10/12/2024

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What if Warren Buffett had faced Kamala Harris’s unrealized-capital-gains tax from the outset? Here are the numbers.© Kevin Dietsch/Getty Images

One of the earliest proposals in Vice President Kamala Harris’s presidential campaign was taxing the unrealized capital gains of the very wealthiest Americans.

The controversial idea, which even in a blue-wave scenario would be difficult to get through Congress, would be to impose a 25% tax on the income, inclusive of unrealized capital gains, of taxpayers with wealth above $100 million.

Opinion (August 2024): Kamala Harris’s critics are totally wrong about taxing unrealized gains

Daniel Gladis, a director of the Malta-based Vltava Fund, decided to calculate the impact if such a tax were law for all of Buffett’s career.

(One quick caveat — he does assume that Buffett would be paying right from the start. If you inflation-adjust Buffett’s holding in Berkshire Hathaway from April 1965 it would be about $75 million, so not wildly far from the proposed threshold.)

In a letter to shareholders, Gladis also assumes for calculation purposes that Buffett didn’t give away shares to charity, as he has done. Otherwise, the sage of Omaha hasn’t sold any Berkshire Hathaway stock.

In the Gladis calculations, Buffett doesn’t pay any tax in years where Berkshire Hathaway’s stock doesn’t appreciate; in years in which it does, he sells enough to pay the tax on the unrealized gain.

Related video: Kamala Harris’ Capital Gains Tax Proposal: How It Could Affect Your Investment

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On to the result: In the current tax regime, the nearly 393,000 shares Buffett held from 1965 would be worth $271 billion. But in the alternative world envisioned by the Harris revenue proposal, he’d own just 22,648 shares, worth $15.6 billion.

That’s a big difference — to Buffett. For the federal government, however, the additional revenue is just $5.7 billion, he says. “Instead of the $271 billion in wealth created, all of which Buffett has given or intends to give to charity, only $15.6 billion would have been generated for charitable purposes and $5.7 billion in revenue for the state,” he says.

Gladis also says that in an unrealized-capital-gains-tax world, Buffett might not even be running the company. “Had Buffett needed to sell off a significant chunk of stock each year, however, he might have lost control sometime in the 1980s, and who knows what the company would look like today, what it would be worth, or whether it would even exist at all,” he says.

While Gladis is of the opinion the Harris proposal is unlikely to become law, he says he considers the idea to be the tip of an iceberg.

“The idea of introducing a tax on unrealized capital gains may not be put into practice, but we will almost certainly hear more and more similar half-mad proposals for new forms of taxation. Some politicians believe that low taxes are the root of the world’s problems today, some don’t believe it but nevertheless know the suggestion can win them votes, and some know that more taxes mean greater power in their hands,” he says.

Read on (September 2024): Would Kamala Harris’s corporate taxes be bad for your 401(k)? The answer may surprise you.

*****

Harris is a very greedy person.

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