Brown: Robbing Peter to pay Paul


Columnist Aaron Brown explains how the latest tax doesn’t make sense.

Aaron Brown

Congress has been arguing. That’s nothing new. But the things over which they have been arguing recently are new in a way. “Unrealized capital gains” are the latest target of our greedy Washington rulers. It’s a great phrase to obscure what they are doing. At the center is the word “capital” which reminds people of capitalism, which many associate with selfish unjust behavior. “Gains” should certainly be taxed if we tax profit, right? For those who got an ‘A’ in ECON 101 and do know what “capital gains” are, they might not realize what “unrealized” capital gains are or how ridiculous the core concept is.


Capital gains occur when you buy something, say a vinyl record, and you sell it for more than you paid. Now say you bought a vinyl record and you enjoy the music so much, you will never sell it. You never “realize” the potential capital gains, despite the local record store’s offers to pay double or triple what you paid. The government wants you to pay them every time the offers to buy your vintage vinyl increase. You never actually make any profit off the record. You merely enjoy the music and you must pay the government for “unrealized” gains: the gains you never got.


Another analogy could be real estate. You buy a house and must pay the federal government an extra tax every time the perceived value of your house increases. It doesn’t matter that you plan to never sell the house and make a profit. The feds want your money nonetheless.


I have a friend with piles and piles of scrap on the edges of his corn fields. He’s waiting for metal scrap prices to go up high enough to be worth hauling it all. If we were to bogusly tax “unrealized” “gains,” he would need to pay the government every time scrap price went up. But if scrap prices fell, would the IRS turn the tables and start paying him for “unrealized losses”? Some bureaucrat would have to be paid to come out and estimate how much junk he has because there’s no way he could weigh the scrap.


Where does it end? Well, here’s the thing: they aren’t targeting chump change right now. They don’t care about how much your vintage Nike shoes are worth, yet. For now they are concerned with people who invest in the stock market. For now, they only want to go after “the richest of the rich,” they say. On top of that, people don’t understand the vital role that the stock market plays in an economy. Most people only think of rich tricksters gaming the system to exploit people.


However, if rich people were really the target when it comes to whose stuff to steal more, why would rich people be praising such ideas? Why do folks like George Soros promote increased federal taxes while paying none for three years straight? These two questions have the same answer. Poor people don’t run the government. You don’t really think they are being altruistic when rich people running the government come up with new laws to have rich people “pay their fair share,” do you?


I certainly do not wish to portray all wealthy folks as some uniform, monolithic group with only evil motives. I speak only of those who wish to control the government to maintain power. To some extent, George Orwell’s “1984” was right in describing the rich as trying to keep the middle class down. The super-wealthy and super-powerful will still hire lawyers to find loopholes in the tax code. This idea of taxing unrealized capital gains is just a small step towards robbing all of the little guys, the “monkeys,” of r/WallStreetBets and YouTube. After they’ve taken all the small diamond-handed investors’ tendies, they will come after everyone else. We will have embraced the idea that the State is not only entitled to taking what it desires from the fruit of our labor, but also right to take potential profit before we even find it.


We should be aiming for systems where rich people are not treated differently from poor people. If Bill and Hillary Clinton murder some people, they should be punished in the same manner you or I would be punished for murder. “Equal justice under the law” is a phrase engraved above the main entrance to the U.S. Supreme Court. Such principles used to be more popular. You can criticize the BLM movement for many things—like promotion of collectivism or racism—but they get this right: it is not right to apply law differently to different groups of people.


Taxation is theft, though most people are not cognizant of this reality. The loopholes through which rich guys sneak their money will continue to increase every time we increase the complexity of the tax code. The examples I gave to explain the proposed taxes are nowhere near as complicated as the real thing. We need to dramatically simplify taxes in the U.S. We Americans spend 11 billion dollars every year just to figure out how much we have to give the government. We need less taxation, not more expansive and complicated rules.


Looting is fun for a while, I suppose. Last year, I helped clean up many storefronts in Southern California after the looting. The justification for the looting was that rich corporations deserved to be looted. What I cleaned up was the broken glass of stores owned by local businessmen. One guy had spent his whole adult life building up his inventory to have it gutted in one night. The guys who worked so hard to run their one store had to take out loans, start over or shut down. The big businesses had the police racing to their defense and the National Guard posted all around.


If we continue to invent more ways to tax people, we are just looting the hardest-working of society. The rich guys will have their government bail-outs and loopholes. Looters will enjoy free stuff for a minute but pay the cost later. Hopefully you realize “unrealized” capital gains are no gain at all. Taxing such incalculable sums only opens up another door to more oppression, theft and bureaucracy.