who create it. Welcome to the left, Comrade

Note just sticking with Taylor as that's example provided but really using her as proxy for generic 'big boss'

Yes and I think she has created her wealth. I'd point out the other stat today that every billionaire under 30 inherited their wealth:
https://www.theguardian.com/business/2024/apr/03/all-billionaires-under-30-have-inherited-their-wealth-research-finds

And this is the extreme end of something that's going to happen across parts of the world - particularly the US, Canada, UK, Ireland etc - where inheritance is really important. It's going to transform lives of various millenials and zoomers. I think it's going to be important in a way that inheritance hasn't been for a while (in part because two world wars destroyed a lot of wealth).

Edit: And UBS points out that there's over 1000 billionaires (collectively worth £5.2 trillion) over 70 who are likely to transfer their wealth ini one way or another in the next decade or two. I mentioned the article before on housing and inheritance shaping people's lives, life choices, romantic choices etc - but we're really heading back to a Jane Austen world.

[Syt]

It was reported 10-15 years ago that the main avenue to accumulate personal wealth in Germany is through inheritance (not talking about the ultra-rich).

[crazy canuck]

Which is why I think looking at GDP/income data is more useful, as "stock billionaires" is largely speculative till they cash out (though of course it also translates to "real" wealth/resources to some degree. If Elon goes to the bank to get something financed for xx millions, he'll get a different response than if I do it.

Still, indication seems to be that for a small group things get better while others do GoFundMe campaigns for their insulin or work three jobs while living in their car.

It's more than that, a rich person pays much less tax because their money is taxed at a much lower rate.  Either dividends or loans against their assets (which is not taxed at all).

Meanwhile the vast majority of people live off of wage income which is has the highest tax rate.

Yi often refers to "hating" on the rich and "wealth transfers".  All the while ignoring that there has been a massive wealth transfer in favour of the very few.

[crazy canuck]

Well one way wealth is "created" is e.g. Tesla stock price going up (when it used to) and Musk declared to be X billions more wealthy. Which is ridiculous.

Why is that?  Shares can be turned into cash at will.

If it's that accessible why isn't it taxed as such? Serious question. Don't really get the unrealized status. Maybe not at full pop, but why no tax at all?

Yeah, it's funny that when it comes to being taxed, the argument is that it's unrealized, and so should not be taxed, but it can certainly be used as collateral against which loans are provided which intern is a tax-free method for the wealthy to live their life.

If most voters understood the tax code better, the task code would surely have to change.  But most people only understand the tax code as it relates to taxing employment income and so they don't really see how much the system is rigged.

[Admiral Yi]

If it's that accessible why isn't it taxed as such? Serious question. Don't really get the unrealized status. Maybe not at full pop, but why no tax at all?

The same reason your bank account isn't taxed.

It was when I earned the money, and when I gain interest. When stocks appreciate in value (analogous to interest I think) nothing gets taxed.

Billionaires will never realize all their worth, so it'll go u taxed. Trusts and loopholes ensure their kids won't pay either.

Side question, how are loans attained with unrealized assets as collateral taxed? I assume they're not.

If I buy stock that money was also taxed when it was earned, just like your bank account.

I've always thought of dividends as the equivalent of interest, but your point still stands.  You earn interest, my stock appreciates, we both have more money than we did before, we should both be taxed.

Thinking it through from first principles, I think the reason for the different tax treatment is that interest is on the cusp of being consumed whereas unrealized appreciation is still one stop away from that.  As soon as it gets transformed into money, that is the point when it is taxed.

Also consider that taxing unrealized gains and taxing realized gains are two binary choices.  Otherwise it's a stealth doubling of the capital gains rate.

Also consider how you will treat capital losses.  My stock goes up, i pay tax, then my stock goes down.  Do I get the tax back?  If not then I paid tax on nothing.

I don't get the notion of taxing loans.  I run up a credit card balance, why should I pay tax on that?

[HVC]

I agree it should only be taxed once, not at unrealized and again at realized. A better method would be two rates, I think. A lower unrealized rate which provides tax credits for if an when it becomes realized. Capital loses would act as it does now, if you sell at a loss you get to apply that against gains. Same would apply to unrealized assets you hold. Although in my made up scenario you could only carry forward, not back. Mainly just on a whim that carry backs seem easier to game the system

I mention loans because in Canada it's a classic tax avoidance scheme. You take the loan, pay no tax, and pay the principle and interest from other means of income as long as your investment return comes ahead of the interest paid your golden. Tax free use of your "unrealized" gains.


*edit* again, in my made up scenario world these loans would be taxed at full rate, no capital asset rate. Or made ineligible as collateral.

[HVC]

Thinking it through from first principles, I think the reason for the different tax treatment is that interest is on the cusp of being consumed whereas unrealized appreciation is still one stop away from that.  As soon as it gets transformed into money, that is the point when it is taxed.

I missed this part. Problem, in my view, is that with this principle there a very large amount that will never be taxed. Musk won't ever realize all his capital, for example. Nor will Mr Louis Vuitton. Add all the other unrealized gains that will never be realized and you have a lot of wealth not being taxed. But there are means that that wealth can still be used (the loan tax loop I mentioned just being one).

[crazy canuck]

If it's that accessible why isn't it taxed as such? Serious question. Don't really get the unrealized status. Maybe not at full pop, but why no tax at all?

The same reason your bank account isn't taxed.

It was when I earned the money, and when I gain interest. When stocks appreciate in value (analogous to interest I think) nothing gets taxed.

Billionaires will never realize all their worth, so it'll go u taxed. Trusts and loopholes ensure their kids won't pay either.

Side question, how are loans attained with unrealized assets as collateral taxed? I assume they're not.

If I buy stock that money was also taxed when it was earned, just like your bank account.

I've always thought of dividends as the equivalent of interest, but your point still stands.  You earn interest, my stock appreciates, we both have more money than we did before, we should both be taxed.

Thinking it through from first principles, I think the reason for the different tax treatment is that interest is on the cusp of being consumed whereas unrealized appreciation is still one stop away from that.  As soon as it gets transformed into money, that is the point when it is taxed.

Also consider that taxing unrealized gains and taxing realized gains are two binary choices.  Otherwise it's a stealth doubling of the capital gains rate.

Also consider how you will treat capital losses.  My stock goes up, i pay tax, then my stock goes down.  Do I get the tax back?  If not then I paid tax on nothing.

I don't get the notion of taxing loans.  I run up a credit card balance, why should I pay tax on that?

This explanation is a perfect illustration of what I was talking about. Wealthy people don't buy stocks with income that has already been taxed. Their holding companies purchased the stocks.

You guys are looking at this only from the perspective of a wage earner.  If you keep doing that you are going to miss entirely how the system is rigged against all wage earners.

[Admiral Yi]

I missed this part. Problem, in my view, is that with this principle there a very large amount that will never be taxed. Musk won't ever realize all his capital, for example. Nor will Mr Louis Vuitton. Add all the other unrealized gains that will never be realized and you have a lot of wealth not being taxed. But there are means that that wealth can still be used (the loan tax loop I mentioned just being one).

I guess your taking about buying stock on margin?  Why is that a loophole?  I borrowed money and I now have an asset (cash) and I  have an equivalent liability (the loan).  At that point my wealth has not increased.

[HVC]

Not even that. You buy a stock at 100. It appreciates to 300. There's 200 in wealth not taxed. Even if you sell 100 you still have the left over 200 not taxed. For the extremely wealthy that 200 appreciated will never be taxed.

I'll freely admit I'm no expert and can be missing subtleties

*edit* the loan loophole is the one I mentioned in the post before that one. The unrealized asset as collateral tax avoidance scheme