From: allin
Kamala Harris’s campaign has reportedly endorsed tax policies, including a significant wealth tax and increases to corporate and stock buyback taxes [01:05:27], [01:06:26]-[01:06:28]. These proposals are part of the Biden-Harris 2025 budget and reflect a continuity in their economic plans [01:05:50]-[01:06:28].
Key Proposals
The proposed 2025 tax plan includes:
- A 25% wealth tax on individuals with over $100 million in assets [01:05:35]-[01:05:41].
- A 25% unrealized capital gains tax for those with over $100 million in assets [01:06:45]-[01:06:48].
- An increase in the corporate tax rate to 28% from the current 21% [01:06:51]-[01:06:53].
- Quadrupling the stock buyback tax to 4% (currently 1%) [01:06:56]-[01:07:07].
Unrealized Capital Gains Tax Details
The most “triggering” aspect of the plan, affecting approximately 5,000 individuals, is the 25% unrealized capital gains tax [01:11:17]-[01:12:28].
- Payment Structure: The first time this tax is applied, payments can be split over nine years [01:11:23]-[01:11:26]. Subsequent payments can be made over five years [01:11:34]-[01:11:36]. These payments are considered prepayments on taxes that would eventually be due when capital gains are realized [01:11:36]-[01:11:40].
- Valuation and Reporting:
- Taxpayers would need to annually report the cost basis and estimated value of all assets, categorized by asset class [01:11:42]-[01:11:49].
- Tradable assets (e.g., stocks) are valued at the end of the year [01:11:56]-[01:12:00].
- For illiquid assets (e.g., private companies, real estate), a valuation from a financing event or major revaluation must be used [01:12:00]-[01:12:13]. If no such event occurs, the Treasury will set a nominal annual increase rate for the asset’s value [01:12:14]-[01:12:19].
- An appeal process would be available for valuation disputes [01:12:28]-[01:12:42].
- Illiquid Taxpayer Provision: If a taxpayer’s tradable assets (stocks or cash) are less than 20% of their total wealth, they may elect to only include unrealized gains from their tradable assets in their tax liability calculation [01:13:17]-[01:13:39]. However, this comes with a deferral charge, meaning a higher tax will be paid on the illiquid asset’s capital gains upon realization [01:13:42]-[01:13:52].
Economic and Legal Implications
Arguments Against the Proposal
- Confiscatory Nature: Critics describe the tax as a “confiscation” or “seizure” of assets, designed to take 25% of what millionaires and billionaires possess [01:15:40]-[01:15:48].
- Lack of Realization Principle: The existing tax code is based on “realization,” where tax is paid upon the sale of an asset, ensuring a clear sale price and liquidity to pay the tax bill [01:15:53]-[01:16:10]. An unrealized gains tax lacks these benefits, making valuation difficult and creating liquidity problems for taxpayers [01:16:12]-[01:16:19].
- Administrative Burden: Complying with such a tax would necessitate a new, complex tax bureaucracy and require taxpayers to hire many new lawyers and accountants [01:16:29]-[01:16:46].
- Impact on Entrepreneurship: Forcing entrepreneurs to sell large portions of their company stock to pay taxes on unrealized gains would deplete ownership, dump assets on the market, and “starve the market of capital,” potentially hindering entrepreneurial activity and leading to early retirements [01:17:08]-[01:17:35].
- Mobility of Capital: Unlike the 1940s and 1950s when high tax rates were implemented, capital and individuals are now far more mobile [01:08:40]-[01:08:53], [01:10:46]-[01:10:51]. If the U.S. pursues extreme taxation, wealthy individuals and companies could leave, leading to capital flight [01:09:46]-[01:10:00], [01:27:08]-[01:27:15]. This has been observed in places like California (moving to Texas and Florida) and other countries like France and Norway [01:09:17]-[01:09:55], [01:28:09]-[01:28:16], [01:28:33]-[01:28:36]. Sovereign wealth funds might even emerge to help entrepreneurs pay “exit taxes” to leave the U.S., effectively investing in talent and jobs in other nations [01:27:31]-[01:28:05].
Constitutionality
- The 16th Amendment has been cited as potentially prohibiting such taxation [01:16:17]-[01:16:21].
- However, a Supreme Court ruling in June 2024 in the Moore v. United States case, which involved a repatriation tax on unrealized gains for those who left the country, did not overturn the government’s authority to tax unrealized capital gains in that specific context [01:14:26]-[01:15:17]. This precedent suggests that a wealth tax on unrealized gains might not be thrown out on constitutional grounds [01:15:14]-[01:15:24].
Economic Impact
Even with all proposed tax hikes, the unrealized gains tax is estimated to raise about 2 trillion deficit, indicating that significant spending cuts would also be required to balance the budget [01:26:51]-[01:27:00]. Furthermore, the existence of new government programs would likely increase the deficit [01:27:00]-[01:27:04]. Historically, wealth taxes have often failed to raise anticipated revenue due to wealth flight, leading to pressure to broaden their application to more people [01:28:36]-[01:28:49].
Political Context
The proposal is seen as part of the Democratic Party’s shift towards “left-wing populism,” emphasizing “soak the rich” policies and an element of class warfare [01:04:42]-[01:05:00], [01:05:11]. This approach aims to appeal to a large segment of the population that may not own homes or equities and feels shut out from the “equity economy” [00:58:40]-[00:58:55], [01:04:00]-[01:04:15].
Some panelists express concern that releasing these detailed policy proposals by Kamala Harris’s campaign is negatively impacting her poll numbers, as the public learns more about the substance of her potential presidency [00:39:29]-[00:40:12]. This suggests a challenge for the campaign in running a “substance-free” or “vibes-based” strategy for the remaining months before the election [01:40:14]-[01:40:31].