Bitcoin HODLers live by the words of the 1987 Rick Astley hit song, “Never Gonna Give You Up.” Many have held their stack for years, through steep price declines, only to see the price ratchet up to new highs every year.
Treasury Secretary Janet Yellen announced on October 23 that a proposed tax on unrealized capital gains — yes, gains from investments that haven’t even been sold yet — could help finance President Biden’s now scaled-back $1.75 trillion social spending bill.
Every time you sell or spend cryptocurrency, you have a taxable transaction resulting in either a capital gain or capital loss.
apply to those with over $1 billion in assets or those who experience three straight years of income over $100 million.
Some members of Congress are apparently not thrilled that some wealthy people can receive little or no current income, pay no taxes, and yet have their wealth grow exponentially over time.
It should be noted that the plan to tax unrealized gains is not the same as a “wealth tax” of the kind proposed by Senator Elizabeth Warren.
There is no way that these valuations could be done in a timely manner each year to be included in a tax return filing.
But, as with the closely-held businesses mentioned above, it’s also not easy to value assets such as artwork, wine collections, yachts, and airplanes.
How would reporting of the value of these assets be done? Brokerage houses would be required to issue forms detailing the fair market value of all assets at each year end, which would no doubt prompt some pushback.
To pay an annual tax on the value of those stocks, every year, would no doubt require selling off some of the holdings.
Congress may be counting on the tax revenue to flow in smoothly to the government coffers, but there is no way it will play out that way.
Would declines in value be able to be carried back against increases, thus generating huge tax refunds in future years? The bitcoin bear market of 2018 comes to mind, when the price of one bitcoin dropped from over $19,000 to about $3,300, an 80% drop in value.
Where would all of these enforcement agents come from? Not to mention, every business in the country is facing a shortage of workers.
Case law has found that something defined as income has to do with the person having complete control over the source of money and being able to use it as he sees fit.
The text of the amendment, when taken literally, would seem to allow only taxes on income, and certainly not wealth.
The Revenue Act of 1913 imposed an income tax on individuals with an income of over $3,000.
Taxing a few hundred billionaires is one step, but like the income tax, the real money is with the broader public.
Thus far, there has been no talk of this tax being applied to corporate assets.
An unrealized capital gains tax on corporate assets could hit those with real estate especially hard, but companies with bitcoin also come to mind.
And, with the spending bill already trimmed down from its original $3.5 trillion price tag, chances look better.