In recent years, progressives have been pushing harder for taxation of unrealized gains, either through wealth taxes or “mark-to-market” taxation. Though there are numerous economic reasons why proposals to tax unrealized gains are wrongheaded, one should merely need to imagine how chaotic administration of such taxes would end up being to know they are an idea best left on the cutting room floor.
As I’ve noted in the past, a major issue that any proposal to tax unrealized gains would need to address is what happens when those unrealized gains disappear after they’ve been taxed. That’s particularly an issue for volatile assets — in the most recent example, cryptocurrency.
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