That's no good for Ro.
Progressive Rep. Ro Khanna, D-Calif., on Wednesday warned Vice President Harris that she should not pursue a tax on unrealized capital gains, despite her opposition. Signaling Support President Biden's fiscal year 2025 budget proposal would do just that.
“Let's say you're an entrepreneur and you start a company and it's worth $100 million or $200 million on paper. If you tax that, you're probably going to force that person to sell their company.” Kana, whose Silicon Valley-based district is the wealthiest in the United States, spoke on CNBC's “Squawk Box.”.”
“Do we really want to see entrepreneurs being forced to sell their companies to larger companies and have their valuations go down? I don't think we want that in the startup ecosystem,” Khanna added, without naming his Californian peer.
Because most capital assets are taxed after they are sold, the wealthy are able to accumulate more wealth as their asset values increase over time.
In contrast, traditional income is taxed annually by the government.
This gave rise to a strategy known as “buy, borrow, die,” in which wealthy individuals borrow against their assets to obtain cash from unrealized capital gains without paying taxes.
Many progressives complain that the U.S. capital gains tax system allows the wealthy to avoid their obligations to the U.S. government.
“I understand that many of my party members are calling for higher taxes on the wealthy,” Cana said Wednesday, adding, “This is not the right way to go about it.”
“Also, 90 to 95 percent of startup investments fail,” he added, “so that discourages people from investing in startups.”
As an alternative, Kana suggested the government could tax loans that the wealthy take out to take advantage of the capital gains tax regime.
Hours after Khanna's appearance, Harris called for raising the top long-term capital gains tax rate on individuals making more than $1 million a year to 28%. Currently, the top capital gains tax rate is 20%.
President Biden's fiscal 2025 budget included a policy to impose a 44.6% tax on capital gains at the highest level. According to some analysis of the plan it is Assuming Biden will promote The top tax rate is 39.6% and there is an investment income tax of 5%.
“Billionaires and corporations must pay their fair share of taxes,” Harris declared at a rally in New Hampshire on Wednesday. “It's just not right that those who can afford it the most pay a lower tax rate than our teachers, nurses and firefighters.”
“We will tax capital gains at a rate that rewards investment in American innovators, founders, and small businesses.”
Harris, 59, called her plan a “millionaire minimum tax” after announcing her support for expanding the business start-up expense deduction from $5,000 to $50,000 during the campaign.
“When governments encourage investment, it leads to broad-based economic growth,” she told supporters. “That creates jobs and makes our economy stronger.”
