Biden’s Plan to Tax the Super Wealthy Unlikely to Gain Traction

President Biden recently proposed a “Billionaire Minimum Income Tax” minimum 20% tax rate that would target U.S. households worth more than $100 million. This would tax both income and unrealized capital gains.

When most people think of capital gains they think of stocks or investments, but that is just a small part of what would be taxed under this proposal. Your house, paintings, vehicles, basically any type of asset you own that appreciates value would be taxed even if you had no plan to sell. These unrealized gains would only exist on paper, yet you would need to pay taxes on this plan.

Imagine a scenario where you bought a home for $600,000 and it’s now valued at around $3 million. Under this proposed plan, you would now need to pay 20% on those gains, even if you never intended to sell the home. So, you pay your 20% of unrealized gains, and the following year the housing market crashes and your home is now only worth $600,000 again. What happens now?

Remember at the end of 2021 when Elon Musk asked his Twitter followers if he should sell some of his shares? What do you think happened when he sold $16 billion worth of stock in Tesla? The market didn’t like it, Tesla stock dropped 11% while over that same period the S&P rose 2%. And that was for only $16 billion, not the estimated $50 billion tax bill that Elon Musk would have faced under this proposal.

Now imagine if everyone that was impacted by this proposal had to do the same thing. These large companies make up significant portions of people’s 401(k)s and retirement funds, if CEOs and large shareholders were forced to liquidate those accounts would take a massive hit.

Please reach out to the professionals at the Center for Financial, Legal, and Tax Planning, Inc., at (618) 997-3436 for more information.