The holders would pay less in taxes when the valuation drops, why would they get a credit? Also, the only people who would be subject to those taxes are already extraordinarily wealthy, so who cares?
Perhaps you're not familiar with some of the proposals to tax unrealized gains or what this means. This means there have been serious proposals from so-called serious people to tax individuals when a stock they're holding goes up, even if they don't sell that. So somebody is making a point that nobody has made a serious proposal to give a similar credit for unrealized losses. It's just the government wanting to tax and take and take.
> Also, the only people who would be subject to those taxes are already extraordinarily wealthy, so who cares?
You've got it backwards.
The already wealthy aren't the ones bothered by paying a bit more taxes on unrealized gains too much. If Warren Buffet had to pay an extra few million because a stock he held went up, he probably wouldn't really notice. It wouldn't even be a buzzkill on his day.
In the event of a tax on unrealized gains, it's the middle class dude who made a great investment on the next Apple who is screwed over from holding for a few years because he has to sell the second the price went up just a bit to pay that tax.
Second, the proposal isn’t to tax on price changes, its taxing the value of the asset at a given point in time. If the value goes down, the tax collected goes down. This is also how property taxes work - it’s a percentage of the assessed value. If the assessed value drops, you pay less in taxes.
Also, there no reason a middle class investor would have to sell all their stock to pay taxes. If the value of your portfolio doubled, you’d only have to sell between 7.5% and 10% of your holdings to cover the taxes (at the current capital gains tax rates).
Imagine you're the founder of NFLX and you held $1 billion worth of stock at the peak last year ($690 / share)
The IRS says you owe $300 million (30% of your unrealized gains)
Fast forward to spring 2022. The stock has crashed to $186, your shares are worth only $270 million but you owe a $300 million tax bill.
Not to mention the impossible situation this creates for corporate governance and the general functioning of a business when founders / board members are constantly forced to divest and therefore no one can know who will even control the company from quarter to quarter.