by Dr. Paul Craig Roberts
The White House Moron wants to tax unrealized capital gains, and some neoliberal economists think it is a good idea.
Let’s take a look and see what we think.
A capital gain is an increase in the price of something since you purchased it. It could be a stock, a bond, a house, artwork, gold, silver, anything for which there is a market. An unrealized capital gain is a paper gain based on the day’s price. It is not income and it is not wealth until it is realized. You realize it by selling the item, thereby having the money in your possession. An unrealized capital gain is a potential possession.
So what does it mean to tax income you have not received? Suppose you purchase stock at the beginning of the year and it rises in value by year end. That rise is an unrealized capital gain. You pay the tax on the unrealized gain, and then in the new year the stock market falls, wiping out the taxed gain. The tax you paid eats into your original investment. You have experienced a wealth confiscation.