Unrealized Capital Gains Tax: How It Could Impact Your Wallet

In the lead-up to the 2024 election, the topic of taxing unrealized capital gains came up as it was part of Vice President Kamala Harris’ proposal. If that were to happen, what would it mean for the wealthy?

An unrealized capital gains tax, or a billionaire minimum tax as it’s often called, is one of the talking points. It calls for an even taxation of wealth that would see those making more paying more.

But what could those implications be for Americans? We dug into the policy.

What Are Unrealized Capital Gains?

Unrealized capital gains are increases in the value of an asset that has not been yet realized. That gain won’t be realized until the asset is sold. In essence, it only exists on paper, it’s not tangible.

The different types of assets subject to these unrealized gains include real estate, private businesses, and stocks, to name a few.

Who Would Be Affected?

There is a lot of misinformation going around about who, if any, would be affected by an unrealized capital gains tax if it were to go into effect, whether now or in the future.

In short, as the current proposal reads, the ones who would feel the hit would be those with a net worth exceeding $100 million, which applies to approximately 1% of the population.

Implications for Americans

Should an unrealized capital gains tax ever be passed and go into effect, the majority of Americans would not be affected. According to data from the IRS and Altrata, the ultrawealthy population—the subset that would feel the pinch—is very small, despite recent growth.

To put that in perspective, as of 2020, the latest data available to Statista, just over 110,000 American taxpayers had a net worth of $50 million or more. Nearly 350 million people are living in the US.

Would That Be a New Tax Bill?

In short, no. The way the proposal is laid out, the ultra-wealthy—those with $100 million or more in net worth—would pay a minimum tax rate of 25% on income.

If that income level brought the tax rate below 25%, there would be an additional amount due. There are no separate tax bills under the current plan.

What Are the Odds a Billionaire Minimum Tax Would Pass?

Truthfully, Democrats in Congress have already tried and failed to pass such a measure. That’s not to say they won’t ever succeed in doing so, but as of right now, the current political climate would create many obstacles for a law of this magnitude to pass.

If one did happen to make it through Congress, it would face multiple legal challenges, which would, in turn, hold any such law up from taking effect. Additionally, a Supreme Court ruling in Moore v. United States has left doubt as to whether such a law could withstand constitutional scrutiny.