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Jimmy Williams
Vice President Kamala Harris has emerged as a key supporter of a Biden administration plan to impose a tax on unrealized stock gains for the ultra-wealthy, reigniting debates about economic policy and equity. The proposal, which targets individuals with a net worth of at least $100 million, would levy taxes on the increasing value of stock holdings, regardless of whether they are sold.
“Buy, Borrow, Die” Loophole
Currently, capital gains taxes are only imposed when stocks are sold, allowing the wealthy to take advantage of a strategy called “buy, borrow, die.” This involves buying assets, borrowing against their value to acquire more wealth, and passing them on to heirs tax-free, ultimately avoiding paying taxes on these assets altogether.
Under Harris’s plan, unrealized capital gains — the increasing value of stocks or tradable assets before they are sold — would be taxed, closing what some economists see as a loophole that allows the ultra-wealthy to avoid taxes. Advocates argue that this new approach would bring much-needed equity to the tax system.
Conservative Backlash and Criticism
Conservative pundits and business leaders have slammed the proposal, framing it as an attack on property rights. Critics like former presidential candidate and venture capitalist Vivek Ramaswamy have taken aim at Harris, arguing that such a tax could harm businesses and innovation. Elon Musk, one of the wealthiest individuals in the world, reposted Ramaswamy’s comments, amplifying opposition to the plan.
The Cato Institute, a libertarian think tank, echoed these concerns, raising questions about the implications for financial privacy, individual property rights, and due process. Additionally, critics argue that the volatile nature of stocks could mean individuals might pay taxes on value increases that never materialize, should the stock market decline.
Progressive Defense of the Tax
Proponents of the tax, however, view it as a critical tool for addressing income inequality. The proposal is narrowly targeted, affecting only about 10,660 individuals in the U.S. with a net worth of $100 million or more. These individuals hold an estimated 40% of their wealth in unrealized capital gains, which remain untaxed under the current system.
The Biden administration describes this tax as a “billionaire minimum income tax” aimed at ensuring that the wealthiest Americans pay at least a 25% tax rate on their income. While the administration has projected the tax could raise as much as $503 billion over 10 years, critics argue it may face significant legal and political challenges.
Legal Hurdles Ahead
Legal scholars point to a recent Supreme Court decision that could serve as a potential roadblock to the implementation of the tax. Although the ruling in Moore v. United States did not explicitly bar such a tax, its interpretation of the government’s taxing powers may offer a pathway for opponents to challenge it in the future.
Additionally, getting this proposal through Congress could be difficult. Even when President Biden had slim majorities in both chambers, the proposal faced resistance. Given the current political climate, Harris’s endorsement of the plan signals a broader push for tax reform but raises doubts about its immediate prospects for success.
Moral and Fiscal Arguments
Despite the opposition, the Biden administration argues that taxing unrealized capital gains is not only financially sound but morally necessary. The Treasury Department has highlighted how preferential treatment for capital gains disproportionately benefits high-wealth taxpayers, exacerbating income and wealth disparities. Progressives argue that imposing a tax on unrealized gains would help level the playing field between the ultra-wealthy and ordinary taxpayers, who are taxed annually on their income regardless of market fluctuations.
Conclusion
Kamala Harris’s endorsement of the Biden administration’s plan to tax unrealized capital gains places her at the forefront of a contentious economic debate. While the proposal seeks to close loopholes that benefit the ultra-wealthy, it faces significant legal, political, and ideological opposition. As the 2024 election approaches, the tax plan will likely remain a focal point of debate between progressives pushing for economic equity and conservatives warning of its potential impact on business and investment.
