The problems with Biden’s new ‘minimum tax’ on wealthy people for unrealized capital gains
Brad Polumbo of Based-politics.com and the Washington Examiner, raises some very valid concerns about the new proposal of the Biden admintration to assess a minimum tax rate of 20% on unrealized capital gains, for people worth over $100 million.
His points are itemized below. They should concern anyone who wants a strong US economy. Taking money out of the pockets of “the rich and powerful” means reducing the amounf of money they can invest in new companies and jobs for the lower and middle class.
Life insurance industry experts have alerted us to the possibility that cash value life insurance, and private placement life insurance plans, could be included in this taxation.
Increased taxation of these products could reduce their consumption, and make our families and businesses less financially secure.
Some tax proposals should be stopped in their tracks. Looks like this is one of them.
Taxing unrealized gains is both fundamentally unfair and economically absurd. “The Biden tax plan is crackers,” Cato Institute economist Chris Edwards said. “Unrealized gain is not income. It represents the expectation of future income, which would be taxed in the future under a well-designed tax system. Often, expected future income doesn’t materialize and asset values drop.”
Moreover, a “capital gain” is just a fancy way of saying “value gain on a productive investment.” It’s simple Economics 101 that when you tax something, you get less of it. Do we really want the tax code to (further) discourage productive investments?
Biden’s plan could also drive more investment returns overseas. “The proposal would increase the tax burden on domestic saving in the U.S., which could impair capital investment and formation over the long run,” Tax Foundation senior policy analyst Garrett Watson told the Washington Examiner. “Even if capital investment still occurred at current levels, it is likely that more of it would be conducted by foreign investors who are not subject to this tax on their savings. That would increase the amount of investment returns going abroad, reducing American incomes over the long run.”