Harris Advocates for Tax on Unrealized Stock Gains for Ultra-Wealthy
Vice President Kamala Harris has recently endorsed a Biden administration plan that includes a tax on unrealized stock gains, sparking debate among conservative pundits and Trump supporters who argue that the proposal amounts to socialism or communism. The plan aims to impose a tax on stock holdings as their value increases, regardless of whether they are sold.
Under the current system, the federal government only taxes profits from stock investments, known as capital gains, once a stock is sold. The proposed plan, backed by Harris, would apply this tax to a narrow segment of the population: individuals with a net worth of at least $100 million. According to estimates, this would affect approximately 10,660 people in the U.S.
Currently, no such tax exists, a situation that many progressive-leaning advocates view as regressive. By most estimates, the top 1% of the population has approximately 40% of their wealth tied up in unrealized capital gains. Some economists and tax experts consider the lack of taxes on capital gains a loophole for the wealthy.
The wealthy have employed a strategy known as "buy, borrow, die," which involves buying assets and borrowing against the value of those assets to buy even more assets. This strategy is tax-free and allows assets to be passed on to heirs without incurring taxes. Over the lifetime of ownership, no tax is paid on these assets.
Despite the proposal targeting only the ultra-wealthy and excluding real estate or shares in private startups, conservative opposition remains strong. The right-leaning CATO Institute has raised concerns about individual property rights, financial privacy, and due process.
Former presidential candidate and venture capitalist Vivek Ramaswamy recently posted a video on X, criticizing the plan. "A few weeks ago, I started pointing out that Kamala Harris wants to tax *unrealized* capital gains," he wrote. "The main objection I heard was 'she’ll never actually do this.' Now, we’re seeing it’s one of her signature economic policy proposals." His post was reposted by Elon Musk, one of the wealthiest individuals in the world.
Critics of the Biden and Harris proposal argue that the value of unrealized assets can decline as quickly as it increases, meaning someone could pay a tax on value they never actually realized if the stock market tanks. However, Biden's proposal addresses this by assessing the tax over five years.
Jeff Huggett, a member of the Patriotic Millionaires group, points out that average American workers experience similar financial fluctuations yet are still expected to pay taxes each year. "The same should be expected of anyone who makes a killing on Wall Street," Huggett wrote in a blog post.
The proposal faces significant legal and political hurdles. A recent Supreme Court decision, Moore v. United States, has raised questions about the government's taxing power, potentially complicating the implementation of such a tax. Additionally, passing the proposal through Congress would be challenging, as Biden was unable to secure its passage even with slim majorities in the House and Senate earlier in his term.
Proponents of Harris' plan highlight that GOP nominee Donald Trump's budget plan, which extends his 2017 tax cuts, is projected to add $5.8 trillion to the deficit over the next decade—nearly five times more than the $1.2 trillion increase estimated for Harris.
Biden has referred to the administration's proposal as a “billionaire minimum income tax” with a rate of 25%. The Committee for a Responsible Federal Budget estimates it could raise as much as $503 billion over 10 years. While this would be a fraction of the $5 trillion in tax increases Biden has proposed, his administration describes it as both financially prudent and morally necessary.
“Preferential treatment for unrealized gains disproportionately benefits high-wealth taxpayers and provides many high-wealth taxpayers with a lower effective tax rate than many low- and middle-income taxpayers,” a Treasury Department document on the proposal stated. “Preferential treatment for unrealized gains also exacerbates income and wealth disparities, including by gender, geography, race, and ethnicity.”
The proposal continues to generate heated debate, reflecting the broader discussions on wealth inequality and tax policy in the United States.