I think a law stating you can’t borrow against unrealized gains would be sensible.

You can keep your unrealized gains forever, live of your dividends for all i care, and pay no tax. But realizing them, either through selling or borrowing against, triggers a taxation.

Mhm. There’s a very good reason unrealized gains aren’t taxed: volatility. Are you and the government expected to swap cash back and forth everyday to correct for changes in the market? No that’s silly.

For that same reason, using unrealized gains as security is dangerous, in the same way as the subprime loans market was.

There’s a very good reason they should be taxed; half a dozen people are richer than god, and basically never pay any real amount of tax.

This would effectively lock out every small investor from the stock market due to the liability of both success and failure.

How so?

“Oh no, I made money, better put a small percentage of my gains away for tax season, just like I do with all of my income, because I’m American and lack a good PAYE system”.

You’ve likely made a false assumption of stable value. Questions probably demonstrates best: Individuals are to pay taxes on value at what point in time? What if it was worth much more just previous to the time? What if it’s worth much less immediately after that time?

The time will probably be Dec. 31st. A small investor can get wiped out by poor holiday earnings. Or, far more likely, stocks will be artificially shorted by hedge funds in January to create the same situation. With options shenanigans and asymmetric rules, it’s trivially easy for the big fish to immediately eat everyone else.

Someone here has made a false assumption. In fact, I’m pretty sure we both have made several. The question is who has made a fatal false assumption? Let’s go.

My root comment, at the top of all of this, was my idea that perhaps we should consider gains “realized” when they are sold OR used as a collateral in a loan.

Your assertion is that it would wipe out small investors.

I would question how many small investors are using their small investments as collateral in a loan?

Anyone doing more than DCA retirement has collateralized their holdings for margin, prerequisite to options.

You said small investors not Wallstreetbet degenerates.

I said investors, not zero-effort DCA into a managed fund. My “degenerate” ways bought my freedom. I didn’t have to beat the big fish, just people like you who think they’re the smartest person in the room.

I said investors

This would effectively lock out every small investor

But sure, now we’re just insulting each other, I’m going to ignore that and try to answer your point.

TBH. US tax is weird as fuck, and I don’t know nearly enough about it to have more than a high level discussion on it. In my head, this would simply change when you’re paying taxes, as opposed to how much.

But… Nope. Tried to reason about it, can’t think of a nice clean way out. It’s friday afternoon. I’m out.

What is your alternative solution to the over all problem?

Constitutionally outlaw corporate personhood and all derived market futures. But, that won’t solve the core issues with capitalism or human proclivity.

Sounds reasonable. Why not both? Both sound good.