Subject: Re: Harris and the Dem tax proposals,
If you have the time, let's take Buffett. Round numbers he has 140 BILLION in brka, cost basis near zero, what happens to him in year one? Thanks.

Exactly what you think would happen. He'd have to either liquidate or borrow against his holdings.

Buffett is the ur-example of both the reasons for this kind of proposal. But also a little bit against.

On the "for" side, Buffett has increased his net worth by more than $200 billion over the course of his lifetime - he's earned more than almost any other human. But he's paid no taxes on virtually all of those earnings, because they've taken the form of appreciation in his BRK shares. That's why he pays so much less in taxes than his secretary - not because the marginal rates are off, but because Buffett can earn his money through an investment vehicle that accrues unrealized gains, and all his secretary's wages are immediately taxable. Generally speaking, you want your taxation system to be neutral - that however people are making their money, they all pay taxes the same way. But because some ways of earning money result in unrealized gains, that has extraordinary benefits compared to realized income.

But on the "con" side, it's really difficult to generate significant tax revenues from unrealized gains without forcing people to realize those gains by selling assets. And since ownership and control are bound together in many contexts, like closely held corporations (and even some public ones), that can have serious consequences. And Buffet's the easy one, since his assets are mostly in securities. Many folks have their wealth tied up in assets that are illiquid and long-term, and simply cannot be liquidated to pay taxes.

There's ways to manage that a bit, but it's all idle fancy - we're never going to see a tax on unrealized income in a Harris administration, so the details are unimportant.