Paying real tax on real incomes

That D idea that folk should pay income tax on unrealised capital gains.

Elon Musk’s wealth has fallen $100.5 billion so far in 2022, per Bloomberg Billionaires Index.

Hell of a refund there.

6 thoughts on “Paying real tax on real incomes”

  1. I don’t know why you think there would be a refund. If I sell shares at a profit, I have to pay Capital Gains Tax, but if I sell them at a loss, there’s no Capital Loss Benefit (apart from the ability to offset gains with losses).

    If unrealised gains were taxed, I’d expect that you would have to pay tax every year on such gains, but losses could only be used to offset gains, so if you buy shares for $1M, and they rise to $1.2M, you pay UCGT on $200,000. If they then fall to $1.1M, you pay nothing and get nothing, but if they rise to $1.35M after that, then you pay UCGT on $150,000 because the loss to $1.1M offsets the gain as far as $1.2M and you only pay the tax on the rest of the rise. This would effectively be CGT, just spread erratically over the period from acquisition to peak price.

  2. Charles, you optimistic, gullible, and idealistic Stargazer…

    You really think they’d even let you offset losses?

    Some people….

  3. Well, while most of us have taken a bit of wealth hit so far this year, it’s probably not as severe as Elon’s (which is a somewhat self inflicted). So, as that wealth gap between him and rest of us has narrowed we must now be living in a fairer and happier society.

    Crushing the stock market would probably do wonders for the GINI Coefficient, though it would also crush a lot of retirement plans, but isn’t that a small price to pay for equity and fairness?

  4. @Hopper – “how complex is the tax return going to be”

    The current tax rules for CGT allow for offsetting of loss, so no increase is needed for that. The only extra is the need to report unrealised gains and losses, so it would be as complex as another CGT section.

    @Grikath – “You really think they’d even let you offset losses?”

    Since they do for CGT, I don’t see why not. And the while UCGT idea is crazy anyway, so it would be unworkable if used without (and, probably even with). Suppose you have shares worth $1M which over a period rose to $1.1M and fell again to $1M. Each cycle costs you $100,000, so after 10 such cycles you have nothing left (though in reality you’d sell some of the $1M after the first cycle to pay the tax, so your tax liability would diminish).

    @TD

    Perfect equality is when we are all dead. Some alive and some dead is a form of inequality.

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