Of all of Vice President Kamala Harris’ economic ideas, her support for taxing unrealized gains might be the worst.
Right now, capital gains are taxed when they are realized, like when you sell stock or other assets. This proposal would tax gains when they’re unrealized, or purely speculative, for those with assets worth more than $100 million.
I get it: $100 million is a lot of money and it’s hard to feel sorry for someone that rich. But that doesn’t make Harris’s proposal any less bad.
Democratic economic policy has long been fueled by the populist mantra “the rich need to pay their fair share.”
But like most political slogans, it sounds good and means little. What is a “fair share?” I’ve yet to hear anyone define it.
According to the Tax Foundation, 50% of taxpayers pay 97% of federal income taxes. Is that a fair share? If not, there’s not much room left to make it more “fair.”
But if the top 50% of taxpayers contribute nearly all of the federal income tax revenue, the One Percenters, those made famous by the Occupy movement and Sen. Bernie Sanders, are doing the bulk of the work.
Returning to Tax Foundation analysis, the top 1% — about 1.5 million taxpayers — pay 46% of all federal income taxes received. That’s 1% of taxpayers paying nearly half of the federal income tax revenue. Is that a “fair share?”
Since 2001 the share of federal income tax revenue paid by these One Percenters has actually increased around 13%, according to you know who.
What would make this more fair: One Percenters paying 50% of all federal income tax revenue? 60%? 10%?
And since we’re concerned with fairness, what’s fair about taxing unrealized gains? Unrealized gains exist only in theory. Anyone who has ever watched their retirement accounts closely knows that sometimes you’re up, sometimes you’re down. Having to pay taxes based on those swings is crazy, since, again, they only exist on paper.
There’s really nothing fair about being forced to pay real money in the form of taxes on imaginary money in the form of speculative gains — gains that could be wiped away in an instant. One move that could make this more fair is to provide tax credits when your unrealized gains decrease, but I don’t imagine that’s what Harris is thinking. Also, that would be a logistical nightmare.
Harris and the progressives she’s trying to court are guided by the false belief that ideas like this will smooth out inequality. But progressivism has only made inequality in California worse, and it doesn’t seem to be fixing it on the federal level either.
Harris and company have expensive tastes, but what they won’t acknowledge is that the federal government already has a lot of money.
In 2023, the United States collected around $4.4 trillion in taxes, which is larger than the economies of nearly every country in the world. We don’t have an income problem.
But we do have a spending problem — as evidenced by the $1.7 trillion deficit — and proposals like Harris’s will only make matters worse because they fund new projects at the expense of deficit reduction.
If Harris wants to make a difference, she should prioritize getting America’s finances in order.
Matt Fleming is an opinion columnist for the Southern California News Group and CEO of Sower Strategies, a digital marketing and public affairs firm.
