Biggest argument people are going to have against this is reading the headline and then realizing most their retirement is in the form of unrealized gains. But if you then just read the qualifier of $100 million, you will quickly realize we are not talking about normal people here. We aren’t even talking about normal rich people. We are talking about the 1% of 1% people.
Government has never expanded their reach when given power. Civil forfeiture was about combating organized crime not funding police departments. Border patrol has expanded reasonable searches from crossings to cover entire states. Give it 20 year and this will apply to gains over a million.
Yes, and because of this the corporate tax rate and top marginal tax rate has been trending up for the past half century… right?
It applies only to individuals with at least $100 million in wealth who do not pay at least a 25% tax rate on their income (inclusive of unrealized capital gains). Payments can be spread out over subsequent years.
Within that $100 million club, you’d only pay taxes on unrealized capital gains if at least 80% of your wealth is in tradeable assets (i.e., not shares of private startups or real estate). One caveat for this illiquid group is that there would be a deferred tax of up to 10% on unrealized capital gains upon exit.
Without any changes, this would push investors towards the non-included class of real estate, which would exacerbate the housing crisis.
And on top of that, I can think of a million ways they could skirt this regulation with some clever accounting.
Create private startup as a personal asset holding fund > Transfer shares of publicly-traded liquid investments to private startup > Give yourself illiquid shares of the startup that have a time-bound restriction before they are allowed to become liquid (but don’t have to become liquid, and can stay illiquid for any longer period of time chosen)
Result: You, the individual, don’t hold all the liquid investments. You hold an illiquid asset that’s backed by all of the liquid investments. Illiquid assets are not fully taxed under this proposal.
They need to fix this sort of loophole, otherwise it would just be an invitation for the ultra-wealthy to posture about how they’re “already being subjected to so many harsh tax laws,” while not actually paying the relevant taxes.
this would push investors towards the non-included class of real estate
You’d have to pay property tax then, and unless your in California your paying that on your “unrealized gains” as well since they’ll re-asses your property every few years and tax you on the newly assessed value.