I am writing this on April Fool’s Day. That may be the perfect day to try to explain how impossible, and indeed foolish, the newest Joe Biden tax proposal is.
President Biden is proposing a tax on wealth appreciation for people above a certain level of wealth. In that group, if you have a house and the value goes up, you would pay a tax on the appreciation. If you had stock, you would pay tax on the increase. If you owned a privately held company that had a good year, you would pay a tax on the increase. If you had a farm, and the value of the land and equipment and buildings appreciated, you would pay a tax.
Of course, the first question you have to ask about this new tax is: Why you think it would remain restricted to a small group of wealthy people? Government and pro-government politicians have a never-ending need for more money. They would immediately start targeting the next lowest threshold to shake down.
History is filled with examples of a tax starting small and steadily growing. When the income tax was passed in 1894, it was supposed to apply to only the highest 10 percent of income earners. Naturally, over the years, that was extended to almost everyone. The Biden wealth tax would rapidly face the same kind of expansion. Within a few years, virtually everyone who owned any property, stocks, or businesses would face a complicated system of paying taxes on an increase in wealth—even if you did not have any increase in income.
There are three even bigger problems with this kind of wealth tax.
First, who is going to measure your assets every year? Are you going to have an IRS agent pouring over all your assets (including your home) and then telling you what you are worth in his or her opinion? As the government needs more money, it will simply extend the number of things that count toward your assessed wealth. They’ll open up furniture, paintings, jewelry, family heirlooms, your car—the list will only grow? Imagine the level of paperwork—and the frequency of appeals to a reviewing authority—this will lead to. (Of course, this activity will only give government an excuse to expand and create new bureaucracies.)
Second, if you don’t have enough income to pay the wealth tax, will the government force you to seek assets to meet this new obligation—including the assets it just assessed? Does that represent a taking of your property?
Third, what about the years when you lose wealth? Imagine the mess after the 2008–2009 financial crisis, when the price of housing dropped dramatically—or the impact of the COVID-19 pandemic on many businesses. Knowing government and liberal politicians who are desperate for money, this will be a one-way street. If you succeed, you pay. If you lose, you get no relief.
If you look at the Biden budget proposal, you will see why they are desperate for more money from the American people.
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