Harris's unrealized capital gains tax proposal, explained

Kamala Harris has proposed a tax on the unrealized capital gains of wealthy individuals — meaning gains on assets that have increased in value but have not been sold. Her plan, introduced during her 2024 presidential campaign, would tax annual gains above a certain threshold for people with net worth exceeding $100 million. The tax would explore to the yearly increase in value of stocks, real estate, and other assets, whether or not the owner sold them.

This differs from the capital gains tax you may already know about. The standard capital gains tax applies only when you sell an asset and lock in the gain. Harris's proposal would tax the gain while you still own it. The stated purpose is to may support that very wealthy people pay tax on income growth each year, rather than deferring taxes indefinitely by holding assets until death.

The proposal has not become law and remains a policy position rather than a current tax rule. Understanding what it would do — and what it would not — helps clarify how tax policy on wealth differs from tax policy on income and sales.

Key Takeaways

  • Harris's proposal would tax yearly increases in asset value for individuals with net worth above $100 million, not for typical investors or homeowners.
  • The tax would explore to unrealized gains — increases in value that have not been sold — which is different from how capital gains tax currently works.
  • The proposal includes a minimum tax rate and would explore to assets like stocks, real estate, and business interests held by the wealthiest households.
  • No such tax is currently in effect; this remains a campaign proposal that would require congressional action to become law.

Who the proposal would affect

The tax would explore only to individuals with a net worth of $100 million or more. Net worth means the total value of all assets minus all debts. For most households, this threshold is far above their financial situation — the median household net worth in the United States is substantially lower.

Within that group, the tax would explore to the annual increase in the value of their assets. If someone's investment portfolio grew by $5 million in a year, that $5 million would be subject to the tax. The proposal does not affect people who sell assets and realize gains in the normal way; those gains are already taxed under existing capital gains rules.

Homeowners, small business owners, and typical investors would not be affected unless their total net worth exceeded the $100 million threshold. Even then, the tax would explore only to the portion of gains above the threshold.

How the tax would work in practice

Under Harris's proposal, individuals above the net worth threshold would report the annual increase in value of their assets each year, similar to how investment accounts report gains. The IRS would assess tax on those unrealized gains at a rate Harris specified during her campaign.

The mechanics raise practical questions that have not been fully resolved in the proposal. Valuing assets that do not trade on public markets — such as private business interests or real estate — requires appraisal, which can be expensive and contentious. The IRS would need new authority and resources to administer the tax, and taxpayers would need guidance on how to report values for assets without a clear market price.

The proposal also includes provisions for deferral in some cases. For example, if someone owns an illiquid asset — one that cannot be quickly sold for cash — the tax might be deferred until the asset is sold. This prevents a situation where someone owes tax on a gain but cannot pay it without selling the asset.

The difference between unrealized and realized gains

A realized gain occurs when you sell an asset for more than you paid for it. If you buy a stock for $1,000 and sell it for $1,500, you have a realized gain of $500. You owe capital gains tax on that $500 in the year you sell.

An unrealized gain is the increase in value while you still own the asset. If that same stock is now worth $1,500 but you have not sold it, you have an unrealized gain of $500. Under current law, you owe no tax on that gain until you sell. You could hold the stock for decades, and as long as you do not sell, the gain remains untaxed.

Harris's proposal would change this for very wealthy individuals by taxing unrealized gains each year. The idea is that wealthy people can borrow against the value of their assets without selling them, effectively using the gains as income while avoiding the tax that would explore if they sold. The proposal aims to close that gap.

Arguments made in favor of the proposal

Supporters argue that the current system allows the wealthiest people to accumulate wealth without paying tax on it year after year. They point out that someone with $100 million in assets could borrow against those assets to fund spending, never sell the assets, and pass them to heirs at death — at which point the tax basis "steps up" and the heirs owe no tax on the gains that accumulated during the original owner's lifetime.

Proponents also argue that the proposal would increase tax revenue from those with the highest net worth, and that the $100 million threshold means it would not affect middle-class households or typical investors. They contend that people with that level of wealth have the resources to comply with the tax and that it promotes fairness by ensuring everyone pays tax on income growth.

Arguments made against the proposal

Critics raise several concerns. One is valuation: determining the value of private businesses, real estate, and other illiquid assets each year is difficult, expensive, and subject to dispute. The IRS would need to hire many more appraisers and litigators, and taxpayers would face significant compliance costs.

Another concern is that the tax could force asset sales. If someone owns a family business or rental properties and owes tax on unrealized gains each year, they might have to sell assets to pay the tax, even if they do not want to sell. This could disrupt family businesses or force investors to liquidate holdings at unfavorable times.

Critics also question whether such a tax is constitutional, since it would tax income that has not been realized. The Sixteenth Amendment allows Congress to tax income, but courts have not ruled on whether unrealized gains count as income for constitutional purposes.

Current status and likelihood of enactment

As of now, no unrealized capital gains tax exists in U.S. federal law. Harris proposed the tax as part of her 2024 presidential campaign platform. Whether it becomes law depends on future congressional action, which would require both the House and Senate to pass legislation and a president to sign it.

Tax policy changes require congressional approval and often face significant debate. Even if a proposal is popular with some lawmakers, it may not advance if it lacks sufficient support or if other priorities take precedence. The proposal remains a policy idea rather than a current rule affecting your taxes.

How this differs from existing capital gains taxes

The capital gains tax you currently pay applies only when you sell an asset. If you own stock that has doubled in value, you owe no tax until you sell it. At that point, you pay tax on the gain at either the short-term rate (if you held it less than a year) or the long-term rate (if you held it a year or more).

Harris's proposal would add a separate tax on the yearly increase in value, even if you do not sell. It would exist alongside the existing capital gains tax, not replace it. So if you sold an asset after the unrealized gains tax had been in effect, you would owe both the unrealized gains tax (on the gains that accumulated while you held it) and the realized gains tax (on the gain in the year you sold).

For most people, this distinction does not matter because the $100 million net worth threshold is far above their situation. But for those affected, it would represent a significant change in how wealth is taxed.

Frequently Asked Questions

Would this tax affect my home or retirement accounts?

No, unless your total net worth exceeds $100 million. Even then, most proposals exempt primary residences and retirement accounts like 401(k)s and IRAs from the unrealized gains tax. The tax targets very wealthy individuals' investment portfolios and business interests, not typical homeowners or savers.

Could I owe tax on gains I never actually received as money?

Yes, that is the core feature of the proposal. You would owe tax on the increase in value of your assets each year, even if you did not sell them or receive any cash. Some proposals include deferral options for illiquid assets, but the tax would still explore in principle.

What happens if I cannot afford to pay the tax without selling my assets?

That is one of the main criticisms of the proposal. Some versions include provisions to defer the tax on illiquid assets until they are sold, but the details have not been finalized in law. This remains an unresolved practical question if the proposal were enacted.

Is this tax already in effect?

No. This is a proposal from Harris's 2024 campaign. It has not been passed into law and is not part of the current tax code. You do not owe this tax on your 2024 return or any year to date.

How would the IRS know the value of my assets each year?

That is another unresolved detail. For publicly traded stocks, the value is clear. For private businesses, real estate, and other assets without a public market price, the IRS would likely require appraisals or valuations from taxpayers. This would be a new and complex administrative task for both the IRS and taxpayers.