George Kamel: 5 Ways Harris’ Proposed Tax Could Impact You If You’re Not Wealthy
Written by
Adam Palasciano
Edited by
Amber Barkley
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Taxes are a part of life. We all work and ultimately, we all have to pay taxes.
While the U.S. currently operates on a progressive tax system, meaning that you pay taxes on a percentage of your income based on how much you earn, there could be a significant tax policy change if Vice President Kamala Harris is voted into office.
As reported by CNBC, Harris is promoting a tax on unrealized capital gains tax. As part of what’s known as the “billionaire minimum tax,” the proposal is a 25% minimum tax on total income, which includes so-called “unrealized gains,” or asset growth, exceeding $100 million.
The idea behind this policy is to increase projected tax revenue by $503 billion over 10 years. Additionally, it is to further ensure that the wealthiest people pay their fair share in taxes. There are less than 11,000 centi-millionaires — people who have assets exceeding $100 million — in the U.S., so this new policy, if implemented, would probably not affect your investment portfolio.
But here are five ways that Harris’ proposed tax policy change could end up impacting you even if you’re not a wealthy American, according to George Kamel.
There Could Be Less Incentive To Invest In the Stock Market
Investing in the stock market has historically been one of the most effective ways to grow your wealth over time. However, an unrealized capital gains tax would decrease the incentive to invest your money in the first place.
Kamel pointed out that centi-millionaires may have to sell off stocks to pay unrealized capital gains taxes. This could lead to stock sell-offs ending in stock market volatility, which could adversely impact your retirement funds as a working-class American.
Stock Prices Could Fall
If fewer wealthy people are investing in the stock market, this could cause stock prices to drop. So even if your stock portfolio is small, an unrealized capital gains tax could mean falling stock prices for everyone.
Small Businesses Might Have Fewer Investors
Many small businesses rely on investors to start up or expand their businesses. If investors are taxed on their unrealized capital gains, they may have less incentive to invest at all. Kamel said this could lead to fewer new businesses, less innovation and fewer new jobs.
There Could Be Less Real Estate Investment
If real estate investors are disincentivized to invest due to unrealized capital gains taxes, this could lead to lower demand and lower home values. In turn, Kamel said, lower demand could lead to less new construction, as well. It’s also possible that real estate investors could pass on the cost of unrealized gains by raising rents on their tenants.
The New Rule Could Affect More Americans Over Time
While this proposed tax policy change would only apply to those with investment portfolios of $100 million or more for now, it’s unclear whether this type of regulation could or would trickle down to middle-class Americans in the future.
While it remains to be seen if this proposed tax policy even has a chance of becoming law, the ripple effects of an unrealized capital gains tax could affect more than just the small handful of centi-millionaires.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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