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This practice is complete BS. Using stock as collateral needs to be a taxable event. Assess the collateral's value at the time of the loan origination. Pay taxes on the gains. If we want to begin addressing wealth inequality, that's a good start.
Oh I know. It was brought to my attention by some talk of taxing unrealized capital gains across the board, which is a stupid idea. That would only create a further barrier to the financial markets for your average person. What needs to be done is target this practice of tax avoidance when using assets as collateral.
It is and always has been taxable already. That post is wrong. When you get paid in stock you cover that when it's granted not just when it's sold. Jesus how can this sub so consistently be wrong about basics.
You're kinda right, but what you're saying is not the point. Yes, if stock is granted, you pay taxes based on the value of the stock at that moment. Many of these ultra rich have stock granted at founders value (i.e. nothing). So they've paid peanuts worth of tax on it. But now it's worth say billions. They pay no extra taxes until they actually sell the stock (taxable capital gains = sale proceeds - cost basis). To access that value, they can take out loans against those stocks without selling them. Most get them at ridiculously low rates. They can use that money to reinvest. As long as they beat those rates, it's a never ending treadmill of money. But that kind of scheme is only available to the ultra rich. It's impractical for your average person to pull that off.
That's only a piece of what this thread is discussing. Check the post we're replying to which says they're "paid with company stock". So the point of this thread that I was correcting was actually on compensation, not on already owned stock.
So we can split this conversation here into two discussions. One on pay, and one on unrealized capital gains. Yes everyone understands that unrealized gains are not taxed today, but the post above wrongly says they're being taxed 0% on their CEO pay. They mention base pay because they don't realize that there is no tax difference between base pay and being paid in stock. This is what I'm addressing above.
Now back on unrealized gains, yes there is a huge problem with not being able to tax them, and the loan loophole. That's the point of this new tax, but this has nothing to do with CEOs being paid in stock which is taxed.
If so, then I think using a house as collateral for a loan should be taxable. Because property is property.
In many places, increases on the value of your primary residence is not taxable, so it’s a moot point.