The United States Treasury Secretary Janet Yellen has announced the proposal of a new tax that could hit unrealized capital gains. Speaking on CNN’s “State of the Union” on Oct 24, Secretary Yellen stated that they were looking into new taxes that would hit the very wealthy.
However, part of the proposals included a tax that could be applied to unrealized capital gains. This means that holders of cryptocurrency or stocks could be taxed on increases before they have even sold the assets. It could also mean that appreciation in property prices could also be taxed even before the property has been sold.
What’s under consideration is a proposal that Senator Wyden and the Senate Finance Committee have been looking at that would impose a tax on unrealized capital gains … on liquid assets held by extremely wealthy individuals, billionaires. I wouldn’t call that a wealth tax.
She added that wealthy individuals often escape taxation until they are realized and this would be on way to target their holdings. It wasn’t clear whether the newly proposed tax would apply to all holders of liquid assets or just those over a set threshold.
Taxing the crypto rich
The move did not go down too well within the crypto community as gains are often unrealized until the assets are liquidated and the fiat has been withdrawn. The new tax could heavily impact those holding just a few BTC at current prices.
Outspoken crypto critic Mr. Whale commented:
The fact Janet Yellen is even considering an unrealized capital gains tax perfectly illustrates the monstrous economic crisis we’re in. They are willing to annihilate all investor sentiment in order to raise money to fund their reckless spending spree.
Many were also questioning how the newly proposed tax scheme would affect unrealized losses. This is when the asset is worth less than the purchase price but has yet to be sold.
Baby and the bathwater
Anti-crypto and banking Senator Elizabeth Warren also stated she was “pushing hard” to use a tax on the wealthy to help fund President Biden’s Build Back Better agenda. On Sunday, she stated that Americans get it, adding:
They get that the system is rigged. Teachers and nurses and firefighters are just tired of paying more in taxes than Jeff Bezos pays,
Taxing billionaires is all very commendable, but U.S. lawmakers need to be careful that they don’t throw the baby out with the bathwater. This is essentially what a new tax on investment profits that have not been made yet would effectively do.