Vice President Kamala Harris has approved a tax proposal that is sparking debates everywhere. The 25% minimum tax on total income, including unrealized capital gains, targets the ultra-wealthy, especially those with fortunes of more than $100 million. While some see this as a bold step toward fairness, many financial experts and political voices are sounding the alarm bells.
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Jason Katz, managing director and senior portfolio manager at UBS, is among the most vocal critics. In an interview with Fox Business, Katz did not mince words and called the proposal “an absolute disaster.”
According to him, taxing unrealized gains – that is, gains on assets that have not yet been sold – would create an “accounting nightmare.” He painted a bleak picture of taxpayers facing huge bills for profits that could easily disappear the following year.
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Katz illustrated his point with a hypothetical scenario, asking: “If you have a very wealthy person who, for example, bought $100 million worth of Amazon and it goes to $150 million and the government taxes 23% on that $50 million in the first year If in the second year that $150 – because Amazon drops – goes back to $100 million, is the government going to reduce the previous year’s tax?”
“It would be an accounting nightmare, not to mention it would suck money out of the capital markets,” he said. He added that it “doesn’t make sense” to apply the tax to other asset classes, such as real estate, where investors also see unrealized gains.
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While Katz and other critics warn of potential market disruptions, the Biden administration is defending the proposal as a necessary step to close loopholes that allow the wealthiest Americans to avoid paying their fair share.
Mark Cuban, entrepreneur and “Shark Tank” investor, offered a slightly different perspective. According to CNBC’s Squawk Box, the billionaire entrepreneur and “Shark Tank” star claims to have spoken directly to Harris’ team.
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He said Harris’ aide told him that unrealized capital gains would not be taxed, which contradicts what has been circulating about the proposal. Even within Harris’ camp, there is some division over what the plan entails.
However, tax advocates such as Democratic Senator Elizabeth Warren argue that taxing unrealized capital gains could help close the wealth gap by ensuring that the ultra-wealthy pay their fair share. According to a report by The New York Times, wealth inequality in the US has reached levels not seen since the 1920s.
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From an economic perspective, critics, including former CKE Restaurants CEO Andy Puzder, have called the proposal “voodoo economics.” On Fox Business’ “Evening Edit,” he said, “The idea that we’re going to tax unrealized capital gains is just absurd.” This is voodoo economics… it’s absolutely ridiculous.”.
There are also logistical hurdles to consider. Analysts have pointed out that taxing unrealized profits would likely require new reporting systems and pose enormous compliance problems for taxpayers and the IRS.
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This article This Market Professional Says Kamala Harris’ Unrealized Capital Gains Tax ‘Makes No Sense’ and ‘Will Suck Money Out of the Market’ originally appeared on Benzinga.com
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