The Democrats’ latest tax schemes, recently highlighted by Kamala Harris, include collecting tax on unrealized capital gains. To me, one of the strangest things about the US tax system is that losses are taxed as capital gains so long as there is even the slightest amount of inflation. For example, if you bought a stock in January 2021 for $100 and sold it today for $110 more you’d have about $10 in today’s dollars terms under official CPI and closer to $80 if adjusted for house purchasing power (Zillow). Despite the loss on what turned out to be an unsuccessful investment, you’d owe federal and, perhaps, state tax on the sale. The current not-adjusted-for-inflation capital gains tax regime is, thus, rather cruel when combined with Bidenflation but at least you can choose when to pay the tax on your fictitious profit/real loss.
Related:
- “Efforts to Combat Inflation’s Impact on the Tax Code Should Remain a Priority in 2023” (Tax Foundation) goes through a variety of the ways that government tax revenue is enhanced via inflation
You couldn’t fairly tax inflation adjusted money in a 2 headed system. It is a capital gain when compared to manufacturing deflation but a capital loss when compared to housing inflation. The deflation from automation has offset all the inflation of the last 700 years.
If you believe inflation is going to be chronic, the way to compensate for the unjust inflation tax is to leverage up at the ratio of 1 / (1 – MTR).
Once everyone does this, interest rates will explode and bankrupt the government.
Taxation of unrealized gain will lead to combination of stock and bond market collapse and increase leverage of positions. Leverage + falling collateral prices is a recipe for financial collapse.
It will be sold like fault of capitalism and hard crony communism will be sold as the only solution.
At least taxes are usually based on income in the sense of receiving (nominal) dollars. In family court, child support is calculated like a tax, and can be based on imputed income. That is, whatever income the judge thinks you could be making on your labor or investments.