[brianfitz]

This would also affect most home owners. They purchase a home, it goes up in value, and they refinance or take a second loan rather than sell the property. The wealthy do this as well with property, art, and securities. Trying to tax unrealized gains (like a home that has appreciated in value) would be a new mess of tax legislation with holes you could drive a semi-truck through.

[PaulDavisThe1st]

We already have special treatment for capital gains in the form of a primary residence. No reason that couldn't continue.

[nunez]

Then wouldn't tax law reform on unrealized cap gains drive the wealthy to buy more houses instead?

[brianfitz]

The special treatment is at the time of sale. My comments were in response to taxing the appreciation at the time of a new loan (such as taking a second mortgage).

[telchar]

This sort of wealth tax probably would be targeted at amounts over a $5-50M threshold so it would never hit the primary residence of anyone except billionaires, who could surely pay cash.

[brianfitz]

So we’ve created one loophole. What if I buy multiple properties below the threshold? Is the limit per household? If so, does this apply to people heavily leveraged with little net worth who own many rental properties? The rent is income, but they often make improvements to the homes and take a cash-out refinance to pay for the cash down payment on a new property. If we do this to homes, and the wealthy move their money to a new place, such as venture capital, do we try and re-price those illiquid assets each year? If one IPO’s and they take a loan against the stock to buy a home, do you give them their previous year’s mark-to-market payment back to them if the stock goes down the following year and they get a margin call? I’m just going through a few scenarios but this would quickly inflate the tax code to an almost unmanageable state without creating just as many more new loopholes. Imagine trying to grow a startup and being worth X on paper with no actual gains or money in the bank. If you don’t include it, it suddenly becomes a tool for someone else to use within the assets you’ve excluded. If you don’t exclude it, you may force an early sale of promising new businesses to their competitors to cover a tax bill on the unrealized gains.

[reedjosh]

And the tracking of all transactions over $10,000 used to be a reasonable limit.