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Lewis Morris / October 28, 2021

Democrats’ Latest Scheme for Taxing Wealth

Their greed knows no bounds, as they now pursue confiscating unrealized capital gains.

Democrats are at their most creative when concocting schemes to separate people from their money. Their latest taxpayer swindle comes in the form of targeting “unrealized income,” which is a fancy way of saying the government wants to tax money that people haven’t even made yet.

This new proposal comes courtesy of Democrat Senator Ron Wyden of Oregon. Hailed by the media as “groundbreaking” and “innovative,” it is complex, unwieldy, unfair, and likely unconstitutional, so it will fit right in with the Democrat strategy. The plan calls for taxing billionaires on the appreciation of their assets over the course of a year. As The Wall Street Journal explains, “Someone who owned $2 billion of stock on Jan. 1 and saw it grow to $2.5 billion on Dec. 31, would owe capital-gains taxes on the $500 million gain, even if they didn’t sell any of the stock.” This is what is meant by unrealized gains. This way, the federal government doesn’t have to wait until the person actually sells the assets in question; it can take its cut now.

Democrats say that the tax only targets individuals and families with a net worth greater than $1 billion or with an income in excess of $100 million for three consecutive years. When was the last time a federal income tax stayed within its targeted income class? That’s a trick question. The answer is never. The graduated income tax that was passed via constitutional amendment in 1913 was only supposed to target about 3% of the population, the wealthiest people in the country. We all know how that turned out. One century later, every hard-working person in the country sits under an inescapable tax burden from their town, county, state, and federal government. And let’s not forget the alternative minimum tax, a Frankenstein creation that was supposed to target the wealthy but ended up eating into middle class incomes.

History is replete with examples that virtually guarantee that this tax on unrealized income will eventually metastasize and spread down the income chain. And it will have a disastrous impact on the economy, squelching investment and market and asset speculation as tax hikes always do.

As billionaire Tesla owner Elon Musk put it, “Eventually, they run out of other people’s money, and then they come for you.”

South Carolina Senator Tim Scott went so far as to state that this tax will actually discourage the whole system. “We can’t kill the goose that lays the golden eggs,” the lawmaker said. “And this administration is antithetical to all things free enterprise, hoping for liberty and justice for all. … They’re embedding discrimination in the middle of their economic platforms in ways we’ve never even seen before in our country.”

This latest “eat the rich” proposal was rushed into committee behind closed doors without bipartisan debate or scrutiny. It reeks of a desperate attempt to salvage what’s left of the original “human” infrastructure and Green New Deal spending package after the original plan collapsed under its own weight. As a result, there are numerous questions about how the tax will work that its authors cannot answer. What happens if assets lose money? Will billionaires get credit for that in later years? How are illiquid assets like artwork and jewelry valued? What about transferable assets like estates that pass to other people? Who becomes responsible for the tax? And can someone be double taxed on the appreciation of an asset and the later sale of that same asset?

The tax is not even valuable as a revenue generator. House Speaker Nancy Pelosi says that this scheme would generate up to $250 billion over a decade. That doesn’t put a dent into the spending proposals leftists want to see enacted.

But generating revenue isn’t necessarily the point. Democrats know they can score political points with talk of “fairness.” They can win the argument by appealing to envy. As Wyden put it, “No working person in America thinks it’s right that they pay their taxes and billionaires don’t.”

Maybe Democrats should have thought of that when they started confiscating income from working Americans instead of taxing consumption.

Wyden also argued, “Entire sections of the tax code are unconstitutional if this is unconstitutional.” If the shoe fits… Then he fired a shot across the bow of the Supreme Court: “I can’t imagine the Supreme Court wants to give the wealthiest people on earth billions in tax cuts, particularly at a time when so many Americans are losing faith in the Supreme Court.”

For all of the above considerations and more, the tax proposal is reportedly not long for this world. At least not right now. But bad Democrat ideas rarely die permanently.

We used to make jokes about how the government would one day find a way to tax money we haven’t made yet. Well, the fun’s over, and that day is here. Democrats have become so greedy for our money that elected officials are seriously contemplating how to extract our future earnings to cover their present-day spending. This is exactly the sort of behavior gambling addicts exhibit right before they lose their home.

(Updated.)

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