Another Unconstitutional Wealth Tax
29th March 2022
Democrats love to propose wealth taxes.
California Democrats have done it, congressional Democrats have done it many times, and now it looks as though President Joe Biden wants to get in on the game. If only they’d pause for a moment to consider—or care—whether wealth taxes are constitutional.
Biden’s proposed wealth tax, styled as a minimum income tax on households worth more than $100 million, will claim least 20% of both income and “unrealized capital gains.” If that phrase sounds familiar, that’s because taxing whatever those are was the key feature of congressional Democrats’ short-lived proposal last year.
Unrealized capital gains don’t exist. You can no more tax them directly, as congressional Democrats tried to do, than reclassify them as “income,” as Biden wants to do.
A capital gain is the profit you get when you sell an investment for more than you paid for it. When the sale is complete and the money in your hand, a tax lawyer would call it a “realized” capital gain.
If, on the other hand, you choose not to sell an investment that has increased in value since you bought it, your capital gain is “unrealized,” which means it exists only on paper. That’s because its value could just as easily go down tomorrow, and the only way to lock in, or realize, that gain is by selling the investment.
The congressional Democrats’ proposal would have taxed those gains even though they didn’t exist. That, as I’ve written previously, is likely unconstitutional.
Democrats love to tax people, not on what they have, but on what Democrats think they have. “Billionaires” don’t have shit until they sell the stuff the estimated value of which excites the envy of the greedy. Jeff Bezos is considered a billionaire because he owns a lot of stock in Amazon; such estimates are based on taking the recent price of a share of Amazon stock and multiplying it by his stock holdings. Of course, anyone who knows elementary economics knows that you won’t get that price for all of those shares. But Democrats daily demonstrate that they know nothing about economics. They see the world as just chock-full of piles of cash that they would just love to steal and spend.