I've never understood this argument. If I buy a can of soda with 'already taxed' money for $.50 and sell it for $1, is that not $.50 of income that hasn't been taxed? What makes stock special?
Exactly this. The more appropriate example is you buy a can of soda for $0.50. Hold on to it until the value goes to $2.00, then to $3.00, and eventually sell it at $1.00. You are then taxed on that $0.50 of income. But why would it make sense to tax them at the $2.00 and $3.00 price points if they didn't even sell the soda?
Because they can use that unrealized value to get huge loans from banks at favorable rates then claim interest paid on taxes. This and other hoop jumping allows them to pay surprisingly little compared to their worth.
Wouldn't it make sense to stipulate that loans taken against stocks are taxed in some form?
Average workers holding stocks then would not get taxed until they sell their stock.
Those borrowing against the value of stocks using the strategy you mention would be taxed at a specific rate while the loan exists.
Perhaps that's too difficult or affects average people as well. The other option as another poster points out is to remove tax deduction from specific assets or cap the deduction.
> huge loans from banks at favorable rates then claim interest paid on taxes
So what? The loan has to be paid back one way or another. Any time person sells his can of soda to pay that loan they pay taxes on those realized gains. If they used the loan money to create new business created new profits and paid the loan without selling the can of soda that even bigger win win as they created new wealth that made everyone more rich, paid more taxes, paid the loans as well. Not to mention when the can of soda is sold in future government can stil earn more tax revenue.
It almost makes me thing people hate others for being wealth and somehow want to see them getting hurt rather than promiting a sensible low tax policy. Isn't the world better off because Bezos or Musk can borrow against their equity and create new companies rather than handing that money over to federal government ? What possible good can come out of giving more money to federal government ?
How about removing expense deductions (all of them) from tax code? Or making deductions count only against the same source? What negative effects can that have?
For the purposes of that comparison, nothing. Just like with stock, your soda wouldn't be taxed until you actually sell it.
The alternative that would "fix" this is if you bought a soda you'd have to gradually pay taxes as the market value goes up and down. Or if you're worried about losing out on tax revenue when your kids inherit your soda collection, you could remove it limit the cost basis step up
The curtain drew back when the established Wall Street players, powers, and entities undeniably colluded in plain view to shut down trade during the Gamestop debacle, revealing just how unhealthy, manipulated, and unfair the NYSE really is for the small-time investor.
Our situation clearly is very far from ideal, but that only makes the ideal more important to define and restore in my estimation.
As far as I can tell, healthy stock exchanges have three purposes:
1. Facilitate mutually beneficial exchange between entrepreneurs with creativity and investors with capital.
2. Determine the value of competing businesses and assets through active, decentralized trading and aggregate speculation, effectively churning the standings and keeping score.
3. Induce transparency by opening corporations' dealings to the public, inseparably tying corporations' actions and plans to their valuation.
When the market is healthy nobody is in command, the market is distributed, the game is competitive, fair regulators arbitrate minimally, traders' churning keeps score, failure-capable corporations are responsive to public pressure, and new competition with fresh ideas can enter the market competitively.
Brilliantly, it's an ecosystem powered by greed and insured by selfishness, the basest and most reliable of human emotions - the animal root. Yet the ecosystem is delicate, reliant on all those elements being in place and functioning.
Save the traders' churning like a system clock, everything else in the US market is broken or corrupted in one way or another.
Corrupt government meddling picks winners, the market centralized, there is collusion, the regulators are captive and incestuous, corporations which control public opinion are too big to fail, and new competition is consumed by the established corporate giants or crushed underfoot.
Now to get back around to your question, stock is special because it's the only part of the market still functioning properly and it isn't exactly money, but value equivalent to a percentage of the company. Stock shares abstractly tokenize the ownership of a company and their nature is volatility in varying degrees. Aggregate speculation driven by share trading is the most efficient and accurate model we've developed to evaluate "all the things" and it serves the same function as a heartbeat or a system clock cycle. Taxing that trade in the market's current fucked-sideways status would be disastrous.
Think: making a 46yo cheeseburger enthusiast run wind-sprints in pads on a Texas summer day or overclocking a minitower with a GT 430 that hasn't been cleaned once in the 10 years it's spent on a chain-smoking Brooklyn Taxi Cab accountants' office floor - levels of disaster.