More on Harris’s Wealth Tax Scheme

QUORA: ‘Do Harris voters know she wants to tax unrealized capital meaning if you own your house and the value goes up you have to pay taxes on the increased value even though it may go back down later?’

In answer to the above question, Jeremy Losek attempted to answer the question by claiming that the tax is only limited to a few tax dodgers exploiting a legal technicality. Losek writes:

This is not what Harris means when she says she want [sic] to tax unrealized capital gains. She isn’t going after people who purchase stock and then sit on it till retirement.

She is going after wealthy people who get paid in stock to avoid income taxes.

Losek goes on to purportedly show the gimmicks those wealthy people use to turn the allegedly untaxed stock income into an income tax-skirting windfall. But Losek falls flat, because he starts from a false premise—that compensation paid in stock is not subject to regular income tax. But as I explain, those supposed “tax loopholes” are beside the point. My reply: 

In fact, the value of stock paid as compensation is taxable as regular income. The method of taxation varies with how the stock is paid. But, ultimately, tax is owed. 

Of course, this is a rationalization. If, as Harris claimed, there are loopholes that allow a few wealthy people to legally skirt taxes, then the answer is simply to fix the existing tax rules that allow it. Why institute a draconian new tax to fix a problem that enables a handful of tax dodgers?

Because those few are not the intent.

What Harris has in mind is a sinister scheme to open Americans’ vast long-term growth savings and investment to taxation, with income tax loopholes as an excuse. Don’t be duped by her promise to exempt most of us from the tax. Once the precedent is set, and the principle that the government can tax potential income (unrealized capital gains) is accepted, the tax will inevitably be expanded to ensnare all of us. Even AXIOS, which fact-checked Harris’s scheme, 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. 

The same goes for expanding the scope of the tax to more sources of unrealized capital gains, such as houses. Once enacted, what limiting principle is there to stop the political class?

The federal income tax was originally sold to Americans as a tax only on a few super-rich Americans.

Fortunately, Harris lost the election, and the Republicans control Congress. So the danger of a wealth tax is nil—for now. But don’t kid yourself. The idea won’t go away. 

Related Reading:

The Truth about Harris’s Proposed Tax on Unrealized Capital Gains

Unrealized Capital Gains Taxes Will Trickle Down to the Middle Class by Peter Jacobsen for FEE

Joe Manchin on Biden's Wealth Tax: 'You Can't Tax Something That's Not Earned.' by Peter Suderman for Reason

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