John Breaux was one of the last sensible Democrats in Washington, and a real tax expert from his bipartisan work with Connie Mack on George W Bush’s tax reform commission.
Here’s his take on the Biden plan:
The latest plan circulating around Washington and state legislatures is a tax on “unrealized gains”—an effort to collect more revenue from the wealthy. But if enacted, the policy would have the opposite of its intended effect, allowing high earners to game the system further and transform how income and investment is taxed in this country…
High-priced accountants and lawyers will do what they do best: send their client’s money overseas, or set up more financial instruments, trusts and even charities that would exist mainly to hide wealth. The effect would be to further undermine the government’s ability to collect revenue and ensure the wealthy pay what they owe.
In addition to creating more loopholes than it closes, a tax on unrealized gains would have a chilling effect on investment…
Though the tax is unwise, it’s also unworkable. If you have ever received more than one home appraisal, you know that they can be wildly different. Imagine having to do this for everything you own every year…
History shows that after a new tax is adopted, its reach only grows. This is exactly what has happened with the income tax, whose once narrow scope has exploded since it was enacted in 1913. Our policy makers are pursuing a worthy goal in ensuring the wealthy pay their fair share. But they ought to keep this iron law of tax policy in mind, lest they make the problem worse.
