American stocks and crypto holders are braced for another tax-themed body blow from the government, with House Speaker Nancy Pelosi claiming that a âwealth taxâ â an unrealized capital gains levy â on its way to Congress as early as this week after striking an âagreementâ on a spending plan in the House.
She spoke on CNN of the need to ensure a âwealth taxâ was forthcoming to tax Americaâs âbillionaires,â while also ensuring âcorporate Americaâ was not âlet off the hook.â
This âwealth taxâ is part of a series of measures aimed to fund President Joe Bidenâs spending pledges. These also include the much-maligned infrastructure bill. CNN quoted Pelosi as stating that âthe planâ was for a vote on the troubled bill next week, and the media outlet added:
âThe goal among Democratic leaders is to have a vote Wednesday or Thursday on the infrastructure package and send it to Bidenâs desk, a source briefed on the plan says.â
But while lawmakers have insisted on key amendments to the bill, the government appears to have returned to ideas of building its âwealth taxâ around the notion of unrealized capital gains â increases in the value of assets that investors hold.
These only become ârealizedâ when an investor sells an asset at a higher price than they paid for it. Currently, in the case of crypto, the price of an asset at purchase time and time of sale to fiat matter in tax calculations. But an unrealized capital gains tax has the potential to change all that should it also be made to apply to cryptoasset holdings.
The Treasury Secretary Janet Yellen also told CNN that the proposal was âbeing reviewed by Senate Finance Committee Chairman Ron Wydenâ and âwould impose an annual tax on unrealized capital gains on liquid assets held by billionaires.â
âIt's not a wealth tax, but a tax on unrealized capital gains of exceptionally wealthy individuals. [â¦] I wouldnât 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 theyâre realized.â
Yellen first began speaking of the notion of taxing unrealized gains back in January this year, prior to her appointment. Perhaps more worrying still for crypto holders is the fact that Wyden is also an advocate of the measure, and raised the possibility of imposing such a tax back in 2019.
Neither Pelosi nor Yellen has explained exactly how the tax might work, nor have they hinted at what its rate might be. But reports in January suggested that unrealized gains would âbe taxed at the same rate as all other income,â namely up to 37%.
The tax could make use of a âmark to marketâ methodology, which measures the fair value of assets whose worth can fluctuate over time, quite possibly including crypto.
The economic and crypto analyst Alex KrÃ¼ger hit out at the proposed measure on Twitter, writing that taxing unrealized capital gains âmay be the single most stupid idea of 2021.â He called it a âpoorly designed band aid,â and wrote:
âThat's how you crash markets. Find another way to better tax wealthy people who shield profits behind corporations.â
In theory, this measure could apply to the value of an asset such as a house or unsold stock holdings. In the crypto world, the plans were met with no shortage of derision, with @punk6529 quipping sardonically:
âCheckmate billionaires. They will never figure out how to work around this genius plan.â
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A quick 3min read about today's crypto news!