Billionaires actually could benefit from a Democrat proposal to tax the unrealized gains of extremely wealthy Americans.
Senate Finance Committee Chairman Ron Wyden, D-Ore., has suggested offsetting some of his party's massive infrastructure and social spending by imposing an annual tax on the unrealized capital gains of individuals whose wealth exceeds $1 billion.
However, Wyden has not suggested how to handle losses. If one of the world's wealthiest people has a bad year financially under the proposed plan, the government might have to pay that person a tax refund, the Washington Examiner reported.
The idea of taxpayers' money subsidizing billionaires certainly would not look good for government or Democrats.
"If you're worried about the optics of billionaires not paying taxes on unrealized gains, how will it look if they get refunds for losses from the government during a recession potentially?" Garrett Watson, senior policy analyst at the Tax Foundation, told the Examiner.
Tifphani White-King, head of U.S. tax practice at Mazars USA, said how Wyden's plan would handle losses is "a huge unknown."
"You're not only tracking appreciation, but you have to look at the depreciation as well," she said. "So, what does happen in those loss years?"
Billionaires whose investments grow in value are taxed on those increases (aka capital gains), but only when the assets are sold. Wyden's plan, which has received support from President Joe Biden, would tax billionaires' investments even if they are not sold.
The Examiner used Continental Resources founder Harold Hamm as an example. The founder of the major oil and natural gas firm holds nearly 80% of the company's stock, which plummeted by more than 40% during the pandemic.
Hamm lost about 43% of his net worth in 2020, a decline of some $4.3 billion.
If Wyden's billionaire tax were imposed, Hamm might have received some of that money back in the form of a tax refund because he would have reported a capital loss.
Supporters of Wyden's plan probably would say those funds would return to the government the following year if Continental Resources rebounded.
White-King said people should be wary of believing that wealthy people always will have tax liabilities.
"The way the markets are fluctuating and the way you value assets, it's not necessarily the case," she told the Examiner. "And I think we all know, valuation is a huge unknown in this world, how we value assets it changes all the time and in every industry."
A Finance Committee spokesperson told the Examiner the proposed new tax would only apply to tradeable assets — e.g. stocks — and not to nontradeable assets, such as real estate.
Robert Hoberman, managing partner at New York City accounting firm Hoberman & Lesser, told the Examiner that Wyden's plan also would hurt businesses by forcing CEOs to sell company stock to pay their tax bill.
© 2023 Newsmax. All rights reserved.