Janet Yellen - Unrealized Capital Gains Tax. WTF

https://www.cnbc.com/2021/01/20/oaktrees-howard-m…

Apparently, Janet Yellen has been floating the idea of an "unrealized capital gains tax". It doesnt take a genius to realize how stupid this is and how difficult it would be to actually implement. Do you think theres a chance this actually happens? If so, this would be a major hit to anyone who invests and tries to preserve wealth. I hope this is just fake news.

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Comments (82)

  • Analyst 1 in IB - Gen
Jan 20, 2021 - 11:23pm

its so retarded. if this passed everyone would pull their money out of the market causing a massive crash

  • Analyst 1 in S&T - Equities
Jan 20, 2021 - 11:25pm

Anything is possible. If filibuster ends this is a guarantee. 

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Most Helpful
Jan 21, 2021 - 2:05am

We deserve this.  We have voted in a clown world cabinet.

Between. This and full scale amnesty to all illegals im already missing the idiot trump crew.

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Jan 21, 2021 - 11:12am

wherethefisdonny

We deserve this.  We have voted in a clown world cabinet.

Between. This and full scale amnesty to all illegals im already missing the idiot trump crew.

Just opening gambit. Yellen is a serious leading economist and likely doesn't believe this drivel beyond using it as an opening position. not sure about quality of the rest of the cabinet but the consensus I've heard is a lot of Washington stalwarts vs what the far left wanted 

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  • Analyst 1 in IB - Gen
Jan 22, 2021 - 11:05pm

wherethefisdonny

We deserve this.  We have voted in a clown world cabinet.

Between. This and full scale amnesty to all illegals im already missing the idiot trump crew.

What would you do about illegals here currently? Love the big talk on China because it's an oppressive state, but then I assume you would want similar tactics here when it comes to a minority group.

Jan 23, 2021 - 9:31am

Not really sure how you can make an equivalency with China. Uyghurs and associated minority groups are native to the area and legally live there, whereas illegal immigrants have ILLEGALLY crossed the borders. They are not native to the US, and have already committed a crime. When you commit a crime, you should receive punishment. If you do not have the paperwork to be in the US, you should be deported back to your country. And btw deportation is not the same as genocide and sterilization. 

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Jan 21, 2021 - 11:00am

So what happens when we lose money? Will we get a refund or tax write off for future gains?
 

what happens if your $100 goes to $200 in year 1, but goes to $100 in year 2? U have to pay Cash taxes in year 1? WHAT HAPPENS IF YOU DONT HAVE CASH TO PAY IT AT THAT TIME? THEN WHAT DO YOU DO !!?

Fucking unbelievable. We are so fucked 

Jan 21, 2021 - 4:04pm

GuyLafleur

There is essentially zero chance this happens. She's a world-leading economist and knows how ludicrous this would be. Pure political posturing.

Plus the investment industry donates a lot of money to dems and will not be very happy about a tax on unrealized gains.

http://www.series65examtutor.com
Jan 21, 2021 - 1:38pm

Did Yellen say she'd consider it as in "I think it's worth exploring" consider or "some idiot SJW asked this to me and I didn't want to be an asshole telling him how stupid he is" consider?

Big difference there.

Yellen's a world class economist. Doubt she actually meant it.

But yeah how the fuck would you tax any unrealized gains? This is some Minority Report level shit man.

I guess you could build an AI model that predicts earnings fairly accurately. But even then you're just trying to collect tax 1 year earlier. Idk how this would even make a difference.

Jan 21, 2021 - 1:49pm

in practice you'd have to have brokers like me have their systems report unrealized untaxed gains to the IRS in the same way we report realized gains and dividends. the downside of this is since there's no actual transaction, the recordkeeping would also have to have the IRS feed back to us that these gains were taxed, essentially wiping out the unrealized portion. I don't think this is a tenable proposition, and while I'm sure there's a way for technology to figure it out, I think they're chasing the wrong boogeyman. it'd be remarkably easier to go after partnership, pass through, and carried interest income and just tax it the same as wages, but I'm not in charge so who tf cares

another downside is, while I don't do this, it's VERY easy to lie about cost basis on shares which don't have one automatically assigned to them. other brokers in my office have been around 40 years and have never seen someone's tax return get audited because of suspicions around cost basis, so the enforcement of this would be very difficult.

Jan 21, 2021 - 2:00pm

Hmmm. It's just weird to think about any taxation before realization. Even if they give you a refund on earnings that wasn't actually realized, they're gonna take months to whole another year to do that.

What if your projected capital gains is 10% but you end up losing 10%? And imagine running into some serious cash flow issues that you have to divert some of the capital to make up for that? Oh but you can't because they taxed you and it's going to take months to get back what they took!

I could also see everyone underreporting their projected growth figures. That'll be very bad for investment in the short term... Maybe it'll prevent bubbles but downside risk is you might end up in being forever undervalued. 

Jan 21, 2021 - 2:57pm

No, there simply is NOT a way for technology to figure this out. That's what they say ever fucking time. IRS is backed up 7 months tax returns filed last april. millions of documents they haven't gone through yet. There is absoltuely nothing the government does that deals with world class technology. This shit isn't happening

Jan 21, 2021 - 1:59pm

Wholeheartedly support it. Between this and the diversity quotas for NASDAQ, we can prepare the funeral for US markets. I truly hope to see it go through. People deserve to get what they voted for, insanity.

Never discuss with idiots, first they drag you at their level, then they beat you with experience.

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Jan 21, 2021 - 9:27pm

C'mon. Your username is based off Milton Friedman, I'd hope someone would understand basic economics and know that Yellen would never do this. Ever since the 70s, Yellen has been more Hayek than Keynesian. This is just posturing for the far-left to calm down.

Jan 22, 2021 - 5:41am

Milton Friedchickenman

Did Yellen say she'd consider it as in "I think it's worth exploring" consider or "some idiot SJW asked this to me and I didn't want to be an asshole telling him how stupid he is" consider?

Big difference there.

Yellen's a world class economist. Doubt she actually meant it.

Relax. It was clearly a joke. Why do you think I said this?

Jan 21, 2021 - 8:52pm

Yellen is a Hayek disciple, this won't happen at all. Believe it or not, this cabinet is more center-left than far left. It's just posturing to drum up initial good will. Let's be real, outside of some social issues, this administration won't do anything but provide a stable foundation for the US.

Jan 21, 2021 - 9:04pm

Agreed. The cabinet is more moderate than most people (including myself) thought Biden would go with, and in all fairness, is more centrist and experienced than Trump's cabinet picks (see: Administration turnover between 2016 and 2020).

Controversial
Jan 21, 2021 - 10:07pm

Lol.

His cabinet wants to 

1. Full scale illegal alien amnesty without new border protection (basically making us an open borders nation).

2. This stupid tax

3. Bring back critical race theory training

4. Allow trannies to compete in women's sports as men

5. Count illegals in census for house of reps allocation (this is so dumb I can't even process the logic)

Yeah, very moderate.

Bill Clinton in the 90s would have thought these were far left quackery 

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Jan 22, 2021 - 12:19am

The Biden administration is going to implode.

His cabinet seems very corporate with many Wall Street Executives.

However, the Democratic Party and many Democrat voters are becoming more far-left.

A lot of his recent actions are hurting union workers. eg Revoking the Keystone XL Pipeline and citizenship for low skilled illegal immigrants.  

I see the Fed lowering interest rates soon but it will not save us, and the US will fall into a depression. 

The National debt will be $40 trillion in a few years.

Jan 22, 2021 - 6:00am

WorldsGr8estKid

A lot of his recent actions are hurting union workers. eg Revoking the Keystone XL Pipeline

Debatable. Thing is not that significant economically nor energy supply wise. But it is symbolic. Good for a political scapegoating to send a message that the "US cares about the environment." Oldest trick in the book.

and citizenship for low skilled illegal immigrants.  

Why would this hurt union workers? You give illegal immigrants citizenship,  they become subject to the same labor laws and regulations that Americans face. Meaning, they would be required to get paid the same amount as a US citizen would (well they would be US citizens so...).

Why would anyone want to hire someone who doesn't speak English and doesn't understand American culture for the exact same price? The only competitive advantage illegals have in the labor market is that they are cheaper. Although illegal immigrants taking American jobs is a myth, if they did take American jobs than giving them citizenship will actually decrease their competitiveness in the labor market.

I see the Fed lowering interest rates soon but it will not save us, and the US will fall into a depression. 

LOL. pretty wild and unsubstantiated speculation. Interest rates are already so low due to Covid.

 I'd be more worried about permanent damages that COVID lockdowns left creating problems that may cause recession/depression in the near future.

The National debt will be $40 trillion in a few years.

Yeah we have Bush, Obama, and Trump to thank for the blowing up of the deficit.

Jan 22, 2021 - 2:04am

There is a principle in taxation that has been long-standing practice in the United States that financial wherewithal is key to a tax being owed. In other words, if a transaction occurs in which a tax payer does not have the funds to pay, a tax generally wouldn't be owed. An unrealized capital gains tax would violate this long-standing principle. Even though there is little to no chance of it passing through Congress and if it did would then be struck down by the courts, that it's even being kicked around shows the power of the New Left on the "moral" bent of the party. Any time you hear a fully idiotic piece of public policy, you can be assured the Bernie Sanders wing is making its voice heard.

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Jan 22, 2021 - 1:56pm

One thing no one is talking about in this thread that is far more dangerous and liklely that Biden himself has stated:

Cap gains taxed at ordinary rates if reported income >1 mil annually. This is an absolute kick in the fucking balls if it goes through.

Jan 22, 2021 - 10:09pm

Pizz

Bruh most of us don't make >$1M in capital gains in a year, so you'll be fine

Those of us who make less than $1M rely on the capital formation prowess of those evil, rich capitalists to maximize our opportunities in society, from start-up entrepreneurs to line workers. This is why Democrats are wrong when they say poor conservatives vote against their own economic interests. Everyone is interested in people with excess capital forming it into production of new products and services and new and greater economic opportunities. Capital goes where it is treated best. If America treats capital poorly opportunity goes elsewhere.

I can't think of a more counterproductive policy than effectively doubling capital gains rates. It won't raise much revenue and it will destroy capital formation, which already struggles under the weight of an overly conservative banking system.

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  • VP in S&T - FI
Jan 24, 2021 - 12:16pm

While i think it's a dumb policy, if the tax is small enough it won't affect investment decisions or destroy capital markets. The sad truth is that the government has us by  the balls and there's nothing we can do. Money has to be invested somewhere, and sitting in cash isn't a real option. Assuming 2% inflation on average, you lose half your purchasing power after 20 years. 

Ask yourself this question honestly:

would a 2% tax on unrealized capital gains  change the way you invest your personal portfolio?

Jan 24, 2021 - 4:47pm

While i think it's a dumb policy, if the tax is small enough it won't affect investment decisions or destroy capital markets. The sad truth is that the government has us by  the balls and there's nothing we can do. Money has to be invested somewhere, and sitting in cash isn't a real option. Assuming 2% inflation on average, you lose half your purchasing power after 20 years. 

Ask yourself this question honestly:

would a 2% tax on unrealized capital gains  change the way you invest your personal portfolio?

It would impact enough investment decisions to make capital formation more difficult. The stock market isn't the only source of capital gain.

Array

Jan 25, 2021 - 12:50am

Is the 2% on unrealized gains on non-financial securities as well? What about ownership in private businesses that obviously have unrealized cap gains above cost basis. This goes from the home you live in to the home you rent out to the pizza shop you own.

How are those going to be taxed on an annual basis? 

Last but not least, where is the cash that's going to come to fund these taxes? A 2% drawdawn on your unrealized capital gains requires people to have set aside cash for that very tax purpose. It goes against the concept of taxing income because that's a tax on generated cash flow whereas there is no generated cashflow in this event and there's still a tax on it.

  • VP in S&T - FI
Jan 24, 2021 - 3:18pm
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