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Quick Take
Social media posts have misrepresented a tax proposed in President Joe Biden’s fiscal year 2025 budget. The 25% tax on unrealized capital gains would apply only to those who have a net worth of more than $100 million, not to all taxpayers as the online posts misleadingly claim.
Full Story
President Joe Biden’s budget proposal for fiscal year 2025 calls for collecting taxes on unrealized capital gains for those who have a net worth of more than $100 million. Unrealized capital gains are earnings on investments that haven’t been sold yet.
The proposal would impose a minimum 25% income tax, including on unrealized capital gains, for people in that high-wealth group.
“Billionaires make their money in ways that are often taxed at lower rates than ordinary wage income, or sometimes not taxed at all, thanks to giant loopholes and tax preferences that disproportionately benefit the wealthiest taxpayers,” a fact sheet on Biden’s budget says. “To finally address this glaring inequity, the President’s Budget includes a 25 percent minimum tax on the wealthiest 0.01 percent, those with wealth of more than $100 million.”
We’ve written about Biden’s proposal before, which he refers to when claiming that some billionaires pay lower tax rates than schoolteachers or firefighters.
Vice President Kamala Harris, the Democratic presidential nominee, also supports what Biden and other Democrats have called a “billionaire minimum tax.” That support has prompted social media posts and some politicians to misrepresent what it would do.
Former President Donald Trump, for example, referred to the proposal during a campaign stop in Las Vegas on Aug. 23. “And now she’s even pushing a tax on unrealized capital gains,” he said, going on to suggest that such a tax would result in the closure of the restaurant where he was speaking.
Conspiracy theorist and conservative commentator Mike Cernovich wrote on X, “If you own a house, subtract what you paid for it from the Zillow estimate. Be prepared to pay 25% of that in a check to the IRS. That’s your unrealized capital gains taxed owed under the Kamala Harris proposal.”
That post and a related one have each been viewed more than 11 million times, according to the platform. They’ve also been shared as screenshot memes on Facebook and Instagram.
Other posts have made similar claims, often including the example of home values, or making a broader suggestion that all investments would be subject to the unrealized capital gains tax.
None of those posts includes the key context that the 25% tax on unrealized capital gains would apply only to those who already have more than $100 million in assets.
In its annual analysis of the president’s proposed budget, the Penn Wharton Budget Model described the proposal as “a minimum income tax—where taxable income is redefined to be closer to financial statement income that includes unrealized gains—on households with more than $100 million in net worth.” (The emphasis is PWBM’s.)
The analysis also said that the budget proposal “lacks sufficient details—including basic definitions, how unrealized gains are valued, and the treatment of losses and credits across years—needed to provide meaningful analysis.”
“The tax would apply to unrealized capital gains for households with net wealth above $100 million, so it would not, as currently specified, directly affect middle class taxpayers,” Erica York, a senior economist at the Tax Foundation who criticized the plan as “highly unworkable,” told us by email.
“For the narrow group of taxpayers with net wealth above $100 million, they would have to pay an average tax rate on their regular income plus their unrealized capital gains of 25 percent,” she said.
John Buhl, spokesman for the Tax Policy Center, agreed. “The tax increases in the Biden budget related to capital gains that Harris supports would impact a very small percentage of taxpayers,” he told us by email.
According to the most recent wealth report from Henley & Partners, a British consultancy firm that specializes in migration based on wealth and investment, there are about 9,850 people in the U.S. who have assets worth $100 million or more. Henley & Partners specializes in “citizenship by investment,” which allows wealthy individuals to become residents of some countries if they invest enough money in that country.
The White House has said the reason for the proposed change is that wealthy individuals can avoid taxes on unrealized capital gains forever if they don’t sell the assets and when they die, pass the assets on to heirs.
Currently, investment gains are taxed only when assets are sold. But when an asset is passed on to the next generation, the value is adjusted to the fair market value at that time. So, if the new owner of the asset sells it, there would be no tax on the unrealized gains that accrued between the time the original investor bought it and the inheritance.
“In contrast,” according to the Treasury Department, “less-wealthy individuals who must spend down their assets during retirement pay income tax on their realized capital gains.”
The Treasury Department said that the proposal would moderate the concentration of wealth and raise revenue for the federal government, which is facing a growing national debt. According to a 2022 report from the Congressional Budget Office, the share of wealth held by the top 10% of families increased from 63% in 1989 to 72% in 2019, while the share held by the bottom half decreased from 4% to 2% in the same time period.
“[T]he distribution of wealth among Americans has grown increasingly unequal, concentrating economic resources in a steadily shrinking percentage of individuals,” the Treasury Department wrote in its general explanation of Biden’s proposed budget. “Coinciding with this period of growing inequality, the long-term fiscal shortfall of the United States has significantly increased. Reforms to the taxation of capital gains and qualified dividends will reduce economic disparities among Americans and raise needed revenue.”
Biden has included the “billionaire minimum income tax” in his budget proposals since 2022 — and it has yet to become law. So, it could be unlikely to pass under a future administration. What is clear, though, is that the proposed 25% tax on unrealized capital gains would apply only to those who have a net worth of more than $100 million, not to middle-income taxpayers.
Editor’s note: FactCheck.org is one of several organizations working with Facebook to debunk misinformation shared on social media. Our previous stories can be found here. Facebook has no control over our editorial content.
Sources
White House. Press release. “FACT SHEET: The President’s Budget for Fiscal Year 2025.” 11 Mar 2024.
Nasdaq. “Unrealized capital gain/loss.” Accessed 4 Sep 2024.
O’Brien, Elizabeth and Matt Peterson. “Biden-Harris’ Plan to Tax Unrealized Capital Gains Is a Longshot. It’s Still Ruffling Silicon Valley’s Feathers.” 23 Aug 2024.
Ramaswamy, Vivek (@VivekGRamaswamy). “Republicans need to hit a lot harder on Kamala’s *policy* record: – Favors a tax on unrealized capital gains (which would trigger a second Great Depression).” X. 12 Aug 2024.
News 3 Las Vegas (@News3LasVegas). “Donald Trump gives remarks in Las Vegas.” YouTube. 23 Aug 2024.
Penn Wharton Budget Model. “PRESIDENT BIDEN’S FY2025 BUDGET PROPOSAL: BUDGETARY AND ECONOMIC EFFECTS.” 22 May 2024.
Beyer, Don. Press release. “Congressmen Cohen and Beyer Reintroduce the Billionaire Minimum Income Tax Act.” 29 Nov 2023.
Cohen, Steve. Press release. “Congressmen Cohen and Beyer Introduce Billionaire Minimum Income Tax Act.” 28 Jul 2022.
York, Erica. Senior economist, Tax Foundation. Email to FactCheck.org. 26 Aug 2024.
Buhl, John. Spokesman, Tax Policy Center. Email to FactCheck.org. 26 Aug 2024.
Henley & Partners. “The USA Wealth Report 2024.” 19 Mar 2024.
Department of the Treasury. “General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals.” 11 Mar 2024.
Congressional Budget Office. “Trends in the Distribution of Family Wealth, 1989 to 2019.” 27 Sep 2022.