Janice R. Andrews
As the Democratic candidate for president in 2024, Kamala Harris has gotten a lot of bad press from business people, especially for her support for changes to the capital gains tax. As part of her campaign, she backed these changes, which come from plans from the Biden government to change how the richest Americans are treated. People are talking more about economic fairness, the government’s role in transfer of wealth, and the effects that might happen to the economy because of the discussion.
Taxing unrealized capital gains is a controversial idea.
The most controversial part of Harris’s tax plan is his plan to tax families with a net worth of more than $100 million on unrecognized capital gains. When the value of goods goes up but hasn’t been sold yet, this is called “unrealized gains.” This means that the money is only on paper. At the moment, capital gains are only charged when the goods are sold. But Harris’s plan would add a new minimum tax of 25% to these “income” gains, which would include some gains that haven’t been recognized yet.
There is strong resistance to this plan from many business leaders, including Elon Musk, CEO of Tesla, who said on X (formerly Twitter) that Harris’s economic plan would cause “bread lines and ugly shoes.” Some people say that this way of taxing could stop people from investing and coming up with new ideas because it goes after the ways that the biggest Americans make money, which could have effects on the whole economy.
Aimed at the Rich, But Causing Fears Across the Board
People who support the plan say it’s a step toward making the tax system more fair so that the richest Americans pay a rate that’s closer to what high-income workers pay on their wages. The Biden government says that the plan will only affect the richest 0.3% of households. This is to make sure that these people pay more fairly to the country’s income. Harris’s campaign has said that the money she makes will go to her “opportunity economy” plans, which include giving housing benefits and increasing the child tax credit.
Rich people have spoken out against the plan, but small business owners and middle-class investors are also against it because they think it could lead to more government control. For example, former President Donald Trump has said that this kind of tax could soon be applied to small business owners, even though there is no current plan to do so. Trump has said that the idea goes “beyond socialism,” which plays on people’s fears of the government taking over their lives and redistributing wealth.
To fix capital gains tax, rates will have to be raised for the wealthy.
A big part of Harris’s plan is to raise the capital gains tax rate for the richest Americans. This is in addition to taxing gains that have not yet been realized. Long-term capital gains are taxed at 20% for people with the most money right now. Harris wants to raise this rate so that it is more like the regular income tax rates. Under her watch, it could go as high as 39.6%. The White House says the reason for this is that special rates on long-term capital gains and earnings help high-income taxpayers more than they help lower-income taxpayers, which makes the tax system unfair.
Economists and policy experts have different ideas about how this change might affect things. Supporters say it will cut down on tax avoidance strategies that put capital gains ahead of pay. However, opponents say it could mess up the economy, make people less likely to spend, and slow down economic growth in the long run. The Tax Foundation in Washington, D.C., called the Biden-Harris capital gains plan a “complicated tax on a narrow segment of high-earning households in a way that’s never been tried.” This shows that there are worries about how it will be put into place and how well it will work.
The Political Reality: A Hard Fight in Washington
It would be hard to put these unpopular tax changes into place, even if Kamala Harris won the president. History shows that similar ideas have failed many times before, even when Democrats held both the House and the Senate in the early years of Joe Biden’s president. Brian Gardner, who is Stifel’s top Washington policy strategist, said, “Many of these proposals have been repeated year after year because a Democratic Congress did not pass them.” This makes it seem unlikely that Harris will have any more success in 2025.
Democrats may be having a hard time keeping control of the Senate, which could make Harris’s political situation even worse. “The makeup of Congress will limit how much spending or how many tax cuts or tax proposals you can offer,” Jeannette Lowe of Strategas Securities recently said on Yahoo Finance. You might be limited in some ways.
The conclusion is that the policy is divisive and the future is uncertain.
There is no doubt that Kamala Harris’s view on capital gains taxes divides people into clear groups: those who want fair economic conditions and those who care about economic freedom and growth. The planned changes are aimed at the very rich, but the wider effects have made people from all walks of life afraid. The future of these plans is still unclear because it depends on both the results of the 2024 election and the difficult political talks that will follow. It’s still not clear if Harris’s plan for a changed capital gains system will come true, but the debate over it is already changing the way people talk about politics.
