A staggering national deficit will likely need America’s leaders to brainstorm ways to address it.
But is introducing and enforcing an unrealized capital gains tax — as President Biden has suggested he would do — the proper approach?
To outspoken economist and author Stephen Moore, it’s more than a bad idea. If introduced, it’s an excuse for investors to “run for the high grass,” Moore told Yahoo Finance Executive Editor Brian Sozzi on his Opening Bid podcast (see the video above or listen here.)
Moore is no stranger to how tax policies evolve under political and administrative changes. He helped former President Donald Trump write his tax cut plan in 2016. He remains an economic adviser to Trump and is a senior visiting fellow in economics at the Heritage Foundation.
At present, the capital gains tax only applies to an asset when it is sold. Under Biden’s proposed plan, a 25% unrealized capital gains tax would apply to taxpayers with a net worth above $100 million, even if they do not sell them.
That essentially means that come tax time, investors would owe money on assets they’re holding on to long term if they appreciated in value.
Additionally, the regular capital gains tax rate would rise from 24% to 40% and intends to target corporations and high-net-worth individuals to ensure they pay their “fair share” as Biden likes to say.
But experts beyond Moore have cried foul as it could stunt investing in public markets and possibly private markets.
Venture capitalist heavyweight Marc Andreessen cited the proposed tax as a “final straw” in an interview with TechCrunch (a sister publication to Yahoo Finance), sending him to enthusiastically back team Trump.
“If you’re a venture firm, you’re getting strips of your portfolio pulled away from you every year. You’re out of business,” Andreessen told TechCrunch. “This makes startups completely implausible.”
Blackrock’s CEO Larry Fink doesn’t think tax hikes of any kind are what the country needs right now.
“We can’t see debt as a problem that can be solved only through taxing and spending cuts anymore. Instead, America’s debt efforts have to center around pro-growth policies, which include tapping the capital markets to build one of the best catalysts for growth: Infrastructure. Especially energy infrastructure,” Fink said in his latest annual shareholder letter.
But while accountants could count themselves among the potentially lucky bunch under such policies, for Moore, they are “going to depress the stock market,” he said. “If you raise the tax on stocks, then the value of the stocks goes down.”
Three times each week, Yahoo Finance Executive Editor Brian Sozzi fields insight-filled, market-focused conversations and chats with the biggest names in business on Opening Bid. Find more episodes on our video hub. Watch on your preferred streaming service. Or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
In the below Opening Bid episode, Goldman Sachs Asset Management portfolio manager Brook Dane shares his top tech stock picks besides Nvidia (NVDA).
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