A meme going around Facebook about Kamala Harris’s proposed tax on unrealized capital gains reads “Home Owner Do you realize that the Harris plan to tax unrecognized Capital Gains mean if your house goes up in value you will have to pay that Tax Even if you don’t sell your House!”
The meme drew widespread criticism for it’s falsity. On the face of it, this is factually wrong—but only on the face of it. Harris specifically states that she would limit the tax to those with $100 million in assets, and only to those who don’t pay their “fair share,” defined as 25% at minimum.
But in engaging the skeptics, I argued that, properly analyzed, the meme is in fact correct. Below is a summary of the postings I made on Facebook.
Properly understood, the meme is exactly correct—“Harris's plan to tax unrecognized capital gains MEANS” your home. No, it’s not in her published plan. She's running a campaign. Of course she’s not stupid enough to SPECIFY it for middle class homes. Not now. Politicians regularly sneak in their schemes first for the rich. But once in place, the logic of the principle opens the door to widening the scope of the tax to more and more taxpayers, ultimately snaring the vast middle class. Even AXIOS, which was cited by one fact-checking correspondent challenging that meme, understood this:
There's also a slippery slope concern; the big mental and legislative hurdle is taxing unrealized capital gains — after that, lowering the threshold below $100 million would be easier, EVEN IF NOT CURRENTLY ON THE TABLE.
In other words, once you accept the principle, and set the precedent, it will be easy for politicians to expand the power. James Madison, referring to the increasingly tyrannical British laws that led to the American Revolution, said
The free men of America did not wait till usurped power had strengthened itself by exercise, and entangled the question in precedents. They saw all the consequences in the principle, and they avoided the consequences by denying the principle. [My emphasis]
Fortunately, the Founders understood the slippery slope. That’s why America exists.
We, too, should understand the consequences in the principle Harris and the Democrats are trying to sneak in.
Many people believe Harris’s tax on unrealized capital gains, also known as wealth taxes, will always apply to the miniscule centi-millionaire group. But when we start sliding down the slippery slope, and it hits middle class homes, they’ll say “But I didn’t mean this!” Yes, you did. The total value of Americans’ homes tops $50 trillion. How long does anyone think the political class will ignore that pot of gold? If we don’t see the consequences in the principle of taxing unrealized capital gains, and deny the consequences by denying the principle, we will be opening the door to taxing our homes—and virtually every non-liquid asset Americans own, like 401ks, IRAs, brokerage accounts, collectables, the values of pensions, and on and on to the unrealized capital gains of any asset the politicians can discover.
Personally, my main reason for opposing unrealized capital gains taxes is that it is immoral. It’s wrong for the middle class. And just as wrong for mega-millionaires. It’s also grossly impracticable, as many countries found out by hard experience. As CATO reports:
More than a dozen European countries used to have wealth taxes, but nearly all of these countries repealed them, including Austria, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, the Netherlands, Luxembourg, and Sweden. Wealth taxes survive only in Norway, Spain, and Switzerland.
For both moral and practical reasons; for our own financial well being; and on principle, we should reject Harris’s hideous wealth tax scheme. This is a really big deal. It is something entirely new, and would open up a whole new target on Americans’ financial health. We should not give our tax-hungary political class that target. Let’s deny the consequences of the principle. Reject Harris’s scheme to tax our homes!
Related Reading:
Unrealized Capital Gains Taxes Will Trickle Down to the Middle Class by Peter Jacobsen for FEE
Plans to Tax Unrealized Capital Gains Are Beyond Radical. They’re Ridiculous by Jack Salmon for National Review
Biden Is Trying To Pass a Wealth Tax—Again. It Could Be Unconstitutional by Ira Stoll for Reason
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