https://issuesinsights.com/2021/10/28/dont-be-seduced-by-the-billionaires-tax/
The 19th Century German statesman Otto von Bismarck observed famously that “Politics is the art of the possible, the attainable – the art of the next best.” Sometimes, however, it’s not even the next best; it can be illogical, unworkable, and pie-in-the sky. Such is the nature of Oregon Democratic Sen. Ron Wyden’s tax proposal – which should be called the Wyden-Warren-Sanders’ Folly – to tax billionaires’ unrealized capital gains, such as stocks, valuable art works, or jewels, that appreciate in value with time. The gains are not “realized” until the item is sold.
This might be seductive to those who want “the rich to pay their fair share,” but it’s certainly not fair. It’s unwieldy and susceptible to manipulation, merely a wilted fig leaf to offer the illusion that President Joe Biden’s multi-trillion-dollar expenditures on social programs will be “paid for.” Ultimately, the expenditures will occur, but the revenues won’t materialize.
It’s one thing to tax income, which most Americans dislike but have gotten more or less used to, but taxing wealth in the form of unrealized capital gains is a horse of a different color – possibly literally.
What do I mean by that? Well, suppose you own a racehorse of not particularly distinguished lineage that you bought for, say, $50,000, and on a whim, you enter him in the Kentucky Derby and he wins it. Immediately, he could be worth $50 million, with stud fees in six figures. Under the Wyden-Warren-Sanders’ tax plan, you could have a huge tax bill for the horse (possibly, every year that you own him), because of his potential. But this could be finessed: You could reduce the tax due by (with a wink and a nod) selling the horse to a friend for a far lesser price, and have him sell the animal back to you, again on the cheap. In the face of actual sales transactions, who’s to say that the horse was undervalued?