Kamala’s proposed tax on unrealized capital gains would be unwise, harmful, and unconstitutional…

Leave a CommentKamala’s proposed tax on unrealized capital gains would be unwise, harmful, and unconstitutional…Asset Protection, Evergreen, Tangible Assets, Tax

…and obliterate the economy

Kamala Harris has endorsed a tax on unrealized capital gains, which would require individuals with more than $100 million in wealth to pay taxes on the increased value of their assets, like stocks or property, even before selling them. This proposal aims to address the disparity where high-wealth individuals might pay lower effective tax rates due to current tax treatments of capital gains.

Kamala Harris’s endorsement of a tax on unrealized capital gains, as proposed, primarily targets individuals with more than $100 million in wealth. However, the implications of such a policy could have broader effects that might indirectly impact lower-income people:

  1. Investment Climate: If high-net-worth individuals face taxes on unrealized gains, it might discourage investment in the stock market or other assets. This could lead to a less robust market, potentially affecting the value of retirement accounts like 401(k)s or IRAs, which many lower-income individuals rely on for their future financial security.
  2. Economic Growth: A policy that might reduce investment could slow economic growth. Less investment might mean fewer jobs or slower wage growth, which could indirectly affect lower-income individuals through reduced employment opportunities or lower wage increases.
  3. Housing Market: If applied to housing, where the value of a home is considered an unrealized gain, homeowners might face liquidity issues if they need to pay taxes on the increased value of their homes without selling. This could particularly affect those in lower income brackets who might not have the cash flow to cover such taxes, potentially leading to forced sales or increased borrowing.
  4. Inflation and Cost of Living: If the tax leads to less investment or economic activity, it might contribute to inflation if the government prints more money or if there’s a decrease in productivity. Inflation disproportionately affects lower-income individuals as their wages often do not keep pace with rising costs.
  5. Public Services: If the tax generates revenue, it could potentially fund public services or benefits that might help lower-income individuals, like healthcare, education, or infrastructure improvements. However, this depends on how the revenue is used, which isn’t directly addressed in the proposal’s discussion.
  6. Psychological and Behavioral Impact: The fear or uncertainty about future taxes on assets could change how people manage their finances, possibly leading to more conservative financial behaviors, which might not favor risk-taking or entrepreneurial activities that could benefit the broader economy.

While the tax itself directly targets the wealthy, its indirect effects could ripple through the economy in ways that might not immediately benefit, and could potentially harm, lower-income individuals. However, without seeing the full implementation details or accompanying economic policies, it’s speculative to say definitively if it’s a threat. Economic policies often have unintended consequences, and much depends on how they’re balanced with other fiscal measures aimed at supporting lower-income groups.

The sentiment on platforms like X reflects concerns about how this policy might affect broader market behaviors and individual financial planning, indicating a perceived threat to economic stability for all income levels, not just the wealthy. However, these discussions also highlight the complexity of tax policies and their far-reaching effects, suggesting that while the direct impact might be on the wealthy, the indirect consequences could indeed touch lower-income brackets through economic interconnectedness.

Mike Lee’s Thread on Kamala Harris’s Proposed Tax on Unrealized Capital Gains – Summarized

1/ Kamala Harris has floated the idea of taxing unrealized capital gains, aiming at individuals with over $100 million in net worth. This proposal would mean taxing the increase in value of assets like stocks or property before they’re sold.

2/ The concept isn’t new but has gained traction as a means to tap into the wealth of the ultra-rich more effectively. However, it’s fraught with complexities. How do you value an asset that hasn’t been sold? What about liquidity issues for those taxed on gains they can’t access?

3/ Critics argue this could lead to a “mark-to-market” nightmare, where every year, assets might need revaluation. Imagine the administrative burden and potential for manipulation or error in asset valuation.

4/ Proponents see it as a way to address wealth inequality directly. They argue that the wealthy often avoid taxes by not selling assets, letting them appreciate tax-free until death, when heirs might get a step-up in basis, avoiding capital gains tax altogether.

5/ Legally, there’s contention. The Supreme Court’s decision on Moore v. U.S. might have implications, but it didn’t directly address unrealized gains. However, it did uphold the government’s ability to tax in certain contexts, which might embolden proponents of this tax.

6/ Economically, taxing unrealized gains could lead to less investment in risky assets or startups, as the potential tax liability might discourage holding onto assets that could be volatile in value.

7/ From a policy perspective, Harris’s proposal aligns with broader Democratic pushes for wealth taxes, aiming to fund social programs or reduce deficits by targeting those least likely to feel the pinch from such taxes due to their wealth.

8/ Implementation would be a challenge. How often would these gains be taxed? Annually? And what about downturns? Would there be mechanisms for recapture or loss deductions if an asset’s value drops?

9/ Globally, this idea has been met with skepticism. Countries like Denmark tried similar taxes, only to repeal them due to unforeseen economic impacts and administrative headaches.

10/ In conclusion, while the intent behind Kamala’s proposed tax on unrealized gains might be to level the economic playing field, the execution could be fraught with legal, economic, and practical challenges. It’s a bold move in tax policy, sparking debate on fairness versus feasibility.

— This rewrite by Grok encapsulates the essence of the discussion around Kamala Harris’s proposal on unrealized capital gains, focusing on the implications, challenges, and the broader debate it incites