"I play an incomprehensibly small violin for Elon Musk at the thought he might need to sell some more Tesla shares"... but you'd have to overturn all the insider trading rules in order to let him do it, and that's an unintended consequence. Having tax rules that aren't explicitly allowed by the 16th Amendment is also a problem.

@BenVoigt Except that Elon Musk already declared future share sales last December in order to pay his already-anticipated tax bill. If his tax bill were increased, he would pay for it in the same way. It isn't the IRS's problem if the richest man in the world is too short-sighted to pay his bills, and hey - maybe they'd even be kind enough to put him on a payment plan!

But you're proposing to change his tax bill from something he can predict and influence and know how many shares to declare a sale of, to something based on equity prices (the market as a whole has maybe 50% uncertainty in value, individual stocks have hundreds or even thousands of percent uncertainty). "already-anticipated" goes right out the window.

@BenVoigt Lots of people need to estimate their taxes, and there is a completely known process to do so. When in doubt, pay 110% of last year's balance, and you're precluded from paying penalties if you underpay this year. You would be shocked to hear how little I care about a billionaire who might need to prepay too much in taxes for once.

That completely known process to estimate income tax due would not work at all for estimating wealth tax due

@BenVoigt Yes, which is why overpayment might be necessary to prevent penalties. Again, that requires maybe 2 paragraphs out of what would be probably a 200+ page overhaul of the tax code if this was implemented. You're arguing the details, not the meat of the issue.

It would also require an amendment to the Constitution.

@BenVoigt unrealized income is still 'income' in many contexts, including under most accounting standards. And I'm not proposing a methodology for getting it done, I'm saying, basically, that I wish it were. I really don't care about how to administer it this far behind when it might ever happen. "Why make this change, when it's difficult to do so?" is not a persuasive argument.

Why should I have to give the government a slice of pie that I haven't yet baked? What if I never intend to bake it? If anything, you're arguing for a disincentive for me to ever become able to bake in the first place. Personally I'd rather someone have a giant stockpile of potential pies that benefit humankind as a whole than the government taking as much as they can to spend on invading sandy countries in the middle of nowhere.

"Insider Trading Rules" in no way prevent Elon Musk from selling his shares in Tesla. This is a false claim apparently just shamelessly invented to justify a political view.

Furthermore the claim that a Federal wealth tax would be unconstitutional is speculative at best and uninformed speculation at that. Previous SCOTUS rulings make it pretty clear that as long as it was not a tax on real estate only and was not levied on everyone, then it would be allowed under the pre-existing legal tests.

@AdamBarnes You wouldn't be giving the government a slice of pie. You'd be giving them a portion of the ingredients that you're not using. That stockpile doesn't benefit humanity while you're sitting on it; it just benefits you.

@Grade'Eh'Bacon: "Unrealized gains" are not income. Remember that the meaning of the 16th Amendment uses the legal definition of "income" in effect when the amendment was passed, not how "other contexts" choose to use the word. It's entirely ridiculous to think that subordinate law can change the meaning of the superior law, when the superior law specifically sets out the requirements to change its own meaning (the amendment process).

@RBarryYoung: Insider trading rules restrict Elon Musk to selling shares at pre-disclosed times and in pre-disclosed amounts. That doesn't prevent selling altogether; it does prevent selling the amount necessary and sufficient to cover an unpredictable tax bill.

@BenVoigt Yes, Is know, I was the CEO of a corporation for 30 years. My statement that "Insider Trading Rules" in no way prevent Elon Musk from selling his shares in Tesla" is correct. The statement that "you'd have to overturn all the insider trading rules in order to let him... [sell his shares to pay taxes]" is clearly false. The qualified claim that "it does prevent selling the amount necessary and sufficient to cover an unpredictable tax bill" is also false as evidenced by the thousands of CEOs who do it every year.

@RBarryYoung: Your logical argument requires that there be no difference in the degree of unpredictability between income and unrealized gains. Is this what you are claiming?

@BenVoigt It requires no such thing, CEOs in this situation have many different tools to deal with this. I had to deal with it almost every year.

@RBarryYoung: Are you then claiming that unrealized gains are more predictable than income?

@BenVoigt I am stating that that is irrelevant, because it is.

@RBarryYoung: You have claimed that paying unpredictable taxes on unrealized gains is not a problem because of your experience with paying unpredictable taxes on income, then you admit that compared to unrealized gains, your income tax actually was very predictable after all, causing your whole argument to collapse.

@BenVoigt If you pay 110% of your prior year tax bill in the year, then you have until filing to correct the amount paid. 'Taxing unrealized gains' doesn't mean you pay new tax daily based on value fluctuation; you have many months between knowing your tax bill and paying it. This is a problem already faced by many people in other contexts, and solutions are readily available. Anyone with 100's of Millions in assets has concierge-level service from at least 1 professional accounting firm to handle all of this. A sensible cutoff point for where such a tax might apply, would be quite helpful.

@BenVoigt I have claimed no such thing. You are trying to read into this things that I have not said, which I can only assume is because you either do not know or do not understand how these things work. I encourage you to talk to a corporate tax accountant or attorney, because there are many tools for dealing with this situation. Safe-harbors, deferred filings, amended filings, etc., etc., etc.

-1 - the answer may contain many good nuggets, but I find the tongue-in-cheek and/or sarcasm parts not particularly fitting here.

@Grade'Eh'Bacon: Not daily, no. Every 3 months in the current system. Which is shorter than the required disclosure period for insiders trading. So one or the other has to change, yes?

@BenVoigt 'every 3 months in the current system' No... that's just not how any of this works. Estimated tax payments made quarterly are based on your total annual estimated tax owing - and if you aren't sure how much your tax bill will be you can pay 110% of last year's bill, which is already known, and you won't be penalized until the following April 15, meaning you have Jan 1 -> Apr 15 to rectify underpayment. As I have said many times.

@BenVoigt I have addressed them more than once, you have just chosen to try to change the subject to irrelevant misunderstandings of how this all works and then act as though that were some kind of rebuttal. But just in case you missed it the first two times, your claim that "you'd have to overturn all the insider trading rules in order to let him... [sell his shares to pay taxes]" is false. Do you admit that?

A major problem with taxing unrealized gains is that if the value of the unsold assets drops considerably between the end of the year and when taxes are due, the asset holder may find themself unable to pay the taxes. For example, if I bought 1K of some penny stock and its value went to 100K by years end, I didn't sell, and then the value went back to 1K by April. Now I owe 15K in taxes on a stock now worth 1K. Also, in 2020 the market crashed around March with taxes due in April in the USA. If taxes for unrealized gains from 2019 had been due, a lot of people would have gone bankrupt.

@AdamBarnes ....because you still get the rest of the pie? Why do people have jobs if they have to pay income tax? Because it turns out that getting part of something is a lot better than getting nothing. Do you really think the ultra wealthy are going to completely stop investing if their gains are less? Eventually they run out of other things to do with money. (Also, who buys all the ingredients for a pie and prints out the recipe and everything if they didn't intend for pie to be made? Maybe your kid actually makes the pie, but pie is being made.)

@user4574 This isn't that hard to solve... Poor people already manage to plan ahead in order to have cash available for rent, bills, groceries, etc. You're not actually required to wait until a bill is due in order to think about how you will pay it.

@user4574 agree. Also if unrealized gains are taxable, you can argue that the you have to get compensated for unrealized losses, otherwise just sharp up and down movements leading to the same net worth over the years can make all of it belong to the tax authorities. Probably they don't want to take that risk

@user4574: That seems solvable by allowing asset-holders to use a later date for valuation of an asset that was held continuously from before end-of-year. More generally . . . if a wealth tax were actually going to be instituted, there are smart people who will be working on all issues like this and making sure that wealthy people weren't arbitrarily screwed over.

Yachts are a bare necessity, not a bear's necessity.

@HannoverFist Balu would disagree with you there.

If they take out debt to finance their lifestyle to avoid having income, how do they pay back the debt?

@Ben Voigt: But I AM using those pie ingredients. They are not money, they represent control of a company I founded. So I had a brilliant idea (or in the case of Facebook, Twitter, and the like, a really dumb idea that appealed to a lot of people, but who's judging?), implemented it, and want to go on controlling it. Why should I be forced to give up that control - which arguably might well increase the company's future value - just to give the government a cut?

@jamesqf because as a society we agreed that people pay their share of income toward public expenditures.

@BenVoigt even if you were right about insider trading, the IRS could accept payment from Musk in Tesla shares as well as dollars.