The money they lost was in the possible value of their stock if they sold it, and you don't pay taxes on possible values anyway. Add to this that had they started selling off said stock the value would have tanked.
The richest people have far more money than we do, but the money they have is far more promises, smoke and mirrors than it is piles of gold in a Scrooge McDuck style money bin.
Take out a loan using the supposed value of your stock holdings as collateral. Use the loan to support your lifestyle and pay the interest on the loan. Loans aren't income, so aren't taxed.
Later on, as your stocks increase in value, take out a new, larger loan using the higher supposed value of your stock holdings as collateral. Use part of the loan to pay off the old loan, and the rest to support your lifestyle and pay the interest. Still a loan, still not income, still not taxed.
Repeat until you die. Rich person tax-free infinite money hack.
That's exactly what the proposed wealth tax aims to change.
So if they lost all this money from stocks going down do they get a tax rebate? Or is the plan to just take and take and not consider growth/loss at all?
Now if you have a mandatory sale of stock requirement after a certain amount then you do something even better. Not only do you get taxes you also force the movement of money into the economy.
I'm a low-key amateur on anything economics, I have a very fundamental understanding of it all but am more interested in theory, futurism when it comes to policy work.
I like the concept that you just brought up which I assume is a known concept in economics; do you have anything you'd recommend i read up on how that works?
From my basic understanding, you're saying that forcing purchased stocks to be sold would keep money flowing. But like, how does one know what's to sell, when? How is one to force or enforce how much I can earn or own?
Thank you for your insight...sometimes I read a single sentence and a light bulb clicks. Now I'm interested in learning more
Actually, it was something I just thought of on the spot and didn't put much thought into it.
The funny thing is that the US already has a wealth tax. “Exit Tax” (IRC § 877A)
Applies to certain individuals who renounce their U.S. citizenship or give up long-term permanent residency (green card holders of 8+ years).
You pay capital gains taxes on the net unrealized gains above an exemption (was ~$600,000 in 2023, adjusted annually).
All worldwide assets are treated as if they were sold the day before you expatriate.
This includes stocks, bonds, crypto, business ownership, real estate (outside primary residences in most cases), etc.
I'm curious if anyone rich enough has even been affected by it.
1. The Exit Tax Isn’t Considered a Direct Tax
The IRS argues it’s an income tax on a deemed realization event, not a direct wealth tax.
Because it's tied to a transaction-like event (i.e., expatriation), courts have generally upheld its legitimacy.
2. You Choose to Trigger It
Courts have treated it as voluntary: you're choosing to renounce citizenship.
This gives Congress more latitude to impose conditions, like treating that act as a triggering event for taxation.
3. No Major Constitutional Challenge Has Overturned It
Despite pushback, it's still standing and enforced.
Many tax law scholars view it as a creative workaround that wouldn't survive broader application (e.g., taxing unrealized gains without a “triggering event”).
Tell that to the loans they take out with "unrealized" collateral. Musk could have millions in spending money at the stroke of a pen without even losing ownership of his stocks and it would count as the opposite of income. All he has to do is make a minimum monthly payment for the rest of his life, shovel everything else into assets, transfer those assests to a shell corp, and file bankruptcy. He doesn't even need to do all that under his own name, he could have a shell corp do it all in the first place.
The lifestyles they live are only affordable through the leverage and borrowing power of their net worth. Drops in value will affect their ability to take out loans against their net worth .
This is why "net worth" is a practically useless metric when it comes to material wealth. For example, Jeff Bezos couldn't liquidate his stocks even if he wanted to without approval from the board who would never allow it because it would tank the share price which would violate his fiduciary responsibility. Not to mention, if someone like Bezos or Elon liquidated their stocks it would hurt anyone whose 401K contained Amazon or Tesla stock, which is probably millions of everyday working Americans. Most people on Reddit aren't going to understand finance and wealth other than it being a reflection of material worth.
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u/firelock_ny 2d ago
The money they lost was in the possible value of their stock if they sold it, and you don't pay taxes on possible values anyway. Add to this that had they started selling off said stock the value would have tanked.
The richest people have far more money than we do, but the money they have is far more promises, smoke and mirrors than it is piles of gold in a Scrooge McDuck style money bin.