Max Meyer on X - "There is a *lot* of confusion about the Biden-Harris Admin's "unrealized capital gains tax" proposal. Who endorsed it? Who does it affect? Caveats? I have studied it in detail and will explain it here thoroughly and *neutrally*. At the end, I'll offer my opinion...
FACTS: The proposal appears in the document "General Explanations of the Administration’s Fiscal Year 2024 Revenue Proposals" published March 2023. This is an official document reflecting White House & Treasury policy - and *general* requests to Congress for revenue. But Congress retains tax authority. It's just a proposal. Here it is: "The proposal would impose a minimum tax of 25 percent on total income, generally inclusive of unrealized capital gains, for all taxpayers with wealth (that is, the difference obtained by subtracting liabilities from assets) greater than $100 million." Those are the basics. If the IRS determines you are worth at least $100 million, you should pay a minimum tax of 25% on your income, including on your unrealized capital gains. That could be your house going up in value, your stock, etc.
Your annual minimum tax is 25% times your annual income, realized and unrealized. But there are some key technicalities.
TECHNICALITY 1: The unrealized gains tax payments are treated as a PRE-PAYMENTS on future *realized* gains taxes. So you are not going to pay taxes on the same capital gain twice.*
*TECHNICALITY 1.5: You can get a refund upon realizing the gain if you have "uncredited payments" (unrealized payments that haven't been counted against an actual capital tax) and those uncredited payments exceed what you'd pay in long-term capital gains. This is especially important if you end up selling for a smaller gain than you were "unrealized" taxed for, or if you actually lose money. You aren't paying unrealized on the gain and nothing on the loss. You can get refunded.
TECHNICALITY 2: You don't have to pay it all at once. The first year of minimum tax can be paid in 9 installments. Future years' minimum liability can be paid in 5 installments.
TECHNICALITY 3: if you die, your estate pays the federal death tax and then you get refunded to the extent you "overpaid" unrealized taxes. One thing that has been confused is that this proposal is not *just* applicable at death. It's applicable at all times.
TECHNICALITY 4: if you are "illiquid" i.e. less than 205 of your wealth is in tradable, liquid assets, then you can have only tradable assets count. BUT you have to pay a penalty or "deferral charge" on the gain of of your illiquid assets up to 10%
ANALYSIS/OPINION. HOW WOULD THIS AFFECT SOMEONE LIKE ELON MUSK?
Musk's current net worth (mostly in Tesla public stock, SpaceX private stock, and X private stock) is assessed at $250B. The "unrealized gain" portion of that (on which he hasn't paid taxes) is likely much more than $200B. But we'll be conservative and say $200B. That would mean a year-one estimated minimum tax would be at least $50 billion, which could be spaced into 9 payments of $5.55 billion and would be credited against future capital gains taxes, and refunded versus future capital losses. But right now he would owe $50 billion that he would never have owed unless he sold ALL OF HIS ASSETS. That's why this policy is extreme. You could perform this analysis on other billionaires.
My opinion: it is a confiscatory policy. It is extremely unethical, unworkable, and would cause complete chaos even with the technicalities that have been included. But it is specially designed to target mega billionaires with a large percentage of their wealth in publicly-traded stock. Elon Musk. Warren Buffet. Mark Zuckerberg. Larry Page. For those people, it effectively is the simple 25% confiscation that bureaucrats have been dreaming of forever. For people in the $100M-$1B range AND ESPECIALLY PEOPLE WHO ARE STILL ACTIVE ENTREPRENEURS it would be a nightmare of bureaucracy and compliance. It would terrify people, and in my opinion - discourage further entrepreneurship because they'll try to steal 25% of your ephemeral gains up-front, rather than when you actually earn the income.
HAS HARRIS ENDORSED THIS POLICY?
1. She's the Vice President of the United States. Joe Biden is the President. It's their administration. Unless she says otherwise, it's safe to assume she's on board.
a. Maybe that doesn't mean she would do it herself as POTUS
2. Semafor reports the Committee for a Responsible Federal Budget as saying: "The campaign specifically told us that they support all of the tax increases on the high earners and corporations that are in the Biden budget" That's pretty clear. The unrealized tax was a Biden budget proposal. And unless VP Harris specifically says otherwise, I believe we should assume this is her plan, too.
CLOSING NOTE. Biden-Harris Admin says: "Preferential treatment for unrealized gains disproportionately benefits high-wealth taxpayers and provides many high-wealth taxpayers with a lower effective tax rate than many low- and middle- income taxpayers." There is no "preferential treatment" -- it is REALITY treatment. Gains on paper are not income so they are not treated as income. They say this is unfair. It isn't. Treating unrealized and realized gains both as income is lunacy."
Kamala Harris Plan To Tax Unrealized Capital Gain Is Scary, Here’s Why - "In 2019, she floated a 4% “income-based premium” on households making more than $100,000 to pay for Medicare for All, but this has not yet resurfaced in 2024. Among the more controversial of the Biden proposals—which Harris has repeated—is a tax on unrealized capital gains for taxpayers with wealth greater than $100 million. It may be labeled a “billionaire tax,” though $100 million is a tenth of a billion. Even so, few may want to defend billionaires (or someone with a mere $100 million for that matter) in the current climate. Some argue this fairly targets extremely wealthy Americans who have taken advantage of tax rules to pay lower rates than their secretaries. For example, wealthy people can tap their resources by borrowing money rather than selling something that would trigger tax. Some attack the proposal as a wealth tax that will chill investments of capital... We have never had a tax on gains that are not “realized,” meaning sold. In that sense, this new tax would be groundbreaking... Apart from policy, there are administrative issues galore. How do you go about valuing everything every year to be taxed? Public company stock would be straightforward. But most assets could be a nightmare, and who in the end gets to carry the day on value? Disputes about value in tax cases are legendary and voluminous. Nearly every estate tax case with the IRS includes valuation disputes, often with competing experts. In income tax cases, charitable contributions of noncash assets such as real estate or crypto often also end up in major valuation fights. Just imagine what annual value statements with tax returns might look like, in a world where the increase in value since last year turns into taxes. Capital gains have always been singled out for lower taxes, not higher. And except in the case of estate tax measured on death, it has been nearly sacred not to tax “earnings” you didn’t receive... What is arguably the scariest part of this idea? What if this opens the door to a more generalized effort by the government to tax you on something that you still own? Right now the proposal is only to use this wealth tax for the truly wealthy. Not just billionaires, but also anyone with at least $100 million. Once we start down this path, could we some years from now face a tax like this for someone with $20 million, $10 million, even $1 million?"
Left wingers hate the rich, so they would also support things like reversing the presumption of innocence in criminal law for them, and mock those who object as bootlickers, simps or idiots since they are far from rich. So much for "empathy" or even really good sense
Meme - Spike Cohen @RealSpikeCohen: "If you think that taxes on unrealized gains will only be used on the ultra-rich, I have an introductory income tax bracket to sell you."
"Marginal Income Tax Brackets in 1913
Marginal Tax Rate - 1-7%
1% - Over $0 but not over $20,000 - In 2015 Dollars - $480,697"
Meme - Man with mullet in plaid in truck: "Capital gains will be additional tax on people making over $100m. I'm afraid how that'll affect me"
Weird. Left wingers keep boasting that they're all about "empathy", and that wokeness is about "empathy". Of course, they hate the "rich". And empathy aside, it's only smart to recognise bad ideas, especially when they will eventually hurt you in some way
Taxing wealthy people’s unrealized capital gains is not closing a 'loophole' - "I couldn’t help but shake my head at the United States presidential candidate Kamala Harris ‘ proposal, which she has adopted from President Joe Biden, to tax unrealized capital gains for people who are worth US$100 million or more. For such people, they would be required to annually pay a minimum tax of 25 per cent of their income and unrealized capital gains . In other words, wealthy Americans would pay an annual tax — akin to a wealth tax — on their unrealized capital gains. Some progressive think tanks trumpet the ideology that by not taxing wealthy people’s unrealized capital gains, such people are taking advantage of this “loophole,” but I like to think about it another way. This simplistic view is nonsense and violates the good concepts of common sense, fairness and the basic timing issues of profit generally described above. Ideas such as these are poor policies that unfairly target the wealthy . It’s been in vogue forever to “tax the rich” and “stick it to the wealthy” since they are taking advantage of loopholes (a vacuous phrase that describes nothing), but proper taxation and economic policy needs a more foundational underpinning. In addition, like any form of wealth tax, the idea is rife with administrative complexities, such as how to value assets (especially non-financial assets like businesses, land, rental properties and other real estate). What would happen if, in a subsequent year, there are unrealized losses and taxes have previously been paid on those unrealized gains? Liquidity issues would be common since wealth is often tied up in assets that can not be easily liquidated... One can’t help but think that if this proposal were to somehow pass into law in the U.S., the exodus of capital would be large and would contribute to economic chaos. Despite the complexities of tax law (including the timing of receiving income and computing profit), there is inherently some common sense involved in developing all tax and economic policies. The Harris proposal to tax unrealized capital gains lacks common sense."
When left wingers demand to "tax the rich", they mean taxing them so much they are no longer rich
Unrealized Gains Tax is an Economic Fallacy - "Taxing unrealized capital gains contradicts the basic principles of fairness and property rights essential for a free and prosperous society. Taxation, if we’re going to have it on income, should be based on actual income earned, not on paper gains that may never materialize. Moreover, taxing unrealized gains hurts economic activity by discouraging investment and capital formation, the lifeblood of a dynamic economy. When individuals know their unrealized gains will be taxed, they have less incentive to invest in productive assets such as stocks, real estate, or businesses. This leads to a misallocation of resources and slower economic growth. Additionally, this tax reduces the capital available for entrepreneurship and innovation. Start-ups and small businesses often rely on investment from individuals willing to take risks in the hope of eventually earning a return on their investment. By taxing unrealized capital gains, we discourage risk-taking and stifle innovation, essential elements for improving productivity and raising living standards... this new tax would merely redistribute wealth from productive individuals to the government, thereby further misallocating hard-earned money. Furthermore, the tax revenue raised from this tax will be far less than proponents anticipate, as individuals will work less, invest less, and find ways to avoid such taxes through legal paths. This would result in less economic prosperity and a resulting decline in tax collections."
memetic_sisyphus on X - "The wealthiest 1% own 50% of all the stocks. A hundred million puts you in the top .5%. So let’s call it 30% of the stock market. Every year a tax on unrealized gains for about 30% of the market causes massive sell offs for liquidity, tanking the price of stocks for everyone. Your 401k loses its value every tax season. Long term this encourages the richest members of society to keep more of their wealth liquid, which means massive shortages in investments for business expansion, VCs drying up, interest rates skyrocketing. (Maybe some drop in inflation). From a revenue point of view the federal government would almost certainly lower tax receipts. The sell off to pay taxes on unrealized gains would likely impact the capital gains taxes across the board as many would have to sell at a loss. This is nothing short of an economic catastrophe and even left wing commentators agree."
Meme - memetic_sisyphus @memeticsisyphus: "Every political argument with the left feels like coming to a fork in the path. You know there’s a bear down the left path and you say, “we can’t go that way there’s a bear, it will be unpleasant.” They respond “look how pretty the path is! We don’t have to go that far!” Then sprint down the path right at the angry bear."
MWT @mountainwesttax: "I’m really worried about a tax on unrealized capital gains over $100M" *man in messy room*
Kamala Harris's 'unrealized gains tax' is so dumb as to be truly historic - "It’s been a while since anyone has proposed a dumber idea, so in that sense, at least, she is a historic candidate. And those who think it’s a good idea are historically stupid. As many others have pointed out already, such a tax would harm everyone investing for retirement, depressing asset values as the uber-rich are forced to make massive annual sales just to pay the tax. And what I’d really like to know is whether, if I’m ever forced to pay taxes on stocks I’m still holding just because their value went up on paper, do I get my money back when their on-paper value goes back down again months or years later? The best defense of this tax, intellectually, is that it falls on only the filthy rich, meaning that only a relatively modest number of people will be completely screwed over by a system far more unfair and unjust than the one we have now. But if you support government screwing over Americans, so long as you get to choose which ones get screwed, that only calls your decency into question. The reality is that taxes that start off narrowly focused on just a small group of people always end up expanding to get almost everyone. This has happened over and over again throughout our history. Consider that you are still paying the Spanish-American War Tax tax every time you pay your monthly phone bill. The tax to fund that 1898 war was easy to pass because only rich people had telephones then. The war ended after less than a year, but the phone tax has survived in various forms for more than 100 years. On occasion, it has been partially repealed, reinstated and altered. The tax on long distance access, one of its descendants, finally ended in 2006 after a court ruling forced the IRS to stop collecting it. There’s still a push to repeal its last remnants, but don’t hold your breath. The income tax, in 1913, hit only the rich. Its top rate was 7 percent, falling on incomes of half a million or more, with lower rates for those making at least $20,000 (about $635,000 today), which very few people did at that time. But a funny thing happened on the way to soaking the rich. Although the income tax was never sold as a way to take 10 percent, 25 percent or even more of what average earners make, that’s what it has become. Add that on top of the combined 15.1 percent of your income that you are losing to Social Security and Medicare taxes. Are you feeling the economic justice yet? The Alternative Minimum Tax was created in 1970 because of outrage over just 154 households with incomes over $200,000 ($1.6 million in today’s money) who had paid zero in taxes the year before. Forty-three years later, Congress was forced to act because its formula had allowed the tax to creep so far down the income scale that it was about to gobble up almost every two-income middle class family in America. Only in 2017 did the Trump tax bill restore its original purpose as a tax paid by only the very highest earners, and even then, it passed over Democrats’ vociferous objections. The inheritance tax was supposed to hit only the rich. But the rich have complicated life insurance products and trusts they use to pass wealth to the next generation tax-free. So, who gets hit with this death tax? Not Bill Gates or George Soros, but Old MacDonald — you know, the farmer. His land and farm equipment may be worth $13 million on paper, but he needs those use-assets to make the slim margin that comprises his annual income. Because he cannot shelter it from the IRS the way the super-rich can, his family will have to sell off the farm to Gates or to some large corporation to pay a tax bill as high as 40 percent of the estate. Harris even wants to expand this tax by changing the treatment of inherited capital gains, hammering death-tax victims a second time. If history is any guide, Harris’s tax on so-called “unrealized capital gains” will ultimately bite all of us. Today’s Democratic Party talks about “the rich” paying “their fair share.” They start by claiming they want to target only a small, very specific group, like those 154 zero-tax families, so that you’re convinced it won’t affect you. But once they get the concept in place, it’s only a matter of time before they get their hands into your pockets, too. The only way to protect yourself, your family and what you’ve earned is to vote against Democrats — to stop them from creating and increasing the taxes in the first place."
Weird. I thought left wingers were very keen on learning "history"
I got a lot of amusing copes after posting these facts
The reality of Kamala Harris' plan to tax unrealized capital gains - ""Economists across the political spectrum agree that when a billionaire's wealth goes up by a large amount of money, it's income even if it's not cash in a bank account," the White House official argues. "They often borrow against their assets and use it as disposable income." When asked if a tax on such loans was discussed as an alternative, he declined to answer. The Harris campaign didn't return an interview request."
Left wingers keep pretending that loans are income. This is why they're poor (besides not understanding compound interest, opportunity cost, marginal tax rates etc)