There's all sorts of chaos in that tax proposal, but the unrealized capital gains tax is an estate tax piece:
Major individual, capital gains, and estate tax provisions modeled:
- Expand the base of the net investment income tax (NIIT) to include nonpassive business income and increase the rates for the NIIT and the additional Medicare tax to reach 5 percent on income above $400,000 (effective 2024)
- Increase top individual income tax rate to 39.6 percent on income above $400,000 for single filers and $450,000 for joint filers (effective 2024)
- Tax long-term capital gains and qualified dividends at ordinary income tax rates for taxable income above $1 million and tax unrealized capital gains at death above a $5 million exemption ($10 million for joint filers)
- Limit retirement account contributions for high-income taxpayers with large individual retirement account (IRA) balances
- Tighten rules related to the estate tax
- Tax carried interest as ordinary income for people earning more than $400,000
- Limit 1031 like-kind exchanges to $500,000 in gains
Essentially, it means if you have a rich uncle with a ranch, it'll have to be sold to pay the estate taxes. Passing on family-owned businesses will be that much harder. In the end, much wealth will go to attorneys and trust companies as the well-to-do will find ways around it, and the first generation success stories will have a greater chance of having their heirs getting kicked in the teeth.
President Biden is proposing extraordinarily large tax hikes on businesses and the top 1 percent of earners that would put the U.S. in a distinctly uncompetitive international position and threaten the health of the U.S. economy.
taxfoundation.org