Democrat proposals for a tax on unrealised gains would be apocalyptic for America.
Money is the root of all evil, so they used to say. Many believed it. Money was the enemy because it represented to many the apple that ejected mankind from the utopia of an innocent communal collective where people get what they need and everyone is selfless. Money they feel makes people selfish but take it away and everything would be wonderful. This idea makes Money is the core enemy of socialism and of course the core fuel of capitalism.
These days few believe money is evil, few are buying that idea, so the evil label has to be moved along to folks with money, namely rich people or rich corporations or things like money, for instance, energy. Energy is evil because money is fungible with energy and if you attack energy you are attacking money and you can sell that attack even though energy is life and we all live long because of its modern abundance.
As an outsider looking in you can see the US has its problems but the one shining light of out performance and wealth and success is its stock market. Pretty much all American good news comes out of an ever prospering market that drives a chain of causality down to the incredible technology developments that keeps the US the number one richest country in the world. Like its indexes, the US is a concentrated portfolio of risk, take away its runaway successful tech sector and the game is over. Put another way the top 10 listed US companies are worth roughly half the US national debt and the US stock market is what makes these businesses and the ones developing now in the lands of PR and VC possible.
Nuke the stock market and you nuke America. It is simple to do. They have the problem in the UK and France, its called a transaction tax where the government takes a tiny sliver of the trading action in tax. Its only a tiny amount but aseven a child knows if you put a small whole in a ballon, the balloon with shrink. Luckilly, there is a constant flow of air into the stock market balloon but even so whenyou compare the US and Germany, transaction tax free countries with the UK or France you see the outcomes.
You cant extract value from a share via a tax without deflating its value. If you could it would be free money and as we know there is no such thing. Extracting money via tax is why the UK’s FTSE and the US’s Dow are so divergent. The extraction is cumulative and it also has a deflator in that the fact there is this drain devalues the market as a whole.
So imagine a tax on unrealised profits. All those captain is tech would be cut off at the knees. This alone would be enough to curtail the American tech miracle, but the knock on effect of having to sell huge blocks of stocks would kill the valuations of those top companies. However lets put that obvious issue to one side and look at the $500bn those that propose this toxic tax say will be raised. That’s haf a trillion sucked out of the market and into the bottomless pit of the incontinent spendthrifts in the US government. That would in effect make ownership of stocks unsupportable by the rich and this of course would end up crushing all those Americans hoping their stock portfolio will be the source of a happy retirement.
A unrealised profit tax would be the end of the US equity miracle and all those companies that stand between the US and the crushing economic collapse from unsustainable debt that only these enterprises make sustainable.
The US stock market is the engine of the American economy. Taxing its fruits and its wealth effects are absolutely core to the prosperity of the US. Taxing its roots will cripple it like much milder taxes have crippled the UK and French markets and because of how the US has come to rely on its stock markets to supercharge its economy into the future having offshored the economic drivers of the past, a tax of unrealised gains would be a bitter end to the American dream.