Democrats have been talking about “taxing the rich” for most of 2021. Their sweeping tax plans generally call for increasing tax rates on the wealthy in the U.S.
And while that may sound appealing on the surface, critics say this strategy rarely works. On top of that, it may have some potentially disastrous side effects.
In fact, one flaw might actually help the super rich.
Democrats have submitted a proposal that would tax the unrealized profits of billionaires. The idea was put forth by Senate Finance Committee Chairman Ron Wyden of Oregon, and leftists seem to like it.
Basically, the tax would help Democrats pay for the pricey infrastructure and social spending they’ve got planned.
The proposal calls for a change to how the wealthy pay their taxes: currently, we tax the capital gains of billionaires, but only when the assets sell. This new plan would levy a tax even if the assets don’t sell.
However, this proposal – which President Joe Biden appears to support – could backfire.
And it might involve the richest people in the world actually receiving more money, rather than paying more in taxes.
Via Washington Examiner:
If one of the world’s wealthiest people has an off-year, conceivably, the government would have to pay them a tax refund.
The optics of taxpayers subsidizing billionaires would present terrible appearances for the government and Democrats.
The article provides the example of Harold Hamm, the founder of oil and natural gas firm Continental Resources.
He holds almost 80 percent of the company’s stock, but that stock fell off a cliff during the pandemic: it dropped 40 percent and he lost about 43 percent of his net worth, a steep decline of $4.3 billion.
Under the new tax proposal, Hamm might have gotten some of that many back, because he reported a capital loss.
And that money, of course, has to come from the taxpayers. The only upside is that if the company does better the next year, that money would return to the public — but that’s a big “if.”
A spokesperson from the Finance Committee confirmed that billionaires would be allowed to deduct losses.
And senior policy analyst at the Tax Foundation Garrett Watson added:
If you’re worried about the optics of billionaires not paying taxes on unrealized gains, how will it look if they get refunds for losses from the government during a recession potentially?
Tifphani White-King, head of Mazars USA, said the idea of billionaires claiming losses on their unrealized capital gains “could certainly be discouraging and damaging” for lower-income citizens.
That might be putting it lightly.
Given the fact that we’re facing difficult economic times, and many everyday workers are struggling, allowing billionaires to get a break like this wouldn’t go over well.
Americans are already worried about rising inflation and taxes across the board, despite the fact that the Biden administration insists taxes will only go up for the wealthy.
Right now, everyone is feeling the crunch due to a skyrocketing cost of living, and supply lines continue to fail. Any tax proposal that could feasibly benefit billionaires shouldn’t get much support.
- A Democrat tax proposal calls for billionaires to pay taxes on their unrealized capital gains.
- But this could also mean they’re allowed to deduct losses, and in turn “get refunds for losses from the government.”
- Several experts argue that this idea is even worse, given the current economic situation.
Source: Washington Examiner