Senate Republican leader Mitch McConnell ridiculed a Democratic tax plan targeting the unrealized capital gains of the ultra wealthy as a “harebrained scheme” that could have unintended consequences for the economy and markets.
“The Democrats are so desperate to raise taxes that they are now proposing to tax money the American people haven’t even made yet,” McConnell said Monday of the plan that Democrats are considering to levy taxes on the assets of billionaires and others with high incomes. “The next visionary startup founder could have to sell away ownership prematurely just to pay Uncle Sam.”
Senate Finance Chairman Ron Wyden plans to unveil the proposal this week as an alternative to raising the income tax rate for top earners and corporations to pay for social spending in a tax and spending package totaling as much as $2 trillion and encompassing much of President Joe Biden’s economic agenda.
It would tap the massively appreciated but unsold stock holdings of billionaires like Elon Musk, Jeff Bezos and others whose fortunes are largely unrealized capital gains.
The Senate panel estimates the levy would hit about 700 of the richest Americans — those with $1 billion in assets, or three consecutive years of $100 million or more in income. It would apply to assets like stocks, bonds, real estate, and art, with gains in value taxed on an annual basis, even if the asset is not sold.
McConnell said the proposal hasn’t been studied adequately and could slow growth and skew investments.
“In parallel with taxing people on hypothetical gains they haven’t realized, they apparently also want to hand out tax breaks for hypothetical losses, losses that people haven’t realized,” McConnell said. “This harebrained scheme would have the IRS penalizing people who invested wisely and compensating people who have invested poorly.”
McConnell said billionaires could reap tax cuts during a market crash, while the tax threat would potentially drive them into tax shelters and away from stocks and bonds. That, in turn, he said, could then reduce the growth of ordinary Americans’ investments in the market.
McConnell has also repeatedly spoken out against other Democratic tax plans as well, including raising the corporate tax rate, taxing the unrealized capital gains of millionaires at death, and expanding bank reporting to the IRS.
— With assistance from Colin Wilhelm
