Matthew Lynn Matthew Lynn

Is Biden trying to crash the economy?

A tax on unrealised capital gains is barmy

A war is raging in Ukraine. Inflation has risen to a 30-year high and may have started to spiral out of control. The country is on the brink of recession, and a gaffe-prone leadership is under increasing fire. You could be forgiven for thinking that President Biden has more than enough problems right now. But he is about to make his already miserable term in the White House a whole lot worse. How? By adding a stock market crash, and the destruction of America’s best companies, to the already worryingly long list of self-inflicted disasters.

It is hard to think of a single tax that could be worse for growth

This week, Biden is set to unveil a ‘billionaire’s tax’ targeted at the country’s super-rich. The President, and his small group of revolutionary economic advisers, have already had two or three goes at squeezing some more money out of the likes of Jeff Bezos and Elon Musk. So far failed to get these attempts past Congress. The latest attempt will impose a minimum tax rate of 20 per cent on everyone, sold as a way of making sure the rich pay the same as everyone else. By itself that doesn’t sound too bad. But here’s the catch: it includes ‘unrealised capital gains’.

It is worth taking a moment to look at just how batty that is. Let’s say you are the controlling founder with 50 per cent of a very successful tech company. It does well, and so does the market, and its value goes from $100 billion to $150 billion over the year. You have made $25 billion, on paper. Biden will demand you pay 20 per cent of that in tax, which comes to a cool $5 billion. The only way you can pay that bill is to sell shares to raise the cash.

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