Federal Government to Tax Unrealized Capital Gains?
Is this headline News or Noise?
Oak Harvest is politically neutral. We favor no politician, political party, or group, and evaluate the potential impacts of policies and ideas on the economy, markets, and personal finances only.
After seemingly abandoning a push to raise corporate tax rates from the current 2018 tax cut levels as well as raising top marginal individual income tax levels, Congressional Democrats are scrambling to find alternative ways to pay for their $1.5 to $2.5 trillion social spending proposals in addition to the agreed upon “traditional” infrastructure spending bill.
The Democratic party has come up with what is being billed as a “billionaires’ tax”. Their proposal is to tax the unrealized gain on assets each year of billionaires. That amounts to roughly 700 to 800 households in the USA. This runs contrary to the historical way the IRS has differentiated earned income and investment capital gains at the time of sale when the gain is realized.
Putting aside the discussion of is it “fair” to change the rules after the game is almost over or the risk already taken by others. Let’s stick to more simple things. Logistically? This would be one of the most complicated tax law changes to administer and keep up with year after year. Much of the wealth of the richest families is tied up in assets that are generally hard to value. How do you value a private company, art, real estate, or mineral rights to drill on land year to year? Do you re-appraise these assets annually?
The IRS is already woefully understaffed and now we want to add additional workloads that will be subject to multi-year IRS court battles year after year? This is hardly a practical solution.
Most concerning to me, is this is a “wealth tax” plain and simple. Moreover, while it is currently being proposed for “only billionaires”, I know of no government program, that once firmly in place, doesn’t grow in both scale and scope. So, while maybe in 2022, its “just billionaires” wealth politicians are trying to change the “tax” rules on. In the future, don’t be at all surprised if these proposals target more of the tax base by “whacking” off a few of those zeroes behind individual’s “wealth”. $100 million cutoff? Or maybe $10 million cutoff?
This is noise to the stock markets, but no one should like this proposal as it is a slippery slope.
News or Noise: Noise
Source Articles:
This content contains general information and express the views of Oak Harvest Investment Services. All data, articles, and information cited are believed to be reliable at the time of creation; however, Oak Harvest does not warrant any information contained herein to be correct, complete, accurate or timely.
Oak Harvest provides links to content produced by other websites that OHFG does not control, and Oak Harvest does not necessarily approve or endorse such content and does not guarantee its accuracy. Nothing in this content constitutes personalized investment advice. Any charts, indicators, or graphs included or referenced in this content have limitations, and no such material is able, in and of itself, to provide a buy or sell recommendation for any security. Strategies and ideas discussed may not be right for you, and views and opinions expressed may change without notice. Strategies and ideas discussed will not apply to all client accounts or portfolios.
Nothing in this content constitutes a recommendation, or an offer or solicitation to buy or sell securities. Oak Harvest makes no assurance as to the accuracy of any forecast or projection made. Not all past forecasts or projections were, nor future forecasts and projections may be, as accurate as any forecasts discussed. Indexes like the S&P 500 are not available for direct investment and your results may differ. Past performance is not indicative of future results. Investing involves the risk of loss.
