Unrealized Capital Gains Taxes Will Trickle Down to the Middle Class

Unrealized capital gains taxes may start by targeting the ultra-rich, but they will eventually target you.

The Harris campaign has recently revived the Democrat talking point of taxing unrealized capital gains. In simple terms, an unrealized capital gains tax would tax owners of stocks when those stocks appreciate in value, even if the stocks have not been sold.

The policy is strange. When someone sells his stocks, he is subject to a tax for the income he receives on the sale. Before he sells the stock, he has not realized any “gain” in value because if the stock market falls the next day, all of those supposed gains would disappear.

Typically, supporters of this policy resort to red herring arguments when fighting detractors. For example, one major argument used to silence opponents of the policy is the claim that “it will only affect billionaires, so you shouldn’t care about it anyways!”

Here we go. The unthinkable is being proposed.

Unrealized capital gains tax. pic.twitter.com/Qd1Ri52qnQ

— Jason A. Williams (@GoingParabolic) August 28, 2024

There are lots of problems with this argument. First, if something is unjust, you shouldn’t only oppose it when it happens to you. Second, something can be economically deleterious without being directly targeted at you. You could very well be harmed by the repercussions of a policy aimed at the ultra-rich. However, I’m not going to focus on either of these reasons. Instead, I want to make the case against an unrealized capital gains tax that will appeal to people on narrowly selfish grounds. The case is simple. Unrealized capital gains taxes may start by targeting the ultra-rich, but they will eventually target you.