Taxing “unrealized gains” is a pretty straightforward concept, so it’s simply a matter of being familiar with the proposal or not—anybody should be able to understand the idea (at least in theory) of being taxed on an asset because it increased in value, whether that’s stock, property, or something else, even though you did not actually turn a profit because that asset hasn’t been sold. 

And, if you can’t understand this, then you shouldn’t be voting.

All that being said, there’s no real opportunity for misinformation—but according to the brilliant economists at Forbes, like Derek Saul, criticism of the scheme is “rooted in misinformation.” In his new piece, titled, “What Is Unrealized Capital Gains Tax? Unpacking Kamala Harris-Backed Proposal On Ultra Wealthy,” Saul argues that the tax scheme would on apply to the “ultra wealthy” class, writing this:

For example, if the world’s richest man Elon Musk saw his $102 billion stake in Tesla at the end of 2023 rise to $122 billion by year’s end due to an increase in Tesla’s share price, he would pay taxes on the $20 billion increase in the value of his Tesla stock; current tax code requires he would have only had to pay capital gains tax if he actually offloaded his shares in the electric vehicle company.

Far less than .01% of taxpayers cleared the $100 million net worth threshold to pay unrealized capital gains taxes as just 9,850 Americans were worth that amount or more at the end of 2023, according to estimates from Henley & Partners and New World Wealth.

I mean, it’s only fair that someone worth hundreds of billions should take on more of the public burden, right? (We call this an “appeal to the extreme” as only 14 people worldwide fit into the category of having amassed a fortune in the hundreds of billions.) Why should someone’s net worth increase, after wise investments and savvy business practices, and the government doesn’t get a cut? If someone is worth more money, they should have to pay more in taxes, whether they’ve got the cash or not!

No one needs $100,000,000! Isn’t that right Comrade Bernie? This tax would only apply to fewer than 10,000 Americans, who can certainly “pay their fair share” to help relieve some of the burden on the little guy.

Where have we heard all this before though? Oh that’s right, in 1913.

Now, the wisdom purportedly offered by George Santayana when he philosophized about “those who cannot remember the past” being condemned to repeat it, is not exactly cosmic, but it’s rather profound, and shockingly ignored by far too many people, most obviously the progressives, including those in the media like Saul, so allow me to quickly brief him on the reality: If history is any indicator (it is), then we can expect that on a relatively short timeline, this unrealized gains tax would not only apply to the “ultra wealthy,” but wreak financial havoc for almost all Americans.

When the 16th Amendment was passed in 1909, the next step was ratification—take a look at at what Teach Democracy has to say:

The main argument for ratification was that the amendment would force the wealthy to take on a fairer share of the federal tax burden that had in the past been largely carried by those earning relatively little.

I mean, this is identical language to what we hear today.

In 1913, the Amendment was (reportedly) ratified (there’s quite a bit of interesting material on whether or not this was legitimate), and later that year, Congress passed the first income tax law:

Rep. Cordell Hull introduced the first income tax law under the newly adopted Sixteenth Amendment. He proposed a graduated tax starting with a 1-percent rate for incomes between $4,000 and $20,000 increasing to a top rate of 3 percent for those earning $50,000 or more. The House Ways and Means Committee called upon citizens to ‘cheerfully support and sustain this, the fairest and cheapest of all taxes. . . .’

As the average American earned less than $1,000 per year, (a sum which could shockingly provide for a family), this income tax only applied to the “ultra wealthy” of the time.

But now? Is that still the case? Or, is nearly every working American subject to a federal income tax? And, what does it mean for the economy as a whole, even affecting those who don’t (yet) qualify for a federal income tax bracket? (Those were rhetorical.)

Today, more than 80 years after the ratification of the 16th Amendment, the income tax has changed dramatically. Unlike 1913, most Americans today must pay some federal income tax. Instead of the $71 million collected in 1913, the federal government currently collects over $500 billion in income taxes each year (plus another $117.5 billion from corporations). The 15-page tax code has expanded to more than 1,000 pages.

Another historical reference for Saul? Pandora of Greek mythology. When you unleash a misery, in this case legalized and state-sanctioned theft, you cannot wrangle it back into the box.

As always, it’s important to check the historical record for clues as to where policies might lead because chances are, it’s been done before, and with a little critical thought and attention, they (and their consequences) won’t be hard to find.

Image: YouTube video screen grab, edited.