Don't you actually mean whatever your cost basis was on your holdings ? Suppose the total after-tax money was just $200K of that $1M. The rest is unrealized capital gains. So $800K has never been taxed. Obviously it wouldn't be fair to get a skip on paying taxes on that $800K, right ? The PTS credit would be just $200K.
I don't mean "paper profits". I don't mean "investments". I don't mean the $100,000 stray puppy that I bought with my two $50,000 stray cats.
I mean "savings".
I mean after-tax cold hard cash you have under your matress or in a bank account or in a CD.
Right now, my total portfolio is more or less equally divided between real estate, stocks and cash invested in short term CD's.
Once you start trying to put an "after-tax" value on what your $100,000 worth of Can't-Possibly-Go-Wrong.com that you still hold should be worth, you are simply trying to count your money in the middle of the poker game.
[I mean "savings".
I mean after-tax cold hard cash you have under your matress or in a bank account or in a CD.]
Then that seems pretty cut and dried. By definition, you'd have no unrealized gains to owe income taxes on for that kind of account.
I think other people who had chosen to put all their money in other types of investments would say they were being penalized for their choices, though. They would want to get a credit for their cost basis.
Even so, it still seems workable to me. And in the spirit of the FairTax where everything is taxed once, but only once.
Now on to those pesky tax-deferred accounts...
There is $12T sitting in accounts that have never had any income taxes paid on the earnings. The FairTax, as written, gives the holders of those accounts a massive windfall compared to the already-taxed accounts we've been discussing.
If that $12T had to be transferred to regular accounts over a five year period, and a 15% tax applied to it, a revenue stream of roughly $300B/year would result. That means the FairTax would need to raise only $1.5T to be revenue neutral rather than the full $1.8T, and the FairTax rate could be 19.5% instead of 23%.
This seems fair to me in the same spirit as your PTS accounts. What do you think ?