George Kamel is bracing for tax season post-election. While Kamel filmed his YouTube video on potential major tax changes prior to the 2024 presidential election, he admitted some of the information provided might still come to fruition under the new administration — no matter who won.
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Most of what Kamel honed in on is the tax on capital gains, which he described as “profits from stock or real estate that go up in value after you buy them, which can be ‘realized’ or ‘unrealized.'” Realized capital gains are when you sell something to get the money in your hand, while unrealized capital gains are just theoretical profits that could be cashed in at some point in the future.
Currently, Kamel noted, tax law states you can only be taxed on the profits you make from an investment after you sell it. “In other words,” Kamel stated, “you can only be taxed on money you actually made.”
The big question Kamel asked is why would the government want to tax unrealized gains, since no real money has actually been made. The answer is because the uber wealthy grow their portfolios primarily through unrealized gains, getting richer and richer without having to pay taxes on any of that financial expansion of wealth.
“Basically, the current tax code allows some of the wealthiest Americans to pay lower tax rates on their income than a lot of middle class households pay,” explained Kamel.
The White House released a statement in March 2024 that President Joe Biden proposed a 25% minimum tax on the unrealized gains of people who own $100 million or more in assets. Were this to actually happen, it is estimated to generate $503 billion in tax revenue over ten years. Even though Kamel champions a higher tax on the rich, he broke down that this is a bad idea for solving America’s national debt, which hovers in the range of $35 trillion.
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Implications of Taxing Unrealized Capital Gains
Projections show this tax would apply to just 9,850 people across the United States, yet Kamel actually sees the potential for it to affect middle class Americans, as well. Those effects could negatively impact the average U.S. taxpayer in harmful ways if it were to spread, much like the 1894 income tax that was applied to less than 1% of American households when it was implemented and carried on through today.
Kamel also suggested there could be negative ripple effects over time. If enough people who are invested in the stock market have to pay unrealized gains taxes with money they do not have, it could lead to a big potential sell off or, at the very least, market fluctuations that can take retirement plans like 401(k)s on a rollercoaster ride. This could also make investing less attractive to people, and Kamel theorized it could lead to “fewer new businesses, Less innovation and fewer new jobs.” Additionally, the housing market could take a hit, leading to developers and landlords rising rental prices in order to cover costs.
As a personal finance expert, Kamel shared that this tax policy is not great because it prioritizes short-term gains in tax revenue while causing long term damage to the economy. Should you, the average American worker, be concerned? Kamel guessed that it is probably not going to be an issue for you. The reason is that an unrealized capital gains tax is difficult to enforce because the IRS would be asking taxpayers to calculate personal asset values year after year with no way to audit the filings. It’s also not likely to have enough support in Congress, particularly with a Republican majority in control of The House. Lastly, Kamel highlighted, it could be considered unconstitutional.
Kamel is not alone in thinking this tax policy is not the best. Citing a 2022 Journal of Public Economics report, “[a]bout 75% of Americans prefer for stock gains to be taxed when the stock is sold, not when the gains are unrealized.” Overall, Kamel believed no one should be too concerned with this tax policy being implemented, imploring lawmakers to “Stop trying to make unrealized gains tax happen!”
Kamel closed by saying that no matter who is President, there are always opportunities for you to make money and expand your wealth.
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This article originally appeared on GOBankingRates.com: Major Tax Change Coming? What To Know, According to George Kamel
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