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from https://finance.yahoo.com/news/why-kamala-harriss-approach-to-capital-gains-is-generating-so-much-controversy-112935244.html

Why Kamala Harris's approach to capital gains is generating so much
controversy

Ben Werschkul
Ben Werschkul·Washington Correspondent
Updated Wed, Aug 28, 2024, 2:33 PM PDT5 min read

5.2k
A top business world critique of Kamala Harris since becoming the
Democratic nominee is her endorsement of plans from the Biden
administration that would reshape how the assets of America's richest
citizens are taxed.

But these plans — which include the taxation of unrealized capital gains
on holdings not yet sold — would face an uphill fight on Capitol Hill
even if Harris wins big. Many of the critiques also vastly overstate how far-reaching they would be.

That hasn’t stopped many wealthy figures — especially Trump-friendly
ones — from casting these plans as part of a broad-based attack on
wealth and the business community from Harris.

"This path leads to bread lines & ugly shoes," Tesla (TSLA) CEO Elon
Musk posted on X, formerly Twitter, about the Harris economic agenda.

What triggered this reaction was partly the Harris-Walz campaign
endorsement of tax increase ideas in President Biden's most recent
budget proposal. That revenue, according to Harris aides, would pay for
her "opportunity economy" programs, which include a child tax credit and housing subsidies and more to come.

Read more: Kamala Harris proposes tax credit for first-time home buyers.
What about Trump?

US Vice President and 2024 Democratic presidential candidate Kamala
Harris as she steps off Air Force Two upon arrival at Joint Base
Andrews, Maryland, on August 23, 2024. (Photo by Kevin Lamarque / POOL /
AFP) (Photo by KEVIN LAMARQUE/POOL/AFP via Getty Images)
Vice President and 2024 Democratic presidential candidate Kamala Harris
waves after stepping off Air Force Two upon arrival in Maryland on Aug.
23. (KEVIN LAMARQUE/POOL/AFP via Getty Images) (KEVIN LAMARQUE via Getty Images)
Two of those Biden tax plans now under the Harris umbrella are focused
on capital gains and would indeed raise rates and also bring some
"unrealized" gains in for taxation.

But they would only apply to America's richest households (even many of
the literal 1% wouldn't be impacted) and would have more limited effects
when it comes to some types of wealth.

The Biden White House has tried to cast the idea as an effort to create
a minimum tax rate for the top 0.3% of all households.

The end goal, according to a Biden White House summary, is that these households with massive assets pay the same "marginal rate on their
income just like a high-paid worker pays on their wages."

A focus on 'unrealized' capital gains
The most controversial idea by far is a plan to tax the unrealized
capital gains of households if their net worth exceeds $100 million.
Unrealized gains are advances in net worth that exist on paper but are
tied to an asset that hasn't been sold yet.

It's an echo of calls from figures like Sens. Bernie Sanders and
Elizabeth Warren for a "wealth tax," but the effect here would be more
limited.

Read more: Trump vs. Harris: 4 ways the next president could impact your
bank accounts

Currently, capital gains aren't taxed until assets are sold for any
income level, but this plan would open a thin slice of the richest
Americans to a new minimum tax of 25% of their "income" — alongside a
broader definition of income that includes some unrealized gains.

Story continues

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The case from many Democrats is that Americans with giant reserves are
already able to borrow against these funds and earn income, so they
should be taxed accordingly.

There are also provisions that could dampen the effects further by
allowing taxpayers to spread out payments and delay some costs — albeit
with a "deferral charge" — on some hard-to-liquify assets like startup companies or real estate.

In response, former President Trump has sought to charge that any limits
on these plans would be quickly done away with.

LAS VEGAS, NEVADA - AUGUST 23: Republican Presidential candidate, former
U.S. president, Donald Trump speaks at II Toro E La Capra on August 23,
2024 in Las Vegas, Nevada. The event focused on Trump’s proposed policy
to eliminate taxes on tips for service industry employees. (Photo by
Ian Maule/Getty Images)
Republican Presidential candidate, former U.S. president, Donald Trump
speaks at II Toro E La Capra restaurant on August 23 in Las Vegas. (Ian Maule/Getty Images) (Ian Maule via Getty Images)
A recent visit to a Las Vegas restaurant led the GOP nominee to
baselessly charge the tax on unrealized gains "will soon be applied to small-business owners and you will be forced to sell your restaurant immediately."

Trump added that the idea was "beyond socialism."

Varied assessments of how capital gains overall would change
The overall capital gains system would also be in for changes if Harris
was able to enact a second plank of the Biden plan.

That part calls for a higher capital gains rate, again for the richest Americans, than what exists now.

Long-term capital gains are currently taxed at 20% for the richest
Americans. This plan would — at least for households making over $1
million a year — raise this rate to be in line with rich taxpayers’
overall rate.

The current top tax rate on wages is 37%, but both Biden and Harris are
keen to raise that as well, to 39.6%.

"Preferential tax rates on long-term capital gains and qualified
dividends disproportionately benefit high-income taxpayers," a White
House document cited as the reason for the change.

Economists have also long criticized the plans — especially those around unrealized assets — as unworkable, not enough to solve the multitrillion annual national deficit, and likely to lead to distortions.

Washington's Tax Foundation assessed that Biden's plan would levy "a complicated tax on a narrow segment of high-earning households in a way
that's never been tried."

Biden aides push back that a universal tax rate on income could actually
lessen distortions and remove the incentive for individuals to take compensation as capital gains over wages.

Why it's unlikely to ever happen — even if Kamala Harris wins
These two capital gains plans could raise more than $800 billion over
the coming decade but are likely to face an uphill battle in Washington
even if Harris wins and decides to make it a priority.

These plans are, after all, ones that President Joe Biden himself has
been pushing for years. But he couldn't get them enacted, even in 2021
and 2022, when Democrats had control of both the House and the Senate.


Many of these proposals "have been reiterated year after year because a Democratic Congress did not pass them," Brian Gardner, Stifel chief
Washington policy strategist, wrote in a recent note to clients.

"This raises the question of whether things will be any different in
2025," he added.

If she wins, Harris could face a more inhospitable political climate
than Biden faced when he took office with Democrats facing an uphill
fight to keep control of the Senate.

"How much spending or how many tax cuts or tax proposals you're going to
be able to offer is going to be limited by the makeup of Congress," said Jeannette Lowe of Strategas Securities in a recent Yahoo Finance appearance.

"There may be some restraints."

Ben Werschkul is Washington correspondent for Yahoo Finance.

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they include

👺
23h ago
How come we're taxed on capital gains but can only apply at most $3000
of capital losses against income as a deduction, a monetary amount
established back in 1978 and never adjusted for inflation since?

That deduction should be at least $15,000/yr by now, but we're trapped
in the 1970's with it.

Robert
10h ago
This is all very simple: The largest organized crime element in every
country is the government. The incumbent politicians are, and their predecessors were, crime lords.

Dominic
1d ago
If unrealized capital gains are to be taxed, then unrealized capital
losses should be equally tax refunded.

Taxing unrealized capital gains is like taxing the dealership retail
value each, and every, year on a personal vehicle that one has not, will
not, nor has any intention of selling for the foreseeable future.

Jeff
15h ago
I’m no constitutional scholar, but the 16th amendment specifies the Feds
can collect income tax. Unrealized gains is not income. Makes this unconstitutional.

Bruce
1d ago
Many European countries have tried this and it was a faillure. It's
always debatable what the capital gains might be for properties and collectables and proved to be a nightmare when contested. It also
resulted in the expatriation of the wealthy who were being taxed which
not only meant having lost the tax on unrealized gains but also on other
tax revenues. The other thing that lurks in the shadows is if it is
enacted, what's to say it doesn't become more commonplace among lower
net worth taxpayers? When the first income tax was put into effect it
was either 3% or 5% depending upon income.


Bill H
1d ago
Bezos bailed on WA state to avoid their state tax on capital gains that
apply only to the uber wealthy. Saved himself something like $1 billion
in state taxes when he sold off a bunch of his AMZN stock by moving to
FL. Interestingly WA still considers itself an income tax free state.

"It also resulted in the expatriation of the wealthy who were being
taxed which not only meant having lost the tax on unrealized gains but
also on other tax revenues."

Stephen
1d ago
Bezos didn't recognize communism when it was staring him in the face,
and now it may cost him. Jeff may want to consider turning to fair
journalism instead of running the WP as a propaganda machine for the
very people trying to take is billions. Doesn't he realize that
eventually commies always end up eating the rich.

John S
1d ago
The value of assets owned by the politically connected will somehow be
much lower than the value of assets owned by everyone else.

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