Radical Taxation by Democrats

Heretic or Hero, Unrealized Capital Gains Tax is Unconstitutional, Radicals

In this issue:

  • Liberty Perspective: Heretic or Hero

  • Wealth Digest: Unrealized Capital Gains Tax is Unconstitutional

  • The Word: Radicals

Heretic or Hero

Joe Biden’s human infrastructure bill has two wobbly legs which may cause a total collapse. Freedom loving Americans who fear his socialist agenda can thus far thank Sen. Kyrsten Sinema (D-AZ) and Sen. Joe Manchin (D-WV).

Manchin has said he wouldn’t support any new entitlement programs without means testing and work requirements. The Democrats want their new entitlement programs to be for everyone, including illegals, without any requirements; even though they call it a safety net bill. Senator Manchin is also against public support for abortions.

Sinema, on the other hand, isn’t publically objecting to specific programs. She just doesn’t want to raise corporate taxes, individual rates or taxes on capital gains. As far as many Democrats are concerned, wanting to keep the Trump tax cuts is an unforgiveable sin. It’s blasphemy against their anti-orange man spirit.

The Arizona Senator also opposes ending the filibuster, believing that bipartisanship is necessary when there’s talk of radical transformation. With that in mind, she was the lead negotiator for the smaller $1.2 trillion infrastructure bill that had some Republican support. The bill has already passed the Senate, but House Speaker Nancy Pelosi (D-CA) has been holding it up so progressives can get their radical $5 trillion bill passed first.

It may be a stretch for Joe Manchin to be successfully primaried by a socialist progressive in 2024, but not so with Kyrsten Sinema.

The left is already warning Sinema they will oppose her in ’24 with a primary challenge. A recent poll by Data for Progress shows that 70% of Arizona Democratic primary voters disapprove of Sinema (49% strongly disapprove and 21% somewhat disapprove).

If this progressive wish-list stuffed bill comes tumbling down, Democrats will become apoplectic about their missed opportunity. There may not be another chance to “build back better” since 2022 is an election year.

When Republicans gain some power after the midterms, Biden’s agenda will be forever stalled and Trump’s tax cuts will remain. If that’s the case, Sinema better run for the hills. When her term is up, she will definitely face opposition from the left for her heresy.

The Liberty Perspective is that Kyrsten Sinema should become a Republican right now. At this point, her path as a Democrat for the 2024 Senate Primary doesn’t look promising. The far-left progressive who will challenge her will have a massive war chest behind them from small donations. They’ll also be gifted with a 70% Democratic voter dissatisfaction for Sinema from within Arizona.

The Senator could become an Independent, but she would certainly lose without being on the ticket as either a Republican or a Democrat. There wouldn’t be a natural constituency for her.

If Sinema switched parties now, she would instantly become a hero to Arizonian Republicans. They won’t hail her so just because the GOP would control the Senate, but because of her conviction for country over party. She would be seen as stopping the socialist agenda in its tracks.

As a moderate Republican, who values liberty and free enterprise, she will be supported by Republicans and win any primary challenge. After all, John McCain had their support. Even Jeff Flake did too before he went nutty anti-Trump.

If she waits to switch parties, however, it will not be viewed as heroic. Any GOP primary challenger would point out that she had the chance to switch earlier when it would have mattered, but she chose not to.

Given the options set before her, the best one for her career and for the country is choosing to be a hero.

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Wealth Digest: Unrealized Capital Gains Tax is Unconstitutional

Sen. Ron Wyden (D-OR) is proposing to raise revenue by taxing unrealized capital gains on the ultra-wealthy. This new wealth tax would be on individuals worth at least $1 billion or on those who earn $100 million in income for three straight years. I have no idea why the latter isn’t already covered by the income tax.

They say it will only apply to about 700 people, but they said the same of the income tax that it will only affect the super rich. Those who want big government fool us this way with new taxing schemes, but before long, it broadens and traps nearly everyone. We can’t give them an inch!

The details of the plan will be released later tonight, but it will basically be a tax on wealth appreciation. When income is earned, it’s taxed and when assets are sold, any gain is taxed. What Democrats are proposing is taxing unrealized gains on capital assets.

The Wyden plan is a way of taxing wealth that’s not from income but from yearly appreciation. It’s yet to be determined if realized capital gains will still be taxed or offset somehow.

The tax will be imposed annually for easily tradeable assets such as stocks, but deferred for non-tradeable assets such as real estate. So a family farm will just accrue taxes owed until the asset is sold or the tax is paid off from some other source.

They’re calling it a capital gains tax, but in reality it’s a wealth tax.

Unconstitutional Wealth Tax

Even though it’s called a capital gains tax, it shouldn’t be classified so. A capital gain is taxable because constitutionally it falls within the Sixteenth Amendment as a source of income. Unrealized gains are not sources of income. Therefore, the 16th Amendment cannot be used to justify the legality of this direct tax.

Advocates may absurdly claim they’re changing the definition of income to include unrealized capital gains for only billionaires. There's already a legal definition for the term income so that wouldn't hold up. And, since the redefinition would be for tax purposes, it necessarily will apply for everyone so that the tax satisfies the Uniformity Clause in the Constitution. At least, the Supreme Court should view it that way. This would mean that everyone with any appreciated asset will be viewed by the IRS as having income.

If they don’t want to change the definition of income, they will make other arguments about the tax’s legality.

The Constitution mandates that all direct taxes, except all sources of income from the 16th, must be apportioned among all the states. The proposed tax doesn’t adhere to apportionment because it would be impossible to implement. The Democrats, however, may claim that this isn’t a direct tax but indirect, which only requires uniformity.

If Democrats want to claim it’s an indirect tax, then it still fails. The courts have found certain taxes can be classified as indirect if the tax is on an ownership action or on some privilege.

Appreciation of a capital asset isn’t an incident of ownership or a privileged action. There are no actions or privileges they can claim to tax. They are directly taxing the individual.

Ownership Actions

This is when a tax isn’t on the taxpayer, but on an incident such as gifting the property to someone else. The act of transferring property is what’s being taxed, not the taxpayer directly.

There are no incidents of ownership with this unrealized capital gains tax because the owner of the asset isn’t doing anything. The asset just appreciates due to inflation or market forces. What are they going to tax, the laws of supply and demand?

Privileged Act

This is when a tax is on some privilege that can be avoided. Before the Sixteenth, courts classified the income tax as indirect requiring only uniformity. They ridiculously called it an excise tax because they considered the act of earning income a privilege and that’s what they were taxing. They then determined the tax owed based on the amount which was earned.

If Democrats want to claim that it’s a privilege to buy a capital asset, then that action theoretically could be taxed. But they’re not taxing that action, just any future appreciation occurring within a fiscal year long after the action.

I could be wrong and they may just contend that the tax shouldn’t be classified as direct simply because the founders didn’t intend for such taxes to be. They would be wrong on this front too.

Even though a wealth tax is highly desired by Democrats and may yet pass Congress, any wealth tax will be found to be unconstitutional. Read Organic Wealth to learn why. I also have written here at Liberty Word why their constitutionality arguments are dishonest nonsense.

The Word: Radicals

Today’s Democratic Party is openly radical. Those of us on the right have always believed them to be so. But in years past, leftists were covert radicals. They hid it well claiming to be a part of mainstream America.

They are no longer hiding their true beliefs and have become overt with their radicalism. We used to fight them on how big a safety net we should have. That was radical enough because a social liberalism philosophy still holds for self-reliance and free market capitalism. Over the years, Democrats have come to demonize both.

The new Build Back Better plan will transform America from a free enterprise system to one that’s managed by Washington. They want to unionize America whether the workers want it or not. They want to enact their green agenda, which includes forcing renewable energy to everyone’s economic detriment.

Instead of having a safety net, Democrats want entitlement programs to be universal, meaning for everyone. They want open borders to bring in new people who may not value liberty, but who would value government control and its handouts.

Why do Democrats want to transform America? The question is radical enough because America is uniquely successful as compared to much of the world. Why does success need transforming? If it were tweaks to the system to make our Union better, that would be understandable. Democrats, though, want to transform away from individual liberty and free market capitalism to a system that’s under their control.

It’s simply insufficient to pretend that it’s a normal debate about a spending bill. “We can’t afford it”… “It will raise inflation”… Blah blah blah. The Republicans don’t have enough votes to stop them, but they can sound the alarm. The power of the electorate may be the deciding factor. Anyone with a platform should be talking about the radical plans of Democrats.

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