The significant change is that unrealized capital gains are now taxed as income. (Photo: Tin360)
President Joe Biden received standing ovations during his State of the Union address on Tuesday night when he proposed a new tax on the wealthy. “Pass my billionaire minimum tax proposal.” And he added, “No billionaire should pay less tax than a teacher or a firefighter.”
The billionaire minimum tax would require households with a net wealth of more than $100 million to pay a minimum effective tax rate of 20% on an expanded measure of income that includes unrealized capital gains.
The significant change is that unrealized capital gains are now taxed as income. The bill will tax wealth, including unsold stocks, bonds, and real estate.
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The significant change is that unrealized capital gains are now taxed as income. (Photo: Yahoo! Sports)
The significant change is that unrealized capital gains are now taxed as income. The bill will tax wealth, including unsold stocks, bonds, and real estate.
Take Elon Musk:
- If the billionaire minimum tax had been implemented in 2020, he would have owed a tax of $31 billion on his total net worth, which was $156 billion at the start of the year.
- His net worth increased by $121 billion in 2021, resulting in a $24 billion tax bill.
- In 2022, his net worth dropped by $115 billion due to Tesla’s stock price has dropped. If he has already paid the 2021 tax, he will have spent billions of dollars in taxes on wealth he no longer possesses.
- The government would then send him a refund check for $23 billion. Alternatively, any credit for 2022 would take years to apply and would be contingent on Tesla’s stock recovering.
- If Musk had to take out a margin loan or sell stock to pay the 2021 tax, those expenses would not be offset by a tax credit.
The Biden administration claims the billionaire minimum tax would generate $360 billion in additional revenue over ten years. This tax would only apply to the top one-hundredth of one percent (0.01%) of American households. More than half of the revenue will come from families worth more than $1 billion.
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