Another even more pernicious principle in the tax plan is the prospect of taxing unrealized capital gains. Yes, they plan to limit this to the "super rich" with a net worth of $100 million or more, but once the taxation of unrealized capital gains is enshrined, the tax base will inevitably expand. This could make private ownership of homes, farms or small (or even large) businesses impossible -- who could take the risk of having to come up with the cash to pay taxes on unrealized gains? It would wreak havoc on the stock market too. Imagine if the market is up at year end but suffers a correction in the first quarter of the next year -- it wouldn't necessarily be a cinch to sell enough shares to cover the tax on the unrealized (phantom) year-end gain, especially if at the same time everyone else is doing the same thing. Might even result in an actual, realized loss. Moreover, imagine the downward price pressure on the markets overall if gains tend to need to be realized in "real time" in order to be able to hedge the risk of needing to pay taxes in the future on unrealized, phantom gains.
Finally, even under the current proposal, how will one prove that one is not "rich enough" to be over the net worth threshold? Will every taxpayer need to certify as to net worth? Provide or obtain appraisals? The potential burdensome and intrusive and expensive compliance regime is frightening in and of itself -- leaving aside the privacy implications. Also, as we know too well, it is possible to get into deep trouble if one's own appraisals or estimates of value are different from others' or from what the government thinks they should have been.....
Agree 100%!
Another even more pernicious principle in the tax plan is the prospect of taxing unrealized capital gains. Yes, they plan to limit this to the "super rich" with a net worth of $100 million or more, but once the taxation of unrealized capital gains is enshrined, the tax base will inevitably expand. This could make private ownership of homes, farms or small (or even large) businesses impossible -- who could take the risk of having to come up with the cash to pay taxes on unrealized gains? It would wreak havoc on the stock market too. Imagine if the market is up at year end but suffers a correction in the first quarter of the next year -- it wouldn't necessarily be a cinch to sell enough shares to cover the tax on the unrealized (phantom) year-end gain, especially if at the same time everyone else is doing the same thing. Might even result in an actual, realized loss. Moreover, imagine the downward price pressure on the markets overall if gains tend to need to be realized in "real time" in order to be able to hedge the risk of needing to pay taxes in the future on unrealized, phantom gains.
Finally, even under the current proposal, how will one prove that one is not "rich enough" to be over the net worth threshold? Will every taxpayer need to certify as to net worth? Provide or obtain appraisals? The potential burdensome and intrusive and expensive compliance regime is frightening in and of itself -- leaving aside the privacy implications. Also, as we know too well, it is possible to get into deep trouble if one's own appraisals or estimates of value are different from others' or from what the government thinks they should have been.....