The proposal, floating around Washington and state legislatures, would create more loopholes than it closes and chill investment.
By John Breaux
America’s tax code contains far too many loopholes. Yet rather than close them, lawmakers across the country want to establish a new levy that would create more. The latest plan circulating around Washington and state legislatures is a tax on “unrealized gains”—an effort to collect more revenue from the wealthy. But if enacted, the policy would have the opposite of its intended effect, allowing high earners to game the system further and transform how income and investment is taxed in this country.
Under current law, when we sell an asset—be it property or stock—we pay taxes on the profit. The new proposal would eliminate this arrangement and require taxpayers to pay tax on the increased value of all of their assets every year—whether they’re sold or not. A homeowner, for example, would have to seek out an appraisal of his property’s worth. With each year, he’d then pay a tax on its increase in value. Such a process would be subjective, complex and onerous both to taxpayers and the government.
As a longtime senior member of the Senate Finance Committee and a co-chairman of President George W. Bush’s 2005 tax-reform commission, I advanced and supported ideas to hold the wealthy accountable for paying what they owe. I agree with President Biden’s latest assessment in his State of the Union address that “the tax system is not fair” and that “we have to fix it.” Research cited by the Treasury Department suggests we’re losing more than $160 billion each year because the top 1% of taxpayers aren’t paying what they owe. That should change—and quickly.
