Capital Losses

Janet Yellen (Fed Chair) announced yesterday that the US government was looking into taxing unrealized gains. Yes, you heard that correctly. Money that has not been realized or touched will be taxed on "ultra wealthy individuals." Like most things in government, this would be a disaster for middle class stock owners. Just last week CNBC published an article¹ that stated, "10% of Americans own 89% of all stocks in the United States." The market is already dominated by a select few firms and owners, and Yellen's move would only expand this gap.

Imagine this scenario: Yellen announces that on a certain date that all unrealized gains will be taxed at 10% for individuals with gains over $1,000,000 or whatever figure she chooses. Days leading up to this, stock prices will fall and a fire-sale will pursue. Those who aren't being "taxed" will see their gains destroyed in a matter of minutes while the wealthy who just sold off will rebuy in at lower prices. The gap only increases.

This concept also does not work the opposite way as usual. Can we write off unrealized losses for tax purposes? What about price changes on our car or house? The government won't look in the mirror and realize that our tax revenues are at historic highs only to be bogged down by historic spending. The government will never solve your problems because that means they are out of a job. 

This unrealized gain tax on stocks would be a disaster as would any unrealized gain tax. I am in favor of tax code revisions just as much as the next guy (no corporate bail outs, higher tax rates on the wealthy, no additional aid for corporations, etc.) to ensure the right people pay taxes. But its hard to see this scenario play out any differently than it usually does: lower income pays no taxes, wealthy pay no taxes, middle class gets the bill. Please stop letting the wealthiest individuals make the policy for working class Americans. It isn't helping.


Links:

1. CNBC Stock Ownership: https://www.cnbc.com/2021/10/18/the-wealthiest-10percent-of-americans-own-a-record-89percent-of-all-us-stocks.html


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