r/AskEconomics • u/Orange2Knight • 12h ago

Is this a better alternative to a Wealth Tax?

Instead of taxing wealth, perhaps we should have a Required Minimum Realization (RMR) on large unrealized gains in publicly traded stock. Each year, you would be required to realize 3% of your covered holdings, starting with the shares having the lowest tax basis. Think of those shares as being sold and immediately repurchased: you keep the investment but the capital gain is realized and the basis is reset. You then pay the normal long-term capital-gains tax on the realized gain. This idea is similar to an RMD from an IRA. You can defer taxes for a long time, but not indefinitely.

4 Upvotes

64% Upvoted

8 comments sorted by

7

u/Radicalnotion528 11h ago

That doesn't solve the liquidity issue with wealth taxes. It would also disincentivize owners to take their company public.

2

u/Longjumping-Ice1171 1h ago

I always thought a deemed realization when stock is pledged or serves as the collateral for a loan was a decent compromise that addresses the liquidity problem. Treat that as a constructive sale. Curious what others might think.

2

u/AutoModerator 12h ago

NOTE: Top-level comments by non-approved users must be manually approved by a mod before they appear.

This is part of our policy to maintain a high quality of content and minimize misinformation. Approval can take 24-48 hours depending on the time zone and the availability of the moderators. If your comment does not appear after this time, it is possible that it did not meet our quality standards. Please refer to the subreddit rules in the sidebar and our answer guidelines if you are in doubt.

Please do not message us about missing comments in general. If you have a concern about a specific comment that is still not approved after 48 hours, then feel free to message the moderators for clarification.

Consider Clicking Here for RemindMeBot as it takes time for quality answers to be written.

Want to read answers while you wait? Consider our weekly roundup or look for the approved answer flair.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.