Topline
Vice President Kamala Harris no longer backs President Joe Biden’s proposal to tax unrealized capital gains, billionaire Harris surrogate Mark Cuban proclaimed at a campaign event over the weekend, dousing a controversial plan unsurprisingly denounced by former President Donald Trump and his associates, though some criticism of the plan is rooted in misinformation.
Vice President Kamala Harris attends a campaign event in Georgia.
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Key Facts
The Democratic presidential nominee initially supported a plan first introduced in 2022 by Biden to impose a 25% minimum tax on unrealized capital gains accrued by Americans with net worths of $100 million or more, according to the Biden administration’s latest 2025 tax proposal released in March which Harris cosigned—which would alter a fundamental principle of how capital gains are taxed in the U.S., but only affect a small fraction of America’s wealthiest population.
As a refresher, capital gains taxes currently only apply to physical and financial assets, such as real estate properties, shares in publicly traded companies and jewelry, which were sold at a profit and thus are taxed as income.
That means the affected individuals would pay taxes on assets that appreciated in value through a year, even if they did not sell, bucking the current standard that only charges capital gains taxes on profits tallied from those assets.
For example, if the world’s richest man Elon Musk saw his $102 billion stake in Tesla at the end of 2023 rise to $122 billion by year’s end due to an increase in Tesla’s share price, he would pay taxes on the $20 billion increase in the value of his Tesla stock; current tax code requires he would have only had to pay capital gains tax if he actually offloaded his shares in the electric vehicle company.
Far less than .01% of taxpayers cleared the $100 million net worth threshold to pay unrealized capital gains taxes as just 9,850 Americans were worth that amount or more at the end of 2023, according to estimates from Henley & Partners and New World Wealth.
News Peg
Cuban, one of the 79 billionaires identified by Forbes as Harris backers, slammed the unrealized capital gains tax as an “economy killer” at a Saturday event in Phoenix. “Kamala knows that,” Cuban added, noting “you haven’t heard her talk about” the policy she apparently supported earlier by blanket endorsing Biden’s budget proposal. “Some people think that there’s going to be an unrealized gains tax on capital gains, there is not,” declared Cuban, the former “Shark Tank” star and one of Harris’ most visible allies in the world of business. Harris has not formally addressed unrealized capital gains on the campaign trail.
Chief Critics
Recent viral social media posts falsely claim the proposal will cause everyday Americans worth far below the threshold to feel impacts—the median American family has a net worth of $192,900, according to the Federal Reserve’s most recent data. Trump claimed at an Aug. 23 rally the Harris proposal on unrealized capital gains will impact “small business owners” who will be forced to sell their “restaurant immediately,” a seemingly misguided statement considering the small group the plan would impact. Trump allies have panned the proposal: Musk said it’s part of a policy plan that will lead to “bread lines” and billionaire venture capitalist Marc Andreessen said founding startups in the U.S. would become “completely implausible” due to the perceived disincentivization the proposed taxes would have for founders looking to build massive fortunes. The unrealized capital gains tax is “one of the worst tax ideas floating around,” Jay Clayton, commissioner of the Securities and Exchange Commission under Trump, told CNBC on Tuesday.
Key Background
The Biden administration estimates the unrealized capital gains tax would generate about $503 billion in tax revenue from the government’s 2025 to 2034 fiscal years. Experts suggest it’s unlikely the proposal makes much headway in Washington, considering Biden failed to pass the proposal when Democrats controlled both chambers of Congress from 2021 to 2023 and the headaches policymakers would have in enforcement. Several experts identified the issue that determining what actually qualifies as unrealized capital gains is a challenging exercise considering it’s not based on actual transactions, creating a “very onerous process,” Raymond James’ chief investment officer Larry Adam recently told Yahoo Finance.
Contra
The idea of taxing the U.S.’ richest residents is generally popular, and a 2022 YouGov survey found 57% of Americans believe billionaires don’t pay enough in taxes. A 2021 White House study found billionaires on Forbes’ annual list of the 400 richest Americans paid an effective average federal tax rate of 8.2% from 2010 to 2018, using a methodology including unrealized capital gains, far below the average federal income tax of more than 18% during the period, according to Tax Policy Center.
Further Reading
