Vice President Kamala Harris has recently stirred up controversy with her economic agenda, particularly when it comes to taxing wealthy Americans and corporations. Advocating for higher taxes on the rich, she has endorsed President Joe Biden’s proposal for a 25% minimum tax on total income, which includes “unrealized gains” exceeding $100 million. This so-called billionaire minimum tax has sparked debate among experts and the general public alike.
If implemented, individuals with assets surpassing the $100 million mark would be required to report unrealized gains for each asset class annually. This reporting would entail disclosing the basis, or original purchase price, as well as the market value of the assets by December 31st. Currently, investors are subject to capital gains taxes of either 0%, 15%, or 20% when selling profitable assets held for more than one year. Adding an extra layer to the tax burden, higher earners also face a 3.8% net investment income tax.
Despite the push for a billionaire minimum tax in Biden’s fiscal year budgets for 2023-2025 and Senate Democrats’ efforts in 2021, the proposal has met resistance. Political support for this tax increase remains low, as noted by Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. Additionally, there has been criticism from the business community, with entrepreneur Mark Cuban expressing doubt about the feasibility of taxing unrealized gains. Cuban’s concern extends to the potential impact on the stock market, should such a tax be imposed.
While many Americans advocate for taxing the wealthy, policy experts have raised red flags about the proposed billionaire minimum tax. Erica York, a senior economist at the Tax Foundation’s Center for Federal Tax Policy, argues that the policy moves away from sound tax practices. She highlights administrative and compliance challenges, liquidity issues, gaming possibilities, and potential disputes with the IRS as major drawbacks of the proposal. Rosenthal echoes similar concerns, pointing to the likelihood of legal challenges in the wake of a recent Supreme Court ruling.
The debate surrounding taxing billionaires reveals deep-rooted divisions in economic policy and taxation. While Harris and Biden champion a more equitable tax system, the road ahead is fraught with challenges and uncertainties. Whether the billionaire minimum tax will become a reality or remain a contentious issue for years to come, only time will tell.