Vice President Kamala Harris has aligned herself with a highly contentious $5 trillion tax plan, a cornerstone of her 2024 presidential campaign. The proposal, which expands on tax increases first introduced in President Joe Biden’s 2025 budget, has ignited a heated debate over its economic and constitutional implications. Central to the controversy is a proposed tax on unrealized capital gains—a measure that many argue is not only impractical but also unconstitutional.
Harris's tax plan, if implemented, would impose the largest tax increase in over 40 years, significantly affecting corporations, wealthy individuals, and potentially the broader economy. Among the 90 new tax measures in the plan, the tax on unrealized capital gains has drawn the sharpest criticism. This tax would require individuals with assets exceeding $100 million to pay taxes on gains they haven’t yet realized, such as the increase in value of a stock or property that hasn’t been sold.
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Critics argue that this proposal violates the Constitution's apportionment clause, which mandates that direct taxes must be apportioned among the states according to their populations. The tax on unrealized gains is seen as a direct tax on property and wealth, which, under current interpretations, cannot be legally imposed unless it meets specific apportionment requirements. Legal experts from conservative think tanks like the Cato Institute have slammed the proposal as fundamentally flawed and predict it would face significant legal challenges.
Economically, the implications of such a tax are equally concerning. Opponents warn that taxing unrealized gains could lead to forced asset sales, where individuals may need to sell property or stock just to pay the tax bill. This could create market volatility and discourage investment, particularly in innovation-driven sectors. Moreover, this tax could lead to significant administrative challenges, as accurately valuing and taxing unrealized gains annually would be a complex and error-prone process.
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Beyond the unrealized gains tax, Harris’s plan also includes increasing the corporate tax rate from 21% to 28%, which, when combined with state taxes, would make the U.S. corporate tax rate one of the highest in the developed world. The corporate tax hike, critics say, would likely lead to lower wages for workers, fewer job opportunities, and a slowdown in economic growth. The plan also proposes quadrupling the tax on stock buybacks, imposing a new excise tax on electricity used in cryptocurrency mining, and raising taxes on energy production, all of which could have ripple effects across the economy.
Despite the sweeping nature of these proposals, Harris has remained relatively quiet on the specifics, allowing her campaign to signal support without engaging in detailed public discussions. This strategy has led to speculation about how deeply committed she is to these measures and whether they will survive the legislative process, even if she wins the presidency. The silence has also allowed opponents, including Republicans and some moderate Democrats, to dominate the narrative, portraying the plan as an overreach that could hurt more Americans than it helps.
In sum, while Harris's $5 trillion tax plan aims to address wealth inequality and generate significant revenue for federal programs, it faces stiff opposition on both constitutional and economic grounds. The proposed tax on unrealized capital gains, in particular, stands out as a flashpoint in the ongoing debate over the future of U.S. tax policy.
