Harris’ Unrealized Gains Tax Could Devastate the U.S. Economy

Vice President Kamala Harris has thrown her support behind a controversial tax proposal that could have far-reaching consequences for the U.S. economy. The plan, initially put forth by President Joe Biden, seeks to impose a 25% tax on unrealized capital gains for households with over $100 million in net wealth. This unprecedented move, part of the Biden-Harris 2025 budget proposal, has sparked widespread concern among economists, investors, and business leaders.

Under current law, capital gains are only taxed when the asset is sold, allowing investors to defer taxes until they realize the gains. However, the new proposal would require wealthy households to pay taxes on the appreciation of their assets, even if they haven't sold them. This means that if a billionaire's stock portfolio increases in value, they would owe taxes on that increase each year, regardless of whether they sold the stock​.

Kamala Harris Backs Unrealized Gains Tax.
Listen to @VivekGRamaswamy explain it.
28% Corporate Tax
44.6% Capital Gains Tax
25% Tax on Unrealized Gains
Price Controls
No Tax on Tips
Up to $6k Child Tax Credit pic.twitter.com/d7m8iU02b2

— Truth Patriot (@Truth2Everyone) August 21, 2024

Critics argue that this policy would be disastrous for the U.S. economy, potentially stifling investment and innovation. The tax could force investors to sell assets prematurely to cover their tax liabilities, leading to market volatility and reduced capital for startups and growing businesses. Moreover, the administrative burden on the IRS to accurately assess and collect taxes on unrealized gains would be enormous, likely leading to inefficiencies and errors​.

Supporters of the tax, including Harris and Biden, argue that it is necessary to address income inequality and ensure that the wealthiest Americans pay their fair share. They claim that the current tax system allows the ultra-rich to accumulate vast wealth without contributing proportionately to public coffers. However, opponents counter that the proposal is more about punitive measures than sound economic policy, and that it risks undermining the very foundations of the U.S. economy by discouraging investment and entrepreneurship​.

The Democrats want to tax unrealized gains. This is the insanity they would cause. pic.twitter.com/gGSCDFcFeh

— Declaration of Memes (@LibertyCappy) August 1, 2024

The proposed tax is part of a broader effort by the Biden-Harris administration to increase revenue from the wealthiest Americans. In addition to the unrealized gains tax, the administration has proposed raising the top capital gains tax rate to 44.6%, a move that would further hit investors and potentially slow economic growth. The combination of these taxes could lead to capital flight, with wealthy individuals and businesses moving their money overseas to avoid the punitive U.S. tax regime.

Small businesses could also be caught in the crossfire. While the tax is aimed at billionaires, its ripple effects could harm the broader economy. Higher taxes on investment could lead to lower job creation, reduced wages, and slower economic growth. The impact on small businesses, which rely heavily on investment to grow and create jobs, could be particularly severe.

The proposed tax has also raised concerns about fairness and practicality. Valuing non-liquid assets, such as privately held companies or real estate, is inherently difficult and could lead to disputes and inaccuracies. Furthermore, taxpayers might find themselves in situations where they owe taxes on paper gains that never materialize, particularly if the value of their assets declines in subsequent years​.

In conclusion, while the unrealized gains tax is being promoted as a way to address income inequality, its potential to disrupt the U.S. economy cannot be understated. With the 2024 election looming, this tax proposal is likely to become a major point of contention, as its implications for the economy and the average American become more widely understood. Critics warn that the tax could be the final blow to an economy already grappling with inflation, high interest rates, and slowing growth, urging the administration to reconsider before it's too late​.