Thursday, August 29, 2019
The tax system of the United States may experience a serious overall if Democrats win the White House and Congress in the next election. Instead of simply taxing income, Democratic presidential candidates and legislators want to dive into taxing the wealth of the rich in America.
At the end of 2017, U.S. households had $3.8 trillion in unrealized gains in stocks and investment funds, and the majority of the value of estates over $100 million is comprised of those unrealized gains. Much has never been touched by individual income taxes and may never be because capital gains are taxed only when gains are realized through a sale and become income. “The whole tax system is stacked in favor of the tax-avoidance crowd,” said Senator Ron Wyden, who has outlined a plan for annual taxes on unrealized gains. Many of the agendas center on using wealth taxes to finance societal needs, such as expanding health-insurance coverage, combating climate change and aiding low-income households.
Experts across the political spectrum agree income inequality widened in recent decades, and wealth inequality even more. But there does not appear to be a consensus necessarily on what to do about it. Conservatives fear heavily taxing the wealthy will hinder investment and disrupt markets, while liberals believe the lighter tax rate on wealth compared to income is morally wrong and a contributor to wealth gaps between blacks and whites.
See Richard Rubin, Democrats’ Emerging Tax Idea: Look Beyond Income, Target Wealth, Wall Street Journal, August 27, 2019.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.