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The investors have about mark-to-market taxation, where unrealized gains are taxed before assets are sold. If such a policy were implemented, it would indeed create a new kind of tax liability for investors based on the value of their portfolio, regardless of whether they’ve actually cashed in their gains.
One potential issue with this is volatility. If the market drops after you've paid taxes on unrealized gains, you're left paying taxes on wealth that’s no longer there. While this could force some to sell assets to cover tax bills, potentially increasing market instability, such proposals often come with measures to soften the blow—like taxing only the wealthiest investors or providing options for deferring taxes in down markets.
The idea behind such a tax is to address income inequality by ensuring that wealthy investors who accumulate significant wealth through capital gains pay their share. However, critics argue that it could deter investment and spark unintended consequences, like market sell-offs and reduced liquidity.
Ultimately, whether this could trigger a financial crisis would depend on how such a policy is structured and its impact on investor behavior. What are your thoughts on balancing tax fairness and market stability?
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