Kamala Harris's Capital Gains Tax: Why It's Sparking Controversy

hold on to your wallets folks because the Biden Harris Administration is cooking up a new tax plan and this one is causing quite a stir it's all about going after those unrealized capital gains those profits lurking in Investments that haven't been sold yet yeah you heard that right they're coming for the money you haven't even made yet at least on paper The Proposal targets the super rich those with a net worth north of $100 million we're talking about a 25% minimum tax on their total income including those unrealized gains the administration says it's all about fairness making sure the wealthiest Americans pay their fair share but as with anything in politics it's not that simple this tax plan is like a dog chasing its tail full of potential complications and unintended consequences economists are waving their arms investors are getting Twitchy and politicians are lining up for a good old-fashioned brawl buckle up because this is going to be a bumpy ride okay let's break down this whole unrealized gains thing because it's at the heart of this whole tax Kur fuffle imagine you buy a fancy painting for $10,000 suddenly everyone decides your taste in art is impeccable and the painting is now worth $50,000 congrats you've got a $40,000 unrealized gain now under current rules you don't pay taxes on that gain until you sell the painting makes sense right you haven't actually seen that money yet yet but this new plan throws that out the window if it passes you'd be taxed on that $440,000 gain even though the painting is still hanging on your wall proponents argue this is about closing loopholes that benefit the wealthy who often hold on to assets for ages delaying taxes critics however cry foul saying it's like taxing a mirage how do you accurately value something that hasn't been sold and what happens if the value plummets before you sell it's a logistical and philosophical nightmare supporters of this capital gains tax overhaul are banging the drum of fairness they argue the current system favors the wealthy allowing them to amass fortunes while paying a lower tax rate than many middle-class Americans it's a Tale As Old As Time the rich get richer and the rest of us are left holding the bag billionaires pay little to no income tax because their wealth is tied up in assets that haven't been sold this they argue is simply unjustifiable critics scoff at this Robin Hood approach they argue that punishing success is no way to grow an economy tax the rich they say and you'll only end up hurting everyone else Leave It To The Economist to throw some cold water on this fiery debate while they generally agree that the current tax system is riddled with flaws many are wary of this unrealized gains tax they argue that it could have unintended consequences throwing sand in the gears of the very economy it's supposed to help one major concern is that it could discourage investment if people know they'll be taxed on gains they haven't realized they might be less likely to invest in the first place this could lead to less Capital flowing into businesses potentially stifling Innovation and economic growth then there's the issue of volatility imagine a bunch of wealthy investors suddenly needing to sell assets to pay taxes on unrealized gains this could create a fire sale sending markets into a SP and let's not forget about the administrative nightmare of trying to Value assets that haven't been sold it's a recipe for complexity confusion and potentially a whole lot of lawsuits unsurprisingly this capital gains tax proposal has become a political football with Democrats and Republicans lining up on opposite sides of the field the Biden Administration sees it as a signature achievement a way to deliver on Promises of tax Ness and fund their ambitious agenda Republicans however are painting it as an attack on the American dream a socialist power grab that will destroy jobs and the economy they're already sharpening their knives ready to wage war against it in the halls of Congress and in the court of public opinion this partisan divide makes it tough to see a clear path forward for this legislation it's likely to face Fierce opposition from Republicans and even some moderate Democrats might bulk at some of its more radical elements get ready for a long drawn out battle with both sides digging in their heels and refusing to budge so the million-dollar question is can this capital gains tax actually become law well in the immortal words of every political pundit ever it's complicated the Democrats hold a slim majority in Congress but it's far from a sure thing Republicans are united in their opposition and will use every trick to derail it they'll filibuster grandstand and blame it on everything from inflation to gas prices and let's not forget about potential legal challenges if it squeaks through Congress it will end up in court faster than you can say unrealized gains the fate of this tax plan rests on a knife's edge it's a high stakes game of political poker one things for certain it's going to be a wild ride