Capitalist Investor

Breaking Down Kamala Harris's Tax Proposals: Unrealized Gains, Corporate Taxes, and Price Controls, Ep 276

• Strategic Wealth Partners

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In the latest episode of "The Capitalist Investor," hosts Luke Lloyd (Cool Hand Luke) and Derek (Diamond Hands D) dive into some of the most pressing issues in the current economic landscape. With Tony out on assignment, it was an engaging and insightful dialogue between the two hosts covering a multitude of topics that could significantly impact the financial markets and everyday investors.

Unrealized Capital Gains Tax at 25%
One of the most contentious issues discussed was the proposal by the Democratic National Committee (DNC) to impose a 25% tax on unrealized capital gains. This concept means that investors would be taxed on the potential profit of their investments even if they haven't sold them yet. For example, if you buy a house for $250,000 and its market value rises to $500,000, you would owe taxes on the $250,000 "unrealized" gain. Luke and Derek argue that this would disincentivize investments and could signal the end of capitalism as we know it.

Corporate Tax Increase to 28%
Another hot topic was the proposal to raise corporate taxes from the current 21% to 28%, a 33% increase. The hosts pointed out that such an increase would likely be passed on to consumers, resulting in higher prices and increased inflation. This policy could stifle economic growth at a time when it may be sorely needed to combat a potential recession.

Price Controls on Food
Price controls on food were another contentious issue brought up during the episode. The hosts vehemently opposed this idea, suggesting that it could lead to supply shortages and inefficiencies in the market. Derek and Luke argue that government price controls could disrupt the natural balance of supply and demand, potentially causing even more severe problems like food shortages.

Top Capital Gains Bracket to 44.6%
The episode also discussed the idea of raising the top capital gains tax bracket to 44.6% from the current 39%. This significant increase would affect high-income earners and long-term investors. Luke and Derek believe that such a tax hike would deter people from making long-term investments, ultimately hurting the economy.

Economic and Political Cycles
Towards the end of the episode, the hosts touched on the concept of economic cycles and human behavior, citing Ray Dalio's book "The Changing World Order." They discussed how economic policies often lead to wealth disparities, which can generate public discontent and extreme political actions. The hosts suggest that recognizing these cycles can help investors better understand and navigate the unpredictable political landscape.

This episode of "Capitalist Investor" provided a thorough analysis of several pivotal economic policies that could drastically shape the future of both individual investors and the broader economy. From taxing unrealized capital gains to implementing price controls on food, the episode was a critical examination of potential policy impacts. As always, the hosts encouraged listeners to stay informed and consult with financial professionals to navigate these turbulent times.
Tune in next time for more in-depth discussions and insights on The Capitalist Investor!

Hello, and welcome to this week's episode of the Capitalist Investor. As always, you have me, diamond hands D. And this week, just Luke Lloyd. Cool hand Luke. What's going on, bud? Just Luke Lloyd. Yep. Just Tony's on assignment. Yep. Jet setting, like you were for a couple weeks, two weeks, a week and a half in Hawaii. How was Hawaii? Oh, it was amazing. It really was. Yep. So wasn't really. That's all you have to say? It was great. Yeah, it's spectacular. So there's. We went to Maui, and there's just tons to do on that island. And then we went to Kauai. So that's like, if you see a lot of the overhead shots for Jurassic Park, a lot of them were on Kauai. That's cool. Yep. So what was the best part? The food, the scenery, the relaxation, the drinks. You don't drink? I would say probably not the relaxation for a family vacation, but, yeah, it was. I played. I played a couple rounds of golf, so that was. That was pretty fun. Of course, it comes back to the damn golf. Yep. Of course. Family vacation. Golf is the best. Yep. Love it. Love it. Today we got some crazy things going on with the DNC and what Kamala Harris within the DNC and within the Democratic Party is announcing from a tax policy standpoint, pretty wild out there on the streets. Yeah, I would say. What was the biggest thing you stood out to you. So, I mean, let's go through, like, the top three or four things like that. She came out with, like, I know one of them was, like, the crazy scenario, which I'm sure we're gonna hammer on today about unrealized capital gains at, like, 25%. Yep. I mean, that's. That's insane. That's one of them. Number two is, like, corporate tax going up to, like, 28%. Was it? It's like, a 33% rise from, like, the 21% that it's currently at. What else is in there? She was talking about the price controls on food, which is just probably the worst thing that you could ever, ever do. Full on communism. Yep. And, yeah, the top capital gains bracket, 44.6%. So raises up for, like, 5%. I think it's 39% is the top one now. Interesting. So let's pinpick at these. What's the out? What's the. If this happens? Well, number one, is it likely to happen? Number two, if it does happen some of these things, what's it actually going to do? So let's start with the unrealized. I think that's one of the biggest and one of the craziest in there. So just to kind of clarify what exactly that means when you buy or sell a security or even a house, right? Let's say you buy a house for $250,000 and you sell it for $500,000. Well, you just had a $250,000 capital gains on a house. I think it's $500,000 is tax free. So I guess that wouldn't be a capital gain. But it still is a capital gain. If you buy a house for $250,000 and you still own that house and it's worth $500,000, you technically have an unrealized gain of $250,000. So you're telling me homeowners that have capital gains are going to have to pay 25% tax on the appreciation of their houses? That's essentially what this unrealized thing is. Now, the Democratic Party, just to clarify, is saying, oh, this is not going to be applied to the average person, middle class America. This isn't even going to be applied to upper class, like the millionaire next door. They're saying it only applies to the nine figure or the Centi. Millionaires are calling it the top top zero 1%. From my experience with the Democratic Party, they say they're not gonna do one thing. They're saying they're only gonna tax the rich, but they end up taxing everybody else. So I don't believe them. That's the only way their policies can ever actually raise the money that they need for all their policies. Cause when you do the math real quick, there's not enough rich people to tax at that rate to really make a difference. So that's how all those tax policies always bleed down into the middle class. And the unrealized capital gains tax, I don't even know how that would even work. So the house is an easy example. But I'd say as it relates to kind of what we're doing here, a lot of our clients have non qualified accounts, right? So not just the savings into, like, the 401K plans that gets rolled over eventually. You know, a lot of people, a lot of my clients have. Have big capital gains inside those non qualified accounts. Cause they've had, you know, securities in there for a long time. You know, Apple comes to mind, you know, got a lot of clients with. With a lot of legacy Apple position. So. So, yeah, if you have, you know, $100,000 gain within your Apple stock and you're selling, you know, you gotta a long term tax strategy where you're selling that off a little bit every year to fund your retirement. Now all of a sudden, that 100,000 in gain, you got to stroke a $25,000 check for gains you haven't even realized. So are they going to give me $25,000 check when I lose money? Yeah, exactly. So if the next year, you know, that that hundred thousand is only worth 80, like, are you getting a giant refund now? So, so, yeah, just procedurally, how that would even work, the, the amount of extra accounting that would need to happen to do all that, the amount of errors that could be made, oversights, you know, it's going to be tough to deal with, you know, not to mention, like currently. So let's say in that non qualified account, you sell something, you know, you're getting a receipt. You know, that goes to the IR's essentially that says, hey, you sold this position and I, and you had this amount of gains. How are you going to generate those for all of the unrealized capital gains? So it is a nightmare scenario to think about. And ultimately, what are we going to get for it? That's really nothing. That is really inflation. Kind of my argument with all of this, regardless of what you believe, regardless of what you hear that's coming out of the DNC, who would want to give the government more money to do more stuff with? Because they're just going to waste it. It's, what problem have they solved? It would just disincentivize investing in general, disincentivize capital markets to work efficiently. And if that's the case, the whole system fails. Just saying, if the 25% capital gains or unrealized capital gains tax happen across the board, let's just assume it's not to the Centi millionaires, whatever it be. If it's across the board, that would be the end of capitalism, the free markets and the end of America. I will go that far because you cannot tax money that has not been made. Right. Truly not been made. It's really stunning, honestly, that that proposal could get to, could make it out into, you know, well, you have a. Bunch of angry people. Mm hmm. Bunch. This is the problem with cycles. Ray Dalio, changing world order. Great book. Like problems with cycles. When you have. Capitalism produces a lot of wealth. Yeah. It produces wealth for everybody. It does. It produces wealth for the lower class, middle class, upper class. Even the lower class is not poor, truly, compared to like 200 years ago, right. Were dying on the streets. Like, the poor aren't poor anymore. All right. But that being said, there is a big wealth disparity. The rich have gotten extremely rich. I get that. There's been a big wealth disparity. So you have a bunch of people at the bottom now that see these multi billionaires with their big yachts, they're living the best life, whatever it be, and they're very angry. So when you talk about 25% unrealized tax gains tax on people that probably don't have much investments, then yeah, of course they're going to support it. I mean, just, they don't, they have never experienced it. This is the part of the cycle we're in. It's just human behavior, things like that. It really is. So hopefully things get a little bit more sane because maybe we'll talk a little bit about it more next time. Well, then you have the corporate taxes hit on real quick. Corporate taxes, 28%. That just would be passed on to the consumer. So you think more inflation, it would slow economic growth, which is in a time next year, next couple of years, we might need economic growth to pull us out of recession. So that's just bad timing. In that scenario, price controls you already hit on probably will be passed on to the consumer in some sort of way. How? I mean, it's like you have the supply issues then at that point where it's like, you guess, I think 1980s, you had like gas lines, people getting gas because price controls on gas or you have shortages on food. That's even worst case scenario, like you put on price control is what's the incentive for businesses to operate. You could actually have like, you know, famine out there. Yeah. Price controls on food. Government price controls on food to keep up with the inflation that the government's creating. Is crazy town. I don't know how else to say it. This government spending is literally the definition of why we're seeing so much inflation. But I don't hate to go to extremes, but this is why government policy is important because it could actually be a matter of life and death. Yep. And honestly, we've never really seen such extreme positions taken before. But, yeah, I mean, yeah, but that's. Price controls on food. That, that is probably one of the most extreme positions that you have heard in your lifetime. Yeah, it just, I'm talking to everyone out there. It's, it's. That is a wild thing to even put out. But why does the louder and crazier the left gets, the more energy? Kind of feels like the game. Why, it does certainly feel that way. And, yeah, you can see it from the speeches at the DNC. It seems the crazier, the more excited everyone gets, that's for sure. Wild stuff. We gotta hit on this on another topic, talk more about human behavior and cycles and why that might be happening. I think that's a good maybe ending point. If you have any questions about how this might impact you, let us know. More than happy to talk about individual situations, like, you know, how you might want to plan around this stuff. I mean, I don't truly. I hope the optimist, which is not much usually in me, says that this will never happen, even if they do get elected. Like hopefully there's some balance and what's it called? A power. What's it called? Checks and balances on power. Hopefully this stuff never even happens, even if like somehow she gets elected, which by the polls, it's 50 50 right. Now, and by the betting mods, 50 50. So it's a coin flip chance. But if you have any questions, always feel free to email us. Let us know. Call in 2168-0900 and we will see you next time on the catalyst investment. The opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any investment, legal, financial or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.