,,,this new tax policy of the Biden administration makes Buy and Hold less compelling.
...currently, the wealthy can hold multi-year capital gains and able to defer tax payments on capital gains until it is realised. Annual capital gains now will be deemed income and be subjected to minimum 25pc tax for these billionaires. Billionaire Minimum Income Tax
10-Year Revenue Impact in President’s Previous Budget: $437 billion
Most people think of a capital gain as the profit one receives when selling an asset for more than it cost to acquire it. But when an asset becomes more valuable, that asset appreciation can also be thought of as income for its owner, even if they do not sell the asset. Economists consider these “unrealized capital gains” to be income, but the tax code usually does not.
The result is a major tax break for capital gains, the ability of wealthy people to defer paying income taxes on gains until they sell assets. The President’s proposed Billionaire Minimum Income Tax would limit this tax break and would be phased in for taxpayers with a net worth between $100 million and $200 million.
Those wealthy enough to be subject to the proposal would generally be required to pay at least 25 percent of their total income, including unrealized capital gains, each year. (The President included the same proposal in his budget plan last year, except that last year his proposed minimum tax rate was just 20 percent instead of 25 percent.)
When this equals more than they owe under the regular tax rules, affected taxpayers would have five years to pay the difference (nine years for the tax assessed in the first year the proposal is in effect). This gradual payment would smooth out long-term calculations of the tax for someone whose assets fluctuate dramatically in value. If unrealized gains in one year are followed by unrealized losses in another year, only a portion of the minimum tax is paid for the first year and then potentially refunded in the following year. Payments of the minimum tax would also serve as prepayments of the tax that would otherwise be due later when a taxpayer sells an asset or passes it to an heir.
Some other proposals, like Sen. Ron Wyden’s “Billionaires Income Tax” create something closer to a “mark-to-market” system of taxation, which would treat unrealized gains as income each year. The President’s proposal is different because it is structured as a minimum tax, ensuring that very wealthy people pay at least 25 percent of their total income, including the unrealized gains that escape taxation under current law.
