Share:

Sinema OKs a tax on unrealized gains

In the scramble to find a tax hike that all 50 Democrat Senators could support, Senator Kyrsten Sinema OKs a Tax on Billionaires’ Unrealized Gains.

A new annual tax on billionaires’ unrealized capital gains is likely to be included to help pay for the vast social policy and climate package lawmakers hope to finalize this week, senior Democrats said Sunday.

“We probably will have a wealth tax,” House Speaker Nancy Pelosi (D., Calif.) said Sunday on CNN, noting that Senate Democrats were still working on their proposal, which isn’t technically a wealth tax but bears a strong resemblance to that idea.

The proposal under consideration from Senate Finance Committee Chairman Ron Wyden (D., Ore.) would impose an annual tax on unrealized capital gains on liquid assets held by billionaires, Treasury Secretary Janet Yellen said Sunday on CNN.

“I wouldn’t call that a wealth tax, but it would help get at capital gains, which are an extraordinarily large part of the incomes of the wealthiest individuals and right now escape taxation until they’re realized,” Ms. Yellen said.

The tax is expected to affect people with $1 billion in assets or $100 million in income for three consecutive years, according to a person familiar with the discussions. The idea, for which President Biden recently expressed support after excluding it from his campaign plans and administration agenda, would affect a narrower group of people than the capital-gains changes that have already flopped among congressional Democrats.

A spokeswoman for Ms. Sinema said Friday that she was working with Sen. Elizabeth Warren (D., Mass.), who has pushed for an annual tax on the wealthiest Americans’ assets. That wealth tax that Ms. Warren talked about during her presidential campaign would have applied to all assets held by the wealthy. The proposal under consideration, in contrast, would focus on unrealized capital gains and it is expected to include a one-time tax on gains to date. That means a tech-company founder with $5 billion, almost all of which is unrealized gains, would be taxed more heavily than someone who just inherited $5 billion and has no unrealized gains under the tax code.

“I think it’s likely. I’m pushing hard,” Ms. Warren said Sunday on MSNBC of raising taxes on billionaires.

Yellen more careful than Pelosi

Senators Kyrsten Sinema and Joe Manchin objected to hikes in marginal rates so this appears to be the default option. 

Treasury Secretary Yellen was far more careful in her wording than Pelosi. The reason being that a wealth tax is likely to be found unconstitutional. 

Q: Is this a wealth tax?
A: My guess is no because it's a tax on gains, not wealth. 

The proposal by Senator Elizabeth Warren is a genuine wealth tax and easily could be tossed by the Supreme Court.  Warren obviously does not give a damn. 

Regardless, expect legal challenges based on the 16th Amendment.

The proposal taxes unrealized gains. But is there "income" before gains are realized? The courts will decide if this goes forward, but the idea is dubious at best.

Funding shortfall

The proposal will likely affect fewer than 1,000 of the wealthiest U.S. taxpayers. Can that possibly cover $2 trillion in spending?

No chance. 

Mrs. Pelosi said the tax on billionaires’ assets would likely generate somewhere between $200 billion and $250 billion in revenue over 10 years.

What's next?

Assuming Joe Manchin holds firm at limiting spending to $1.5 trillion as opposed to the $2 trillion numbers sloshing around, Democrats "only" have to find agreement on another $1.25 trillion.

Hang On To Your Wallets

A friend commented: 

Hang on to your wallets. This is how the original income tax was shackled to us. The original tax in 1913 applied only to the super wealthy and topped out at 7%. The average American would never be taxed.

We all know how that worked out. We will all be paying on unrealized gains before the decade is out.

Also recall that big gains on December 31, 1999 would have been big losses by the first months into next year (and about ten years for the Nasdaq to get back to where it was). But a tax would have been assessed for 1999. 

Share: Feed news

This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

EUR/USD stabilizes above1.0800, looks to post weekly gains

EUR/USD stabilizes above1.0800, looks to post weekly gains

EUR/USD continues to trade in a tight channel above 1.0800 in the second half of the day on Friday, as the improving risk mood makes if difficult for the USD to gather strength. The pair remains on track to snap a five-week losing streak.

EUR/USD News

GBP/USD clings to modest daily gains above 1.2650

GBP/USD clings to modest daily gains above 1.2650

GBP/USD trades in positive territory above 1.2650 in the American session on Friday. The bullish opening in Wall Street doesn't allow the USD to gather strength and helps the pair stay on track to close higher for the fifth consecutive day.

GBP/USD News

Gold holds steady above $2,020 as US yields edge lower

Gold holds steady above $2,020 as US yields edge lower

Gold regained its traction and stabilized above $2,020 after falling below this level during the European trading hours. The benchmark 10-year US Treasury bond yield is down nearly 1% on the day below 4.3%, allowing XAU/USD to keep its footing heading into the weekend.

Gold News

Ethereum price risks decline as increasing exchange supply raises chances of profit taking

Ethereum price risks decline as increasing exchange supply raises chances of profit taking

Ethereum price crossed $3,000 several times this week but the altcoin failed to sustain above this key level, raising concerns regarding its price trend. ETH price faces the risk of decline as the supply of the altcoin on exchanges is on the rise. 

Read more

Up go stocks, down go bonds

Up go stocks, down go bonds

We knew that yesterday was going to be a good day – at least for the stock markets, given that Nvidia defied the expectations that it would - maybe – fail to deliver $20bn sales in the latest quarter. 

Read more

Majors

Cryptocurrencies

Signatures