Vice President Kamala Harris, the Democratic nominee for the 2024 presidential election, has supported a tax proposal that has sparked intense debate across the political spectrum. This proposal involved taxing high-value stock holdings for people whose net worth is at least $100 million.
Tax proposal
Traditionally, the U.S. tax system imposes taxes on capital gains—profits from selling assets like stocks—only when those assets are sold. The Harris-backed proposal, however, would introduce a new layer of taxation by taxing the increase in value of these assets even if they haven’t been sold. This is a significant departure from the current system and would primarily affect the wealthiest individuals in the country.
Under this plan, the tax would apply to individuals with a net worth of at least $100 million. According to recent estimates, this group represents only about 10,660 people in the United States. These individuals have a substantial portion of their wealth tied up in stocks and other tradable assets that appreciate over time. By taxing these unrealized gains, the proposal aims to address what many progressive economists and tax experts see as a significant loophole that allows the ultra-rich to avoid paying taxes on large portions of their wealth.
The current tax system
Some see the current tax system as favoring the wealthy, particularly through the “buy, borrow, die” strategy. This strategy allows wealthy individuals to buy assets, borrow against their value without selling them (and therefore not triggering capital gains taxes), and then pass these assets to their heirs upon death. Because the assets are never sold during the owner’s lifetime, no capital gains taxes are paid, allowing significant wealth to be transferred tax-free.
This loophole has long been criticized by progressive economists who argue that it worsens income inequality by allowing the rich to accumulate and transfer wealth without facing the same tax burdens as ordinary Americans. The Harris-endorsed proposal seeks to close this loophole by imposing a tax on the increase in asset value, even if the assets are not sold, thereby ensuring that the wealthy pay their fair share.
Arguments against the tax
The CATO Institute, a libertarian think tank, has raised concerns about the implications of this tax on financial privacy and due process, arguing that it could set a dangerous precedent for further government intervention in personal wealth.
Former presidential candidate and venture capitalist Vivek Ramaswamy posted a video to X on Wednesday from a recent appearance on CNBC in which he was firmly against the plan.
“A few weeks ago, I started pointing out that Kamala Harris wants to tax unrealized capital gains,” he wrote in the post on X. “The main objection I heard was, ‘She’ll never actually do this.’ Now, we’re seeing it’s one of her signature economic policy proposals.”
Ramaswamy’s post was reposted by Elon Musk, one of the wealthiest people in the world. Notably, Musk at one point planned to purchase X by borrowing against the value of his Tesla holdings before turning to a slightly more conventional loan from Wall Street banks to make the acquisition.
Ramaswamy’s concerns echo those of many on the right, who see the tax as an attack on free enterprise and the American dream of wealth creation.
The wealth tax debate in the context of the 2024 election
Harris’ support for the tax is seen by some as a bold move to address income inequality and raise revenue for social programs, while others view it as a risky political strategy that could alienate moderate voters and business interests.
The Biden administration, under which Harris serves as Vice President, has framed the proposal as a “billionaire minimum income tax.” The administration argues that this tax is necessary to ensure that the ultra-wealthy contribute their fair share to the nation’s finances, particularly at a time when income inequality is reaching historic levels. The proposal includes a tax rate of 25% on unrealized gains, which the Committee for a Responsible Federal Budget estimates could raise as much as $503 billion over 10 years. This would be a major contribution to funding social programs and reducing the national deficit.
Legal and legislative challenges
The plan would likely face some legal challenges, particularly in light of recent Supreme Court decisions that have limited the government’s taxing power. The Moore v. United States case, which dealt with the taxation of foreign income, has been cited by some legal experts as a potential obstacle to implementing a wealth tax. While the Supreme Court did not explicitly rule against wealth taxes, the opinions of several justices suggest that any such tax could face a tough battle in the courts.
Furthermore, passing the tax through Congress would be a challenge. Even with Democratic majorities in both the House and Senate, the Biden administration struggled to advance its tax proposals during the first half of the term. With a divided Congress likely after the 2024 election, Harris will need to navigate a complex and potentially hostile legislative environment to make her tax plan a reality.
