Mark Cuban, Kamala Harris, and Taxing Unrealized Gains

Mark Cuban, of Shark Tank and Dallas Mavericks fame, recently endorsed Vice President Kamala Harris in her 2024 presidential bid. Given the former tech executive's history of touting political independence, this endorsement raised some eyebrows.

However, at a campaign event in Arizona, Cuban addressed the controversial topic of taxing unrealized gains. In recent years, proposals involving an unrealized gains tax have been floated in various Democratic proposals, most notably including President Biden’s FY2025 budget.

Cuban’s comments on Harris' supposed stance on an unrealized gains tax have reignited debate, social media chatter, and confusion. Here’s what you need to know.

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What did Mark Cuban say?

"Let me be clear," Cuban told the crowd, "Kamala understands that taxing unrealized gains would be devastating for the economy. It's not going to happen."

Cuban's comment is notable given the Biden administration's previous proposals to implement a minimum tax on the ultra-wealthy. Specifically, Biden supported a tax on unrealized gains for those with net worths exceeding $100 million.

Last year, Cuban, a billionaire, said he was proud to pay the $279.5 million in taxes he reportedly owed for 2023.

The idea behind taxing unrealized gains for super-high earners is to address what some see as unfairness in the current U.S. tax system.

Note: An unrealized gain occurs when the value of an asset you own increases, but you haven't sold the asset yet. So, the gains are what some call “paper gains” since they haven’t been realized tangibly but exist on paper.

Data show that billionaires can often accumulate vast wealth through asset appreciation without paying taxes, partly because capital gains are only taxed when assets are sold.

For her part, Harris has proposed a smaller increase in the capital gains tax rate compared to Biden's plan and while not specifically addressing taxing unrealized gains, has expressed support for a "billionaire minimum tax."

However, given the legislative process and potential constitutional challenges, the idea that Harris could single-handedly implement a tax on unrealized gains, even if she wanted to, is unrealistic.

Tax on unrealized gains: Legislative and legal hurdles

Any proposal to tax unrealized gains would need to navigate the complex process of formal tax legislation.

• Tax bills must originate in the U.S. House of Representatives and pass through both chambers of Congress.
• The process involves multiple stages, including committee reviews, debates, and House and U.S. Senate amendments.
• Given the current divided political landscape, achieving consensus to pass such a controversial tax measure would be challenging at best.

An unrealized gains proposal would likely face opposition from Republicans and some moderate Democrats. That would make it difficult to secure even a simple majority, let alone the supermajority sometimes required for significant tax changes.

Then there are legal concerns. Even if a bill proposing to tax unrealized gains were to pass Congress somehow, it would likely face legal challenges. The U.S. Supreme Court could be called upon to determine whether an unrealized gains tax is unconstitutional.

The justices would have to grapple with thorny questions surrounding whether the tax was a “direct tax,” requiring apportionment among the states, and whether a tax on unrealized gains could be classified as an excise tax.

While a majority of the Justices recently upheld a mandatory repatriation tax that many saw as a “wealth tax,” the court left the door open to potentially strike down future so-called wealth taxes — like a tax on unrealized gains.

Also, despite what you may hear about Vice President Harris coming for your paper gains, the complexity of implementing a tax on unrealized gains extends beyond legal and constitutional issues.

That kind of tax would essentially involve overhauling the current tax system, raising questions about everything from valuation methods and liquidity issues for taxpayers to practical IRS administration concerns and potential broader economic impacts.

Bottom line: Unrealized gains taxes aren’t a realistic worry for most

While the idea of taxing unrealized gains might appeal to some as a way to address wealth inequality, practical and legal obstacles make it unlikely to come to fruition anytime soon.

As debate and social media chatter about unrealized gains continue, remember that significant changes to the tax code require more than the desire of any president. (As mentioned, any serious attempt at that kind of reform would require presidential support, a broad consensus in Congress, and navigation of constitutional issues.)

So, the notion of Kamala Harris (if elected) implementing a tax on unrealized gains remains unrealistic, for now, and is not a worry for most. According to the White House, the number of people estimated to have a net worth exceeding $100 million is less than 11,000 in the U.S.

Related

• Six New Tax Credits in Harris Economic Proposal
• Kamala Harris Calls for 28% Capital Gains Tax
• Unrealized Gains Tax: One Important Thing to Know Now
• Biden FY25 Proposal Would Nearly Double the Capital Gains Tax Rate