Harris goes quiet on Biden’s push to tax unrealized gains

Vice President Kamala Harris has gone silent on Democrats’ bid to tax unrealized investment gains — casting doubt on how strongly she’d push for a key plank of the party’s efforts to raise taxes on billionaires.

Harris, who has already pledged to scale back one of President Joe Biden’s key policies on capital gains taxation, is declining to give specifics about her support for other pillars of the administration’s vision to raise taxes on businesses and the wealthy. That includes a White House plan to tax unrealized gains, a major proposed Internal Revenue Code change designed to increase levies on the richest Americans who are often able to avoid taxes under the current rules.

The Democratic nominee still supports a billionaire minimum tax, a campaign official said in a brief statement, speaking on condition of anonymity. Her team declined to provide specifics about that proposal or comment directly on how unrealized gains would be treated.

Harris’ campaign also declined to say if she supports the specific parameters of the minimum tax on billionaires included in Biden’s annual budget request to Congress, which — despite the name — would apply a 25% minimum levy to income of those with at least $100 million in assets. Her campaign has been mum about whether she would seek to change a provision in the tax code that allows many wealthy individuals to avoid capital gains taxes entirely when they pass assets onto their heirs.

The move to tax unrealized gains was one of the more polarizing features of Biden’s budget proposal — critics saw it as murky to enforce and a disincentive for growth, while advocates cheered it as an innovative way to tax the rich more.

Harris’ silence comes as she’s bolstered her pro-business rhetoric and tacked her policy agenda to the middle to woo Republican and independent voters with polls showing her deadlocked against Republican rival Donald Trump. She described herself as a “pragmatic capitalist” in an interview with Telemundo Tuesday, saying she is part of a new generation of leadership that “actively works with the private sector to build up the new industries of America.”

Days after Harris replaced Biden as the Democratic presidential nominee in late July, her campaign said she supports the revenue measures in the president’s budget request, though she’s since broken with him on the scope of a capital gains tax increase, calling for a top rate hike from 20% to 28%, instead of the 39.6% that Biden has embraced.

Capital gains taxes are generally paid when an asset is sold, which means that people who hold an asset that has appreciated considerably don’t immediately pay taxes on the increase. In some cases, the wealthy simply borrow money against the gains rather than having to sell.
Some of the richest people owe relatively few taxes in comparison to their overall wealth because they hold onto their assets indefinitely, vastly growing their personal fortunes through unrealized gains, but rarely recording any income on paper, which would trigger an IRS bill.

The ambiguity on unrealized gains could be strategic — by avoiding taking a position, Harris is able to give herself room to negotiate in the future on a portion of her tax agenda that is closely scrutinized by Wall Street and Silicon Valley.

Billionaire investor Mark Cuban, a Harris ally, predicted over the weekend that a tax on unrealized gains would not be enacted. “That’s an economy killer. Kamala knows that,” Cuban said at an event Saturday in Arizona, according to NBC. “You haven’t heard her talk about it.”

The debate is, in some ways, theoretical, with polls showing Republicans on track to take control of the Senate even if Harris wins the presidency. A divided government dims her hopes of passing the fresh taxes she’s seeking, and may pressure her to avoid digging in on proposals with slim chances of success.

Harris is grappling with how strongly to break from Biden in the race against Trump, where his campaign has said a tax on unrealized gains would “kill 75,000 jobs, reduce investment incentives, hurt long-term economic growth, and target family farms and family-owned small businesses the most.” Trump, for his part, has campaigned on a long list of politically-targeted tax breaks, which economists have warned would add trillions to the national debt.

The Biden budget, which has proposed including unrealized gains when calculating income for the 25% billionaire minimum tax, has also raised concerns from tax professionals. 

The plan “would be a departure from the way we’re treating capital gains under current law and how we treat it historically,” Garrett Watson, a senior policy analyst at the right-leaning Tax Foundation, said in an interview. “We’re generally more skeptical of this kind of approach.”

Harris has also campaigned on a slew of other tax measures, including higher corporate tax rates, an expanded child tax credit and expanded deductions for startup businesses.