Democrats appear to be closing in on a deal to trap the American people; the question now is, at what point?
The weekend’s talks with Sen. Joe Manchin, D-West Virginia, would have narrowed the gap on the budget reconciliation plan, initially proposed to $ 3.5 trillion. The final chord should be about half of that number.
It is still a lot of spending on rights that will be a burden on taxpayers for decades to come. Democrats are now turning their attention to how to pay for it all.
Arizona Senator Kyrsten Sinema, the other Democrat who is delaying the switchover, is wary of rising corporate and personal tax rates.
So, negotiators envision a version of a wealth tax, which would increase a good chunk of income while easing progressives’ thirst to punish the rich.
House Speaker Nancy Pelosi said a wealth tax would be part of the funding equation.
What Democrats are considering is a tax on the unrealized capital gains of the super rich – an insidious and unfair levy that would be an administrative nightmare and most likely unconstitutional.
The tax would apply to the growth of assets such as stocks, real estate, businesses, etc., which have not yet been sold.
Accounting for these gains each year – especially in non-cash assets – would be extremely complex and likely fuel huge growth in the tax bureaucracy.
While Democrats hope the tax will raise $ 200 billion over a decade, this is an inconsistent revenue stream as deductions could also be taken for paper losses from an investment.
Another version of the proposal would apply the levy on the death of the owner of the asset, at which point his heirs would be taxed on the capital gain from the time it was initially acquired. This would jeopardize a large number of small, long-standing family businesses.
In its current form, the tax would only apply to those with $ 1 billion in assets or who have had income of at least $ 100 million for three consecutive years.
Initially, this would impact a very small group – around 700 taxpayers. Democrats hope this doesn’t sound like a big deal to most Americans.
But since this is a brand new tax, its potential for growth is enormous. Remember, when the current version of federal income tax was passed in 1909, it only affected 1% of employees, who paid a rate of 1%. My how he grew up. And this new tax is also set to increase.
As Politico notes, this is a tax that “lawmakers may revisit in the future. If Democrats can now establish that unrealized gains are a fair game for the taxman, they could potentially extend it further. late to people who are only millionaires “.
And finally to the average steep of work with a 401K plan. The assets included in the tax could easily be extended to homes, vacation properties, or the diamond grandmother left with her favorite grandchild. Once the collector’s foot has passed the door, it opens more and more.
The biggest obstacle the idea faces is the Constitution. The 16th Amendment, which authorized the current version of income tax, gives Congress the power “to levy and collect taxes on income. “
It remains to be seen how Democrats intend to define unrealized gains as income, when no money has been received from them. But if the tax is overturned by the courts, America would have the expenses without the expected revenues to pay it. Guess who’s going to foot the bill then?
If this tax is not stopped now, it is inevitable, based on past experience, that more Americans than not will end up paying it.
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