The White House has proposed a 25% minimum tax on households worth more than $100 million, applied to income including unrealized capital gains. Supporters say the wealthy borrow against stock to avoid taxes; critics call the idea unconstitutional and unworkable.
The club is leaningStrongly against49for·109against
My students learn that everyone pays taxes, and then I read the ProPublica investigation showing the 25 richest Americans paid an effective federal income tax rate of just 3.4% from 2014 to 2018. The trick is simple: never sell. Borrow against your stock, live off the loans, and let the gains compound untaxed until death wipes the slate through stepped-up basis. The White House proposal answers this directly: a 25% minimum tax on households worth more than $100 million, covering unrealized gains, hitting roughly the top 0.01% and raising an estimated $360 billion over a decade. That is not a tax on teachers with a 401(k). It is a tax on a loophole you need nine figures to use.
The unworkable objection ignores how much mark-to-market taxation already exists. Futures traders have their contracts marked to market every year under Section 1256 of the tax code, and nobody calls that the end of commodities markets. The Netherlands taxes an assumed return on savings and investments instead of waiting for a sale, and Americans who renounce citizenship already pay an exit tax on unrealized gains. For households over $100 million, portfolios are mostly publicly traded securities with a price anyone can look up in seconds, so the valuation horror stories about family farms are aimed at the wrong target. We built the plumbing for this decades ago. What is missing is the political will to turn it on for the people who benefit most from it being off.
I pay taxes on every dollar I earn before I ever see it, and I am tired of being told the system cannot ask the same of people with more money than a hospital. Economists Emmanuel Saez and Gabriel Zucman found that in 2018 the 400 richest families paid a lower total effective tax rate than the bottom half of earners, which flips the whole idea of progressive taxation upside down. Unrealized gains are real economic power: they buy yachts through loans, they buy companies, they buy elections, and the tax code pretends they do not exist until a sale the owner can delay forever. A minimum tax on the wealthiest households would not fix every inequity, but it would end the absurdity of a nurse paying a higher rate than a billionaire. If the code can track my overtime down to the penny, it can value a stock portfolio.
The stock market does not go up in a straight line, which is a problem when you tax gains that can vanish. Imagine taxing a founder's portfolio at its 2021 peak, then watching it fall 40 percent in 2022: the government has collected cash on wealth that no longer exists, and now it owes refunds, or the taxpayer has paid real money for phantom gains. The Congressional Budget Office has repeatedly flagged how volatile capital-gains revenue already is; a tax on unrealized gains would multiply that instability. CBO. States would face the same whiplash. And the cruelty lands in downturns: to pay the tax, investors must sell assets into a falling market, the exact fire sale that turns a correction into a crash. We would be building a tax code that forces selling at the bottom and rewards it at the top. That is not redistribution. It is a machine for manufacturing panics.
I built my company over 22 years, and on paper it is worth enough that a tax like this would notice me if the threshold ever drifts down, which thresholds always do. For founders, most wealth is shares you cannot sell without losing control of the company your employees depend on, so a tax on unrealized gains means selling pieces of the business every year just to pay the IRS. Startup employees get hit too: engineers holding illiquid options would owe real cash on paper value they cannot touch, forcing them to walk away from the equity they earned. The Tax Policy Center has warned about exactly these liquidity crunches, and they are not theoretical, they are arithmetic. A tax bill should not force a founder to choose between paying Washington and keeping her company.
My parents own a small apartment building, and I have watched them argue with the county every year about what it is worth, because appraisals are opinions with letterhead. Now imagine the IRS doing that annually for every private business, art collection, and family farm in the country, with penalties if their opinion differs from yours. France tried a wealth tax and repealed it in 2018 after economists tied it to capital flight, and several other European countries walked away from similar experiments for the same reason. Valuation disputes would flood the courts, compliance costs would crush exactly the mid-sized businesses the threshold supposedly spares, and the revenue projections would melt on contact with reality. A tax the government cannot measure fairly is a tax it cannot levy fairly.
A tax on holding appreciating assets is a subsidy for spending instead of building. If keeping shares in the company you founded means an annual bill for gains you have not received, the rational move is to sell early, diversify into yachts and real estate, or move the whole enterprise somewhere that does not punish ownership. Founders already relocate: when countries raise the price of building companies, the builders leave, and the jobs follow. Economists at the Tax Foundation have documented capital flight following European wealth taxes. Tax Foundation. The deeper issue is what we are taxing: patience. The gains in question mostly come from holding productive assets for decades. Penalize that and you get more short-term trading, more consumption, and fewer people willing to tie their fortune to one company's twenty-year bet. A tax code should reward building things that last. This one fines it.
I have watched every tax-only-the-rich promise of my lifetime eventually knock on the middle class door, and this one has the same knock built in. The 16th Amendment allows taxes on income, and the Supreme Court in Moore v. United States (2024) upheld a tax on already-realized foreign earnings while pointedly leaving the bigger question undecided, which means a tax on gains nobody has received is on shaky constitutional ground. Even if it survives for billionaires today, the machinery it builds, annual federal valuation of everything you own, is ready-made for the next revenue hunt. My 401(k) holds unrealized gains too, and I am not comforted by promises that the line will never move. Lines drawn for revenue always move.