Cryptocurrency investors are left fuming following the news that the President of the United States, Joe Biden, has sent a newly proposed law to the U.S. Congress to impose a 20% tax on gains made by investors.
The new bill dubbed the “Billionaire Minimum Income Tax” is set to target households in the United States having assets worth $100 million or more. The bill, as designed, requires the payment of a minimum tax of 20% for both unrealized and realized capital profits. Assets like stocks, cryptocurrency, real estate, and others are liable to be taxed even if no profits have been made on them.
As is expected, many experts have criticized the move by President Biden, citing it as an exercise against the rich, which they labeled “eating the rich,” calling it unconstitutional and harsh.
The proposed move is full of inconsistencies in interpreting what constitutes income and how impossible it is to work considering the many unclear issues in the bill. Additionally, many threats are identified that may threaten the continued progress of investors and not just billionaires.
Assessing Unrealized Capital Gains
In a statement from the Whitehouse, President Biden is reported to have said America’s tax code is not balanced enough to reflect the realities on the ground. Biden believes that the wealthiest households in the U.S. pay lower taxes compared to working-class households.
However, Tyler Goodspeed of the Hoover Institute argued that if the perception is that high-worth households in the United States should shoulder the tax burden, there are more viable ways to go about that. But to begin charging unrealized capital gains is like creating another issue where none is present.
Fisher Investments noted that the process is more complex than the government is ready to admit on the preferred tax rates. The valuation of numerous assets is costly and prone to subjective interpretation.
To get the unrealized capital gains from crypto and stockholders, the investors would be forced to sell a substantial part of their portfolios each time they renew their tax payments. It is a situation that no serious-minded investors would hope to encounter.
Moreover, it has not been clear enough whether unrealized losses would be a factor in the proposal, and if so, there should be tax returns in place should any major market crash occur.
Crypto Investors Should Be Concerned
The Washington Post disclosed last year that the “tax the rich” approach is an unworkable initiative and unconstitutional, capable of harming all involved parties. This may explain why many remain optimistic that the plan would not scale through Congress vetting.
Besides, many pointed out that it would be impossible to limit the tax to billionaires, only adding that even the Revenue Act of 1913 points out the irregularities and illegality of this move.
As for the crypto industry, investors will sell more of their assets to pay the tax and fear that the bearish trend will take over the market for some time.
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