Bill Ackman Proposes 'Fair And Practical' Billionaire Tax Plan Amid Kamala Harris' Push To Tax Unrealized Gains

Zinger Key Points
  • Kamala Harris supports annual 25% minimum tax on the unrealized gains of individuals with income and assets that exceed $100 million.
  • An independent journalist said there are problems with the plan but lamented that $10B+ billionaires invariably skirted taxes.

Vice President Kamala Harris stirred up the hornet’s nest by hinting at a potential tax on unrealized capital gains and hedge-fund manager Bill Ackman on Wednesday joined the debate with his view on the same.

What Happened: Ackman was responding to independent journalist Lee Fang’s point on people in the $10 billion+ range of wealth skirting tax payment. While acknowledging that there were problems with the tax on unrealized gains proposal, Fang said, “The people in the $10 billion+ range of wealth pay nearly zero income taxes, borrow till death, then heirs get a cost basis reset to pay zero capital gains,” he said.

The substack author clarified that he was not referring to the top 1% who pay a lot of income taxes but about the top 500 billionaires in America, the top 0,0001%. He noted that the Walton family tied to retail giant Walmart set a precedence by defeating the Internal Revenue Service in tax court and since then many have used Grantor Retained Annuity Trusts and other schemes.

See Also: Beginner's Guide: How to File Crypto Taxes in 2024

Ackman, the founder of Pershing Square Holdings, said the way to fix the problem is to make borrowing an amount in excess of one’s basis in a stock taxable. Explaining further, he noted that if one possesses $10 billion in stock in a company he founded with zero basis, loans secured by the stock should be taxable as if a like amount of stock was sold. “If you borrowed $1 billion you would have a capital gain of $1 billion,” he said.

“This would be both fair and practical to implement,” he added.

Ackman said for this a step up in basis equal to the loan amount should be done.

Why It’s Important: Democratic presidential candidate Harris hinted at the party’s national convention earlier this week that she supported an annual 25% minimum tax on the unrealized gains of individuals with income and assets that exceed $100 million.

Wall Street analysts and strategists cried foul over the proposal, with Fund Strat Head of Research Tom Lee, calling it a ” very unstable tax policy,” which would penalize those investing with a long-term perspective. New Street Research's Pierre Ferragu called it a “dumb” proposal.

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