Lawmakers, experts, economists across the board agree that new tax on unrealized gains would fail to achieve its intended goals.
Washington, D.C. – September 24, 2024 – Criticism continues to surround proposals to impose new taxes on unrealized gains, with experts focusing on how it could further complicate tax compliance and stifle investment and economic growth.
Shark Tank’s Kevin O’Leary: “Taxing unrealized capital gains would destroy capital formation and decimate the American dream.”
Hal Scott, Harvard Law School, and John Gulliver, Committee on Capital Markets Regulation: “The selloff caused by a levy on unrealized capital gains would devastate ordinary investors and 401(k)s. …It could do irreparable harm to Americans’ ability to pay for their retirements.”
Investment News: “Taxing unrealized gains? The mind boggles. … the principle of taxing unrealized capital gains appears overly complex and counterintuitive.”
Alexander William Salter, Texas Tech University’s Free Market Institute: “This policy almost appears designed to force investors to turn unrealized gains into realized gains. How else are they going to come up with the cash to meet their tax obligations? Economies grow when wealth is put to work financing long-term investments. It’s massively counterproductive to stifle those investments by forcing capitalists to pay for the supposed sin of creating value.”
Investor’s Business Daily: “‘Obviously, nothing like this has ever been done in the U.S., and it opens the door to the unknown and so much uncertainty,’ said Tim Steffen, director of advanced planning at money management firm Baird. … Some upstart companies might also opt to shift their headquarters and operations to other countries with more investor-friendly tax rules.”
Carolina Journal: “‘A tax on unrealized capital gains is an oxymoron,’ Brian Balfour, VP of Research for the John Locke Foundation, told the Carolina Journal. ‘If a person still holds the asset, they haven’t yet gained anything. The asset could decrease in value at any time, and the person may end up selling it at a loss.’ … Balfour further pointed out that, far from good policies that have positive downstream effects, this policy could spread its harm to other areas, like the real estate industry.”
Tax Notes: “Kyle Pomerleau of the American Enterprise Institute said he understands — although doesn’t agree with — Harris’s more expansive view of income but believes the structure of the proposal could backfire. ‘What makes this complicated is that it is put together as a minimum tax, so you’re going to have taxpayers that may or may not pay this tax year over year, and that requires more administrative burden, information reporting issues, and may also lead to tax avoidance,’ Pomerleau told Tax Notes.”
Financial Post: “The plan has come under fire for both political and practical reasons … Marc Andreessen, the billionaire venture capitalist who runs Andreessen Horowitz and co-founded Netscape in the early days of the Internet, said in a July 16 episode of his podcast that the tax change would make startups ‘completely implausible’ because no one would want to create a growth company only to have their equity stripped away by yearly capital gains taxes.”
GoBankingRates: “The IRS and legislators would need to put together a listing of every single asset that is included in the net wealth calculation. Not to mention that someone would need to be in charge of verifying the calculations for each individual, making regulation time-intensive and open to subjectivity.”
About SAFE
Saving America’s Family Enterprises (SAFE) is a bipartisan research and education organization focused on comprehensive tax reforms that raise revenue, increase fairness, promote greater efficiency, and encourage companies to do more business in the United States.
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