“We probably will have a wealth tax,” House Speaker Nancy Pelosi told CNN.
Sinema OKs a Tax on Unrealized Gains
In the scramble to find a tax hike that all 50 Democrat Senators could support, Senator Kyrsten Sinema OKs a Tax on Billionaires’ Unrealized Gains.
A new annual tax on billionaires’ unrealized capital gains is likely to be included to help pay for the vast social policy and climate package lawmakers hope to finalize this week, senior Democrats said Sunday.
“We probably will have a wealth tax,” House Speaker Nancy Pelosi (D., Calif.) said Sunday on CNN, noting that Senate Democrats were still working on their proposal, which isn’t technically a wealth tax but bears a strong resemblance to that idea.
The proposal under consideration from Senate Finance Committee Chairman Ron Wyden (D., Ore.) would impose an annual tax on unrealized capital gains on liquid assets held by billionaires, Treasury Secretary Janet Yellen said Sunday on CNN.
“I wouldn’t call that a wealth tax, but it would help get at capital gains, which are an extraordinarily large part of the incomes of the wealthiest individuals and right now escape taxation until they’re realized,” Ms. Yellen said.
The tax is expected to affect people with $1 billion in assets or $100 million in income for three consecutive years, according to a person familiar with the discussions. The idea, for which President Biden recently expressed support after excluding it from his campaign plans and administration agenda, would affect a narrower group of people than the capital-gains changes that have already flopped among congressional Democrats.
A spokeswoman for Ms. Sinema said Friday that she was working with Sen. Elizabeth Warren (D., Mass.), who has pushed for an annual tax on the wealthiest Americans’ assets. That wealth tax that Ms. Warren talked about during her presidential campaign would have applied to all assets held by the wealthy. The proposal under consideration, in contrast, would focus on unrealized capital gains and it is expected to include a one-time tax on gains to date. That means a tech-company founder with $5 billion, almost all of which is unrealized gains, would be taxed more heavily than someone who just inherited $5 billion and has no unrealized gains under the tax code.
“I think it’s likely. I’m pushing hard,” Ms. Warren said Sunday on MSNBC of raising taxes on billionaires.
Yellen More Careful Than Pelosi
Senators Kyrsten Sinema and Joe Manchin objected to hikes in marginal rates so this appears to be the default option.
Treasury Secretary Yellen was far more careful in her wording than Pelosi. The reason being that a wealth tax is likely to be found unconstitutional.
Q: Is this a wealth tax?
A: My guess is no because it's a tax on gains, not wealth.
The proposal by Senator Elizabeth Warren is a genuine wealth tax and easily could be tossed by the Supreme Court. Warren obviously does not give a damn.
Regardless, expect legal challenges based on the 16th Amendment.
The proposal taxes unrealized gains. But is there "income" before gains are realized? The courts will decide if this goes forward, but the idea is dubious at best.
The proposal will likely affect fewer than 1,000 of the wealthiest U.S. taxpayers. Can that possibly cover $2 trillion in spending?
Mrs. Pelosi said the tax on billionaires’ assets would likely generate somewhere between $200 billion and $250 billion in revenue over 10 years.
Assuming Joe Manchin holds firm at limiting spending to $1.5 trillion as opposed to the $2 trillion numbers sloshing around, Democrats "only" have to find agreement on another $1.25 trillion.
Hang On To Your Wallets
A friend commented:
Hang on to your wallets. This is how the original income tax was shackled to us. The original tax in 1913 applied only to the super wealthy and topped out at 7%. The average American would never be taxed.
We all know how that worked out. We will all be paying on unrealized gains before the decade is out.
Also recall that big gains on December 31, 1999 would have been big losses by the first months into next year (and about ten years for the Nasdaq to get back to where it was). But a tax would have been assessed for 1999.
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