According to Treasury Secretary Janet Yellen, the Joe Biden administration is now proposing taxing nonexistent profits through capital gains. The new proposal, which Yellen unveiled on CNN Sunday, would force people to pay a tax on their investments that have increased in value, even if they didn’t cash those investments out.
Although Yellen insists the tax would only apply to “exceptionally wealthy individuals,” many have questions on who exactly will fall into this category. So, billionaires like Amazon’s Jeff Bezos or Tesla’s Elon Musk would have to pay taxes on their stock increases, even though they are not cashing out or “realizing” a gain on their assets.
According to Henry Olsen of the Washington Post:
Expensive assets can go down in value, too, and billionaires would rightly insist that the IRS account for those reversals of fortune. This would lead to some politically uncomfortable acts if, say, a market downturn coincides with the end of the tax year, as happened during the Great Recession. The U.S. stock market declined by roughly a third in 2008, with the low point at year’s end — exactly when valuations for an unrealized gain tax would be determined. This would have led to billionaires marking up massive amounts of unrealized losses. Would the IRS have to issue multi-billion dollar refund checks to return the billionaires’ quarterly estimated tax payments from earlier in the year? No president will want to be in charge when their IRS has to give billions of dollars back to Warren Buffett or Bill Gates.
Even Olsen agrees, “it will only be a matter of time before lawmakers apply the tax to ordinary Americans. Anyone who owns a house or has a retirement account has unrealized capital gains.”
Even though the Constitution clearly states “income” may be taxed, this proposal could very well be unconstitutional. Despite that, if it is allowed to go forward, not only will costs of goods and services owned by billionaires skyrocket, people who are not billionaires may soon be subjected to the same “unrealized” taxes on capital gains, harming Americans who are already suffering due to increased prices on everything from gasoline to lumber and food.
