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Comment by sytelus | Hacker News Reader

No, you should not. Taking loan is very different than paying taxes. If you house goes up in value by 10% every year, you shouldn't have to pony up that much tax each year. But you should be able t take loan against your house because it's a commitment for returning that money.

Imagine, I have $1000 unrealized gain in year1. Next year market tanks and I now have -$2000 in year2. Year after that market goes backup and now I have $0 gain in year3. If I hadn't sold my investment for 3 years, I have net gain $0 and I should pay $0 tax. However, taxing unrealized gains means I will have to pay tax on additional $1000 that I never had.

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> If I hadn't sold my investment for 3 years, I have net gain $0 and I should pay $0 tax. However, taxing unrealized gains means I will have to pay tax on additional $1000 that I never had.

The suggestion was tax on unrealized gains used to back loans. You'd only be taxed on $1000 if you used $1000 of your unrealized gains to back a loan. That should also raise your basis by $1000, so sometime later when you sell the property you wouldn't be taxed on that $1000 unrealized gain again.

In many states, property taxes already adjust based on home value.

> If you house goes up in value by 10% every year, you shouldn't have to pony up that much tax each year.

Why not? Obviously not 100% of the unrealized gain, but in most jurisdictions property tax (a subset of wealth tax) is a percentage of the market value (or some proxy) of the house.

And while people might think that they are not receiving government services just for owning land, they would be wrong. Owning land means nothing if you cannot defend it, or you cannot pay someone else to defend it for you.

All those courts/lawyers/police/military cost money, as well as other government services necessary to maintain social order.

If anything, the current situation of income taxes making up most of government revenue means that people who work are disproportionately paying for expenses that disproportionately benefit people who own.

> However, taxing unrealized gains means I will have to pay tax on additional $1000 that I never had.

But would you say you derived a benefit from a society that allowed you to maintain title to something peacefully? Because that mechanism is not free.

At current income tax levels, if we go to an indirect 'wealth' tax route via unrealized gains, would need to decrease significantly to be viable without being forced to effectively liquidate your business within a couple of years to the government. Imagine if property tax was %10-50 of your property value vs. the %0.5-%2 it is today. Nobody would own their properties anymore in a span or a year or two.

Unrealized gain tax would create a huge industry trying to put valuations on random restaurants and car dealerships, and the market for small businesses like that are very illiquid, so they will get detached from reality fairly fast.

Wealth taxes generally only apply to the wealthy. The current proposals kick in at $100 million net worth. The restaurants you're concerned about are going to be fine.

The idea is to tax people who make their money through asset appreciation at the same rate as the folks who make their money by selling their labor.

> Imagine if property tax was %10-50 of your property value vs. the %0.5-%2 it is today. Nobody would own their properties anymore in a span or a year or two.

I'm not sure if this is a disingenuously hyperbolic argument, but on the off chance you literally believe the government is trying to charge recurring, annual, double digit percentage taxes on the entire value of the assets, that's not how it works. The tax is only on the appreciation. If the asset doesn't appreciate, no tax is owed.

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