Biden’s Frightening Plans for Your Investment and Retirement Accounts
There are droves of financial charlatans looking to capitalize on the fears of retirees. They send out emails, texts and newsletters prophesizing the latest doomsday scenario, which they’ll help you avoid if you’ll pull out that credit card.
But this isn’t one of those things.
There really is a significant threat emerging that should worry anyone with a house, investment account, IRA or 401k. In their insatiable thirst for confiscating more money from the pockets of hardworking Americans, leftist Democrats have conceived a truly diabolical plan.
The problem, as they see it, is that too many people are shielding their wealth, and the Democrats want them to pay up. Any asset that appreciates in value, including real estate, stocks, bonds, houses, etc., accumulates unrealized capital gains. From the beginning of time, capital gains existed only on paper. Therefore, there was no tax owed until the underlying asset was sold.
An argument could be made that the capital gains tax should be repealed entirely since it’s a tax on an asset purchased with money that was already taxed at least once. Still, capital gains has been an accepted way for the government to raise revenue on assets that were sold for a profit. If you didn’t want to pay the tax, you simply continued to hold the asset.
However, Joe Biden and his leftist cronies want to change all that.
Among the many new taxes outlined in Biden’s 2024 budget is the so called “Billionaires Tax,” which would create a 25% tax rate on households worth over $100 million. Using a smoke and mirrors tactic to hide the initiative’s true intent, Biden wants to raise the capital gains rate from 20% to 39% for those making at least $1 million and impose a new tax on unrealized capital gains.
Fortunately, since the Republicans control the House, Biden’s budget proposal will be DOA, but that’s not the point. This is the second year in a row that Slow Joe has introduced a bill that contains a provision for taxing unrealized capital gains.
The hope is that average Americans with real estate, investment and retirement capital gains will not fall for the ruse. As history tells us, a key Democrat policy strategy is desensitizing the public to unpopular policies. The first time it’s proposed, the public outcry is overwhelming. The second time, it’s less so, and so on, until the plan eventually is adopted with minimal opposition. If the Democrats ever successfully pass unrealized capital gains legislation, rest assured they will continue to drop the net wealth threshold until virtually everyone is affected.
A Tax with Extraordinary Negative Consequences
It is estimated that Warren Buffett, for example, would owe upwards of $26 billion in new taxes under the Biden proposal. In order to meet his tax obligation, Buffett would need to sell roughly 20% of his stock holdings. Imagine the net effect on the Dow, NASDAQ and S&P if Buffett dumped 20% of his equity positions on the market in a short period of time. Elon Musk would have to liquidate upwards of $50 billion. Jeff Bezos would have to sell $35 billion.
You get the idea…
Let’s say you’ve accumulated $100,000 in capital gains in your 401k, and Democrats come calling because they need more money. Whining about “fair share, they drop the net worth threshold to $1 million and include retirement accounts. Imagine receiving a 25% tax bill on your $100k, plus the unrealized gain on your house if it exceeds the $250k exemption. What would you do, take out a loan, maybe?
A Horrible Idea from Greedy Leftists
An unrealized capital gains tax is probably the worst idea Democrats have ever concocted, and that’s saying a lot. It would crush the markets and disincentivize investment in any asset that might appreciate in value over time.
While the 87,000 new IRS agents will be eager to collect the taxes on unrealized gains, how fast do you think they will refund unrealized losses in the next tax year? In fact, it’s even possible the tax losses would fall under the current $3000 deduction limit.
Besides authoritarian Democrats, only accountants could find something to like in Biden’s misguided budget proposal. Envision the added cost of calculating the unrealized gain/loss on every single stock, bond and real estate holding of a taxpayer. Get ready to pay your tax preparer a lot more each year if this nightmare ever becomes law.
Fortunately, many Constitutional scholars believe an unrealized capital gains tax is unconstitutional because the 16th Amendment, and the 1920 case of Eisner v. Macomber, left no doubt that the Federal government can only tax income. As unrealized capital gains are nothing more than an estimated increase in value, the proposal should not stand in the face of judicial scrutiny.
On the other hand, when has the Constitution stopped woke leftists from pursuing their quest for totalitarian power?
Stay on top of this one, America. No matter how many times the Democrats raise the issue, we must stand firm and loudly reject such an ill-advised and financially devastating idea.