Statements by journalists like this and actions like Bernie Sander's Make Billionaires Pay Act shows that either 1) a number of people have no understanding of how asset prices work or 2) they understand the underlying economics, and would rather stir up anger to implement their agenda than be honest.
An example I've been giving to people who are making the argument about billionaires making money during the pandemic is: Imagine you own a modest $300,000 house. A city inspector comes by and finds that your property is located on an old toxic waste spill and condemns it so that it is now worthless. A week later, the city finds that they've made an error, and there is no toxic waste, so now your house goes back to being worth $300,000. A month after that, you get a tax bill in your mailbox for $100,000, 30% of your $300,000 asset gain.
Doesn't that argument depend on their net worth now being equal to (or at least not significantly greater) than it was before the pandemic (or market pricing in the risk of same) started? I.e. yeah, his net worth went up, but it went down first, so it's just coming back to "normal".
That doesn't seem to be the case here- Amazon's (and thus Bezos's) dip in early 2020 is practically invisible compared to its growth since then March, from what I see on https://finance.yahoo.com/quote/AMZN?p=AMZN
So...
Imagine you own a modest $300,000 house. A city inspector comes by and finds that your property is located on an old toxic waste spill- its value drops to $225,000. A week later, the city finds that they've made an error, and there is no toxic waste- and, in fact, that in doing the testing, they discovered deposits of incredibly valuable minerals on your property, so now your house is worth $450,000. A month after that, you get a tax bill in your mailbox for $45,000, 30% of your $150,000 asset gain. (These numbers are based (rounded) on the actual data.)
You're accusing others of not understanding how asset prices work, then come up with a scenario that's inaccurate? Or do you claim to understand how asset prices work but not capital gains?
Please help me steelman your argument, assuming you aren't being disingenuous.
Holding an asset does not result in a capital gain. The Tax the Billionaires bill wants to tax holding an asset that has appreciated in value. Not only that, but they use a handpicked time boundary that from the bottom of the market crash to calculate a windfall tax.
Lets say you owned 1 BTC since the inception ($0 cost basis) and held it until today. The value of 1 BTC has fluctuated the entire time, but you've only ever owned 1BTC.
Here are a couple lows/highs during the period:
Dec 2018 - $3500
Jun 2019 - $12000
$8500 gain (on paper)
March 2020 - $5500
Aug 2020 - $12000
$6500 gain (on paper)
To use the Bernie Sanders standard of 60% windfall gains, you'd owe $5100 from the 2018 crash and recovery. If these types of windfall taxes become a common thing, you'd owe an additional $3,900 from the 2020 crash and recovery. So you'd have paid $9,000 to hold your 1BTC.
If you sell your 1BTC today, you'd get $10,000. With your $0 cost basis, the entire $10,000 is a capital gain. Lets say your long term capital gains rate is 15%, you'd owe $1,500 in taxes when you sell it.
So for investing in 1 BTC, you'd have $8500 in your bank account, and would have paid $10,500 to hold it.
1) Is BTC more volatile than Amazon stock: Yes
2) Does that amplify the numbers in my example: Yes
3) Is wealth inequality a giant problem in the country: Yes
4) Will I shed tears if Jeff Bezos gets a giant tax bill in the mail: No
However, I think it does demonstrate the problem with taxing the change in value of an asset, vs your capital gain from when you sell it.
Inventing hypothetical scenarios where you are right isn't as strong an argument as you think it is. In the real world, a few people have too damn money and spend it in absolutely frivolous ways while millions of other people are being bankrupted.
You probably shouldn’t be smugly accusing others of not knowing how asset prices work (or pretending not to in order to advance an agenda) when you yourself clearly don’t understand how capital gains taxes work (or are pretending not to in order to advance an agenda). Losses are counted against your tax burden.
An example I've been giving to people who are making the argument about billionaires making money during the pandemic is: Imagine you own a modest $300,000 house. A city inspector comes by and finds that your property is located on an old toxic waste spill and condemns it so that it is now worthless. A week later, the city finds that they've made an error, and there is no toxic waste, so now your house goes back to being worth $300,000. A month after that, you get a tax bill in your mailbox for $100,000, 30% of your $300,000 asset gain.