Kamala Harris Eyes Wealth Tax and Income Inequality in Potential Presidency

In the current economic landscape, having substantial wealth has always been advantageous, but now more than ever, it seems to be a particularly opportune time to be affluent. The Institute for Policy Studies highlights that during the COVID-19 pandemic, American billionaires saw their wealth increase by 62%. Meanwhile, Oxfam reports that the wealthiest 1% of the world amassed two-thirds of the $42 trillion in new wealth generated in the years following the pandemic.

Vice President Kamala Harris, who is positioning herself as a strong candidate for the presidency, shares concerns with her current superior, President Joe Biden, regarding these statistics. Both see these figures as indicative of an unhealthy level of wealth inequality and economic disparity in the country. Should Harris secure a victory in the November election and work with a cooperative Congress, the wealthy in America might find themselves facing significant changes, particularly those with large fortunes.

Harris’s Wealth Tax Proposal

One of Harris’s primary focuses as a potential president would be to implement tax policies that target the wealthiest Americans. Dennis Shirshikov, a professor of finance, accounting, and economics at the City University of New York, and a seasoned real estate investor, anticipates that a Harris administration would advocate for significant tax reforms aimed at increasing the tax burden on high-income earners. “A Kamala Harris presidency could bring significant changes to the tax landscape for the wealthy,” Shirshikov notes.

A critical component of these potential changes is the introduction of a wealth tax. This idea is embedded in the Biden-Harris 2025 budget proposal, which argues that the current tax code is skewed in favor of the wealthy, allowing them to pay disproportionately low taxes compared to middle-class Americans. The proposal aims to impose a minimum tax of 25% on individuals with wealth exceeding $100 million, addressing what it describes as a glaring inequity in the tax system.

Taxing Capital Gains and Unrealized Gains

Another area of focus for Harris would be closing tax loopholes that disproportionately benefit the wealthy. The Biden-Harris budget proposal plans to treat capital gains as regular income for individuals earning $1 million or more, a significant shift from current tax policies. This change would also eliminate the carried interest loophole, which allows investment fund managers to pay lower tax rates than average workers, and the like-kind exchange loophole, which lets real estate investors defer taxes indefinitely.

Perhaps the most groundbreaking proposal is the taxation of unrealized gains for the ultra-wealthy, a concept described by IFC Media as a “radical departure from normal taxation.” Traditionally, unrealized gains — the increase in value of an asset that has not yet been sold — are not taxed. However, Harris’s proposed 25% tax on these gains for individuals with fortunes exceeding $100 million would mark a significant shift in U.S. tax policy.

Implications for High Earners

Harris’s tax proposals are not limited to the ultra-rich. She also supports raising the top marginal tax rate, a move that would affect a broader range of high-income earners. According to Shirshikov, “This approach aligns with her broader goal of addressing income inequality and ensuring that the wealthiest Americans contribute a fairer share to public revenues.”

The Biden-Harris 2025 budget proposal specifically seeks to repeal the tax cuts implemented under former President Donald Trump’s 2017 Tax Cuts and Jobs Act, which reduced the top tax rate for high earners to 37%. Under the new proposal, the top tax rate would be restored to 39.6% for single filers earning more than $400,000 annually and married couples earning more than $450,000. Although these income levels might seem modest compared to billionaire wealth, they place individuals in the top 2% of earners, according to the Tax Foundation. The Biden-Harris administration believes that targeting this group is a reasonable step in addressing income inequality.

The anticipated tax changes under a Harris presidency are intended to generate revenue for social programs and address the widening wealth gap in America. However, these measures are also expected to have significant implications for investment strategies and financial planning among the affluent. As Shirshikov advises, individuals in this income bracket would be wise to start preparing now by consulting with their financial advisors.

Final Thoughts

A Kamala Harris presidency could bring about profound changes in the way the wealthy are taxed in the United States. Her proposals, embedded in the Biden-Harris 2025 budget, aim to create a more equitable tax system that ensures the wealthiest Americans pay a fairer share. Whether through the introduction of a wealth tax, the taxation of unrealized gains, or the increase in the top marginal tax rate, Harris’s potential policies are likely to have a significant impact on the financial landscape for high-income earners in America.