Lawmakers, experts, economists agree that new tax on unrealized gains would fail to achieve its intended goals
Washington, D.C. – September 5, 2024 – Following the recent announcement that Vice President Kamala Harris would support taxing unrealized gains, a wave of criticism has emerged from lawmakers, market analysts, and financial experts.
- Rep. Ro Khanna (D-CA): “Let me tell you why I don’t think a blanket tax on unrealized gains is a good thing… Do you really want the entrepreneurs to be forced to sell their companies to larger institutions and to decline in value? I don’t think that’s what you want for a startup ecosystem.”
- Mark Cuban: “If you tax unrealized gains, you’re going to kill the stock market.”
- Former SEC Chair Jay Clayton: “This is one of the worst tax ideas that’s floating around.”
- CNBC’s Becky Quick: “Taxing unrealized gains doesn’t seem fair in any sense of the word.”
- CNBC’s Joe Kernen: “It’s probably unconstitutional…and it’s never going to happen.”
- UBS Managing Director Jason Katz: “That would be an unmitigated disaster…It would be an accounting nightmare.… Are real estate owners going to liquidate real estate to pay taxes? It makes no sense whatsoever.”
- Megan McArdle, The Washington Post: “These taxes have a lot of problems: They distort investment decisions, as wealth shifts toward hard-to-value assets such as art and privately held companies; they could impede capital formation; and they are an administrative nightmare for an IRS that doesn’t currently have the expertise to figure out exactly how much your mansion appreciated last year. Worst of all, these taxes don’t even raise that much money: $500 billion over 10 years, according to the Peter G. Peterson Foundation. Moreover, some of that simply reflects tax payments shifted forward, rather than a long-term revenue increase, since taxing gains now lessens the taxes paid when the assets are sold.”
- Robert W. Wood, Forbes: “Apart from policy, there are administrative issues galore. How do you go about valuing everything every year to be taxed? Public company stock would be straightforward. But most assets could be a nightmare, and who in the end gets to carry the day on value? Disputes about value in tax cases are legendary and voluminous. Nearly every estate tax case with the IRS includes valuation disputes, often with competing experts. In income tax cases, charitable contributions of noncash assets such as real estate or crypto often also end up in major valuation fights.”
- Derek Hunter, The Hill: “As many others have pointed out already, such a tax would harm everyone investing for retirement, depressing asset values as the uber-rich are forced to make massive annual sales just to pay the tax. And what I’d really like to know is whether, if I’m ever forced to pay taxes on stocks I’m still holding just because their value went up on paper, do I get my money back when their on-paper value goes back down again months or years later? … The reality is that taxes that start off narrowly focused on just a small group of people always end up expanding to get almost everyone. This has happened over and over again throughout our history.”
- Marketwatch: “It’s ‘among the worst ideas in the Biden administration’s proposed budget,’ said Siri Terjesen, a professor and associate dean at Florida Atlantic University’s College of Business. It would serve as a ‘kill switch’ for entrepreneurship because it would end up “discouraging investment & draining capital,” she wrote.
- Fox Business: “According to Richard Stern, the director of the Grover M. Hermann Center for the Federal Budget, the move would also impact businesses. ‘A tax on unrealized gains may be filed by an individual, but it is truly paid for by the workers and customers of the underlying business, and in the form of diminished economic growth,’ Stern said.”
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.
###
