If someone takes a loan out against an unrealized gain, that should immediately trigger a tax event.
The real solution though is for the legislative branch to not be beholden to those same people and be able to quickly and effectively close tax loopholes as they are discovered.
It wouldn't do that. But even if it did do that, this would not be a good thing.
The majority of leverage (debt) in the stock market is not people making wild bets, its just basic functions from institutions.
But even if we narrow the definition to the boogeyman image you have in your head about "leverage," if you remove it you've just made the market radically less responsive to information and arbitraging prices nearly impossible, and ultimately the economy less efficient in broad strokes.
You'll say "fine, who cares cause it'll stop [insert historical bubble example], and also I saw a reddit comment that said all economists are dumb!"
But most people have no idea how big a role leverage (aka debt) plays in just the basic functioning of the capital markets.
Putting a brake on the market might also sound good to you in theory. But the stock market is how the most important capital flows through the private economy, slowing this down is defacto slowing down the economy. Most people don't understand what slower economic growth means for your quality of life over the long term. Just 1-2% slower growth than the average, and the US's entire system collapses in 15 years (France is currently dealing with this reality in slow motion, their debt is now rated worse than Greek debt).
An easier example to understand: a pie that isn't growing is a zero sum pie. Ambition in a zero-sum world requires violence.
> If someone takes a loan out against an unrealized gain, that should immediately trigger a tax event.
How does that work when a house is used as collateral on a loan? Or artwork?
The loans are just a symptom, the problem is in the Estate Tax, and those loans are being used as a tool to wait out the clock and then dodge dynastic taxes entirely.
Remove the final loophole, and they'll stop playing weird games to get there all on their own. Plus it'll be way less-disruptive to everyone involves in regular loans for regular reasons.
There is not a loophole. When you die your loans get paid off first. The money to pay off these loans would be taxed. It could delay paying taxes until you die, but you can't escape it.
> There is not a loophole. When you die your loans get paid off first. The money to pay off these loans would be taxed.
You're missing the loophole, it's the the "step-up basis" rule, which dramatically affects the amount of tax on that liquidate-to-repay event.
1. Repaying 1 day before the owner dies: Liquidate $X, of stock, which 90% of it are capital-gains, heavily taxed.
2. Repaying 1 day after the owner dies: Liquidate $X of stock, which is now considered ZERO gains, almost no tax.
This massive discontinuity also applies when it comes to the transfer of stock to inheritors, and any taxes they might pay for liquidating it. A day before, they get a stock that "has grown X% in Y years." A day later, they get a stock that "has grown 0% in 0 days."
> It could delay paying taxes until you die, but you can't escape it.
But they did escape the taxes, or at least the "gains" portion of them! For decades, the unrealized gains in growing assets were "eventually" going to happen someday... Until, poof, all gains have been forgotten.
> The taxable value is exactly how much you borrowed against it!
I'm not sure what you mean by that term, since we're not talking about property taxes. With respect to capital-gains tax, the amount you liquidate is not the same as the gains being taxed.
> is exactly how much you borrowed
You're mistaken, the tax depends on the history of the item being liquidated. Suppose you need to repay a loan, and you have two options:
1. Sell 1 share of Acme stock for $20, that you originally bought for $20. Your $0 gain leads to $0 tax. Net cash: $20.
2. Sell 1 share of Acme stock for $20, that you originally bought for $5. Your $15 gain leads to $3 tax. Net cash: $17.
It's obvious you'd prefer the first one, right? Even though they're stocks from the same company being sold on the same day for the same market-price to service the same debt.
When you borrow money against an illiquid asset, the value of that asset is at least the amount you borrowed because otherwise the lender wouldn't have approved it. So just use that amount.
> the value of that asset is at least the amount you borrowed
That assumption just isn't true: Loans are made based on risk and the expected ability to repay. Collateral is an optional and sometimes partial of reducing the lenders' risk, it bears no firm relationship to the amount being sought.
To illustrate, imagine a Debtor borrows $5,000 and offers up one of their child's crayon drawings as collateral. For private reasons we cannot see, the Lender accepts this deal. Do you truly believe the crayon-drawing has been proven to be "worth at least $5,000"? Would you joyfully jump at the chance to buy that crayon-drawing for a mere $1,250, confident that you could resell it for an easy $3,750 profit?
Probably not, and that's assuming everyone is acting ethically, we haven't even started to talk about how the Debtor and Lender could collude to game the system.
> So just use that amount.
At this point, you're probably thinking: "Very funny Terr_, but we both know the crayon-drawing obviously wasn't covering the full $5,000 loan here."
Yeah, but how did you reach that conclusion, what mathematical steps did you use?
I'm pretty sure you applied an independent judgement of what a likely crayon-drawing "should" fetch in some hypothetical future. That's quite reasonable, but the fact that you had to do it shows that the loan-basics are not sufficient to solve the problem.
That just doesn't happen. Either the lendor is happy with an uncollateralized loan, a significantly but partially collateralised loan (such as 50%) or a fully collateralised loan. And in each of those cases the lender knows exactly how much he thinks the collateral is worth. If the collateral doesn't cover the loan, there is a written agreement between both parties stating so. The borrower would be wise to use that as evidence, since it reduces his taxable gains. Otherwise it's assumed the collateral covers the loan. No need to do anything special.
Agreed. This would get rid of borrow against gains to spend tax free. But also just get rid of the income tax, it is the worst way to tax, and do a land value tax.
For me, the biggest pain point is the way it decides which window to bring to the front. If I minimize a window, and then click on the application in the bar, it won't show the window just minimized, instead it always seems to show the older window. Really annoying when using an app with many windows
right, but if you cmd-tab, it brings up ALL the windows: say you had multiple browser windows open, and only want to go back to the one you just used before (think reading some docs while coding).
Also it just changes the nature of the game. There's no incentive to interact with the batch until the absolute last microsecond. It will still be dominated by latency-sensitive participants, just in a manner where the difference between visible liquidity and latent liquidity is even more diverged from reality (on average).
I've spent a few million line kilometres in a variety of airframes and understand that "designed to operate" through an event is not the same as "actually survives" that event.
There are many factors at play and things are complicated by unexpected failures.
Thank you for the video that demonstrates a pilot aware in advance of planned "engine failure" can cope with such an event in scheduled test conditions.
Pilots, aircraft engineers, and safety regulators also sit in aircraft.
The phrase "line kilometres" might indicate a smidgeon of aviation industry adjacency to some.
EDIT: Above and below comments appear to be low grade random sniping in bad faith.
There's a failure to address content and specifics and a straw assertion about "more insight than the pilots, engineers and safety regulators", a claim that was never made.
At best I have the same insights as anyone that worked with 20 airframes for a few decades and staged them about the globe in that time.
EDIT2: Symbiote has deleted their problematic reply below that the first edit was made in response to. The michaelt reply came after the reply by Symbiote and is moot, all my statements are here, undeleted and unredacted.
I can reinstate the reply if you like, but michaelt made the same point moments after I did, and I preferred his "jargon" rather than my "fancy vocabulary".
I'd prefer if you addressed the content of my two comments above your https://news.ycombinator.com/item?id=44257232 and explain which part caused you to imply I believe myself to have "more insight than the pilots, engineers and safety regulators".
At no point did I claim that multiple engine aircraft cannot complete a take off on a single engine.
The statement I made:
> Aircraft can land (in right circumstances) by gliding in sans power .. the same cannot be said for take offs.
is about having _no_ thrust power during take off.
The other statement I made acknowledged that test pilots in planned and scheduled clear weather conditions often test aircraft with mock engine failures, then pointed out that this is very different to an unexpected failure during non test flights.
Yes, sometimes these things work out alright (as per your example), other times not so much.
Landing sans power is landing with no thrust (no functioning engine).
Completing a take off with no thrust isn't possible unless the craft is a glider, a hot balloon, or a ballistic launch .. taking off with a single engine is not "taking off sans power".
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Because the large corporations have virtually unlimited power to water down bills with campaign contributions. It takes very little to money to sway a representative federally. How much less do you think it takes to sway a state level candidate?
Spending cash on candidates to prevent bills like this is likely a rounding error on their yearly budget.
We are on-call for 48hrs at a time, about once every 12 days or so, one day as backup, and one as primary. It's nice because it doesn't interrupt your week too much. The downside being that complex issues might require extra work while not on-call
The real solution though is for the legislative branch to not be beholden to those same people and be able to quickly and effectively close tax loopholes as they are discovered.