On Sunday, Treasury Secretary Janet Yellen told CNN’s Jake Tapper that Democrats are considering imposing a tax on unrealized capital gains.
The suggestion drew criticism for those wondering how Democrats could tax a profit before the profit exists, and questions on if the proposal would include the ability for unrealized loss to also be included.
As Investopedia explains, “An unrealized loss occurs when a stock decreases after an investor buys it, but has yet to sell it. If a large loss remains unrealized, the investor is probably hoping the stock’s fortunes will turn around and the stock’s worth will increase past the price at which it was purchased. If the stock rises above the original purchase price, then the investor would have an unrealized gain for the time they hold onto the stock.”
Yellen’s comments were made in response to a question from Tapper about whether a wealth tax would be a part of how Democrats pay for President Biden’s $3.5 trillion social spending bill.
“Well, I think what’s under consideration is a proposal that Senator Wyden and the Senate Finance Committee have been looking at that would impose a tax on unrealized capital gains, on liquid assets held by extremely wealthy individuals, billionaires,” Yellen said. “I wouldn’t call that a wealth tax. But it would help get at capital gains, which are an extraordinarily large part of the incomes of the wealthiest individuals, and right now escape taxation, until they’re realized, and often they’re unrealized in the death benefit from a so-called step-up of basis.”
“So, it’s not a wealth tax, but a tax on unrealized capital gains of exceptionally wealthy individuals,” she added.
NEW – U.S. Treasury Secretary Yellen proposes a tax on unrealized capital gains to finance Biden's "Build Back Better" plans.pic.twitter.com/pefi3PhoDe
— Disclose.tv (@disclosetv) October 24, 2021
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