Vice President Kamala Harris has endorsed a tax proposal that is lighting up debates everywhere. The 25% minimum tax on total income, including unrealized capital gains, targets the ultrawealthy, particularly those with over $100 million fortunes. While some see this as a bold move toward fairness, many financial experts and political voices are raising alarm bells.
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Jason Katz, managing director and senior portfolio manager at UBS, is among the most outspoken critics. In an interview with Fox Business, Katz didn’t mince words, calling the proposal “an unmitigated disaster.”
According to him, taxing unrealized gains – that is, gains on assets that haven’t been sold yet – would create an “accounting nightmare.” He painted a grim picture of taxpayers facing massive bills for gains that could easily disappear the following year.
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Katz illustrated his point with a hypothetical scenario, asking, “If you have an ultra high net worth person who bought, say, $100 million worth of Amazon and it goes to $150 million and the government taxes 23% on that $50 million in year one, if in year two, that $150 – because Amazon drops – goes back to $100 million, is the government going to rebate the tax from the previous year?”
“It would be an accounting nightmare, not to mention the fact it would suck money out of the capital markets,” he said. He added that it ‘made no sense’ applying the tax to other asset classes like real estate, where investors also see unrealized gains.
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While Katz and other critics warn of potential market disruptions, the Biden administration defends the proposal as a necessary step to close loopholes that allow the wealthiest Americans to avoid paying their fair share.
An entrepreneur and “Shark Tank” investor, Mark Cuban offered a somewhat different perspective. According to CNBC’s Squawk Box, the billionaire entrepreneur and “Shark Tank” star claims to have spoken with Harris’ team directly.
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He said Harris’ aide told him that unrealized capital gains wouldn’t be taxed, which contradicts what has been circulating about the proposal. Even within Harris’ camp, there’s a bit of a disconnect on what the plan entails.
However, tax proponents, such as Democratic Sen. Elizabeth Warren, argue that taxing unrealized capital gains could help close the wealth gap by ensuring that the ultrawealthy pay their fair share. According to a report from The New York Times, wealth inequality in the U.S. has reached levels not seen since the 1920s.
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From an economic perspective, critics, including former CKE Restaurants CEO Andy Puzder, have called the proposal “voodoo economics.” Speaking on Fox Business’s ‘Evening Edit,’ he said, “The idea that we’re going to tax unrealized capital gains, that’s just absurd. This is voodoo economics … it’s absolutely ridiculous.”.
There are also logistical hurdles to consider. Analysts have pointed out that taxing unrealized gains would likely require new reporting systems and create huge compliance headaches for taxpayers and the IRS.
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This article This Market Pro Says Kamala Harris’ Unrealized Capital Gains Tax ‘Makes No Sense’ And Will ‘Suck Money Out Of The Market’ originally appeared on Benzinga.com
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Source: finance.yahoo.com