How Kamala's Unrealized Gains Tax Will Destroy the Economy

By tremendousblog on August 26, 2024

Kamala Harris has announced a plan to tax unrealized capital gains. This bizarre and unprecedented plan will hit the US economy like a sledgehammer.

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great breakdown of the @KamalaHarris (via @JoeBiden) 25% wealth tax by @friedberg pic.twitter.com/tlmr6Q6v2Q

— The All-In Podcast (@theallinpod) August 25, 2024

Harris plans to tax unrealized capital gains at 25%. This would only apply to tax payers with assets of over $100 million — for now.

If you're illiquid and can't pay the tax today, you can defer it. But then you'll have to pay an even higher rate.

Expect this tax to affect a lot more people over time. When income taxes were introduced in 1913, they covered only the ultra-rich.

Why It's Unworkable

Let's say you own a building. You picked a good location, and the value goes from $100 million to $150 million.

You now owe $12.5 million in tax, or 25% of $50 million. But you didn't sell the building, so you don't have the money to pay the tax!

Looks like you'll have to defer. But what happens if you sell the building and you can only get $95 million for it?

No one seems to know.

Startup founders will face the same problem. A founder could be worth $200 million on paper but have almost no liquid assets.

Under Kamala's regime, he'd be piling up giant tax bills on money he does not have.

But it gets worse. How do we even know what these private assets are worth?

Well, unless you have a financing event that prices them, the government will just pick a valuation. That valuation will determine how much tax you owe.

Those valuations may have nothing to do with reality. After all, the government will want to maximize its revenue.

Business Grinds to a Halt

If there's one thing that kills business, it's uncertainty. And this Rube Goldberg tax plan is loaded with it.

How much are my private assets really worth? And with all the complex rules, how much am I really supposed to pay?

Businesses won't know what to do. So business activity will slow down.

Meanwhile, the tax will suck money out of the economy. That means less money to build housing or start a business.

The tax may fall on the rich to start. But when we slide into recession and unemployment spikes, this cockamamie tax plan will affect everyone.

Unstable Government Finances, Shrinking Capital Markets

Let's say that I have $200 million in stocks. In 2025, their value goes up to $300 million.

I owe $25 million in tax, and I pay it. But in 2026, the market takes a nosedive.

Now my stocks are only worth $150 million, less than when I started. Is the government going to give me a refund?

Providing refunds would place enormous stress on the government during recessions. But if it doesn't provide refunds, the government will starve the economy of capital.

When the feds take a piece of your winnings but never share the losses, sooner or later you have nothing left.

Hello, Dubai!

Facing punitive taxation and a weak economy, Americans will begin to move abroad. After all, Dubai has no capital gains tax at all.

Investors and entrepreneurs are the most mobile people in America. They'll be the first ones off the sinking ship.

Average Americans will stay. But they'll face an economy starved of investment.

Expect fewer jobs, lower pay, and little or no growth.

Wrap Up

Harris' tax plan is insane. It will starve the economy of the money it needs to grow.

Kamala Harris' America is a very different country. It's a place of low growth, minimal innovation, and high unemployment.

It's a place that anyone with options will leave.

We already pay enough. Let's get the government's hand out of our pockets.

What do you think of Harris' tax plan?