Kamala Harris by The White House / Flicker (Left), Tax Forms / Adobe Stock (Right)
CV NEWS FEED // Shortly after the fallout surrounding her proposed anti-“price gouging” measures, another one of Democratic nominee Vice President Kamala Harris’ proposed economic policies has come under widespread scrutiny.
Last week, Newsweek reported that if elected Harris plans to institute a 25% tax on “unrealized capital gains” for “people with more than $100 million in assets.”
This group encompasses the wealthiest ten thousand Americans – many of whom own companies that create jobs for millions of workers.
Newsweek specified that while a capital gains tax “is usually paid on the sale of an asset,” Harris’ proposed tax on the rich “would target increases in the value of assets—including stocks, bonds and real estate—these high-net-worth individuals own but haven’t yet sold.”
NBC News noted that “no such tax exists” as of now.
Such a tax has long been pushed for by far-left politicians such as socialist Sen. Bernie Sanders, I-VT, and Sen. Elizabeth Warren, D-MA.
A chorus of critics are warning that the policy would be both harmful to the economy and contrary to the U.S. Constitution.
Writing in Forbes on Thursday, tax lawyer Robert W. Wood called the proposed tax “scary.”
“Apart from policy, there are administrative issues galore,” he wrote. “How do you go about valuing everything every year to be taxed?”
Wood added that under Harris’ plan, valuing “most assets could be a nightmare, and who in the end gets to carry the day on value?”
He outlined what he called “arguably the scariest part” of the proposal:
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?
>> HARRIS UNVEILS ECONOMIC AGENDA INCLUDING CONTROVERSIAL ‘PRICE CONTROLS’ <<
In a separate piece for Forbes published on Friday, cryptocurrency entrepreneur Dave Birnbaum wrote that the tax would represent what he termed “capital punishment.”
“This tax would quite literally punish economic growth,” he argued:
Capital formation is the entire point of a healthy economy. Some of the same politicians that support unrealized capital gains taxes view tax policy generally as a tool for shaping public behavior. Taxing unrealized gains should be examined through the same lens. What are the likely behavior changes that we are to see if we discourage capital formation?
“The downstream cultural and political effects would be dramatic,” Birnbaum added. It “would give rise to a 21st century version of bread and circuses.”
During a Wednesday episode of the CNBC show “Squawk Box,” co-hostess Rebecca Quick and co-host Joe Kernen pressed guest Bharat Ramamurti, who advises the Harris campaign on economic issues, on the Democratic nominee’s controversial proposed tax.
“Taxing unrealized gains just doesn’t seem fair in any sense of the word,” Quick told Ramamurti. “In the very best sense, if you are taxing unrealized gains, all you are doing is pulling forward the taxes that would be paid later when someone actually sells the stock.”
Ramamurti suggested that Harris’ proposed tax would be similar to a property tax – a notion that Quick and Kernen quickly rejected.
“That’s always the go-to answer,” Kernen said.
Ramamurti claimed that all the “revenue coming in” from this tax and the other new taxes proposed by Harris would go toward funding what the incumbent vice president calls “more opportunity.”
Kernen fired back: “It’s probably unconstitutional.”
Widely considered to be an economic “progressive,” Ramamurti is a former Biden-Harris administration official and had previously worked for Sen. Warren.
After the episode aired, Republican Florida Gov. Ron DeSantis agreed with Kernen’s notion that the proposal likely ran afoul of the nation’s founding document.
“Taxing unrealized gains would tank the economy and spur a massive capital flight out of the US,” DeSantis wrote on X (formerly Twitter):
It would also represent the most significant expansion of government power in more than a century.
It is also not constitutional, as the federal government lacks the authority to institute such a tax.
Months before Harris’ campaign announced the policy, critics were already sounding the alarm about the potential consequences of taxing “unrealized capital gains”
Last year, Richard B. McKenzie wrote in a Wall Street Journal op-ed that such taxes are “destructive and unfair.”
He called politicians who favor this kind of tax “redistributionists” and stated that they “are acting as if unrealized capital gains are stored in vaults like gold and can be collected at Congress’s will.”
“They don’t appreciate the ephemeral nature of stocks,” McKenzie went on:
A stock portfolio of $100 million is best approximated by the present discounted value of its firms’ future profit streams. Redistributionists point to wealthy people’s portfolio gains, which they call unrealized and untaxed income. But current income and capital gains are conceptually different.
Recent reports suggest that Harris’ proposed “unrealized gains” tax has also garnered critics among her own campaign’s donors.
The New York Times reported on Thursday: “The proposal has hit a nerve with some of the donors who have flocked to supporting Ms. Harris after Mr. Biden dropped out of the presidential race, according to seven people familiar with the conversations.”
The Times added:
Some have directed their complaints to the campaign’s advisers and top allies in the business community who are perceived to be in her inner circle. At least one top donor close to Ms. Harris has raised the issue with her in a private conversation, encouraging her to instead tax the ability of the ultrawealthy to borrow against their wealth.
Further reading: How Harris’ record on crime manages to alienate voters on both sides
