Economists Criticize Biden-Harris Proposal to Tax Unrealized Investment Gains

The proposal by the Biden administration to tax unrealized investment returns is "insane" and "absurd," according to economists interviewed by Planet Chronicle Digital.

The Treasury Department of the Biden-Harris administration released its 2025 fiscal year revenue proposals in March, which included a plan to include unrealized investment returns as part of someone's taxable income if their net worth is over $100 million. This move aligns with the administration's pledge to increase taxes on the wealthy and corporations.

The Harris-Walz campaign reportedly informed Marc Goldwein, vice president of the Committee for a Responsible Budget, that it supports all tax increases on high earners proposed by President Joe Biden.

The Treasury Department's FY25 revenue proposals include a minimum tax of 25% on total income, including unrealized capital gains, for all taxpayers with wealth over $100 million. This proposal was also put forth by the Biden-Harris administration in fiscal years 2024 and 2023, with a lower minimum taxable amount of 20%.

"E.J. Antoni, a public finance economist at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, stated that the proposal by Harris’ handlers is "beyond insane." According to Antoni, the proposal would force individuals to sell off a portion of their investments annually to pay taxes on unrealized gains. However, until an asset is sold, any increase in value is speculative and not real, which is why it is classified as unrealized. Antoni believes that the people pushing this idea are completely ignorant of both finance and economics."

Although some people are worried about the proposal, others are happy about the idea of new taxes on wealthy Americans, corporations, and business owners. After hearing that the Harris campaign supports all of Biden's tax increases on high earners and corporations, University of California – Berkeley economist Gabriel Zucman wrote on X, "Let's go!" He added, "And that includes, yes, the amazing 25% billionaire tax."

Zucman emphasized to Planet Chronicle Digital that the unrealized gains tax proposal is crucial as it tackles a significant issue with the U.S. tax system, which is that billionaires often pay very little tax while everyone else has to contribute.

"The proposal is squarely focused on the super-rich," he insisted.

According to Richard Stern, the director of the Grover M. Hermann Center for the Federal Budget, the move would also affect businesses.

Stern stated that although an individual can file a tax on unrealized gains, it is ultimately paid for by the workers and customers of the underlying business, resulting in reduced economic growth.

"Companies with the highest price-to-earnings ratio are most affected by unrealized gains tax, which can be seen as a tax on optimism and innovation."

Stern highlighted NVIDIA as an example of how speculating unrealized gains can be detrimental to corporations. This year, NVIDIA's market capitalization increased from $1.18 trillion to $3.16 trillion. If the proposed tax were extended to all unrealized gains, it would result in a $495 billion tax bill for shareholders, despite NVIDIA's annualized earning rate being only around $40 billion.

Stern deemed the tax as an "absurd" decision and contended that the proposed redistribution of productive capabilities would be a "blatant ratchet to socialism" if implemented by a potential Harris-Walz administration.

Trump stated on Friday that the proposed tax on unrealized capital gains would benefit appraisers, who would then apply the funds to small business owners, forcing them to sell their businesses immediately. The new owner may not be able to maintain the business, resulting in its closure.

Antoni claimed that a tax could disrupt the financial markets by forcing investors to sell at low prices to avoid taxes, resulting in a decline in market valuations.

"Although predictable, extreme volatility is highly inefficient and can cause devastating secondary effects."