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The U.S. tax system only taxes realized income—meaning money from a paycheck, a dividend payment, or the actual sale of an asset. If a billionaire owns $100 billion in stock and that stock grows by $10 billion in a year, they do not owe a single dime of income tax on that $10 billion increase until they sell the shares.
And neither does anyone else. I don’t pay on the growth in my IRA or any investment. I don’t pay on the increased value of my homes. Besides, I’m retired and 83 years old and I am therefore presumed to be “poor.”
Remember Ronald Read, the gas station attendant and janitor who accumulated $8 million by his death and supposedly had dividend income of $20,000 a month which he reinvested. He paid taxes on those dividends but not on the appreciation in portfolio and why should he or you or anyone else? His estate escaped taxes too as he gave most to local charities to help his community. I have no issue with that either.
I see no difference between billionaires and every other American. I often wonder if we taxed unrealized gain, what would we do about unrealized loss.
The Sixteenth Amendment says Congress may “lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” Congress had the power to tax under Article 1, there were limits on direct taxation which the 16th Amendment resolved.
We seem to mix up income and wealth. Accumulated wealth gains a great deal of attention. I suppose we could redefine “income,” but that would be messy. I see income as a permanent gain, but if we include unrealized gains it can also be a partial or total loss, not so much income.
Let’s hope our obsession with 1000 or so billionaires and their taxes does not result in unintended adverse consequences for middle and upper middle class taxpayers.
The more important question to ask yourselves is what pain are we willing to endure in giving up things we voted for and can’t afford as a country?
If we can’t give up things we either find creative ways, like redefining income, to close the gap or continue borrowing and stick the bill to future generations.
Politicians will always blame the other if they have to be the bearer of bad news to the people they represent.
The US is among the lower taxed countries in the world. We delude ourselves that we can have what we do and not pay taxes or that the taxes will only be paid by the other guy.
Yet we don’t even want to pay to keep what we already need like SS and Medicare. SS can be made sustainable with minor changes including raising the FICA taxes on worker and employer and not excessively, but suggest that and cover your ears.
Look at the maneuvering to avoid IRMAA, sometimes also to avoid taxing SS benefits when those income taxes go into the SS and Medicare trusts. Millions of Americans enjoy paying their employer health insurance premiums with tax free money.
And in the midst of all this, most Americans applaud recent tax reductions and some tax free income.
We are short-sighted, and ignorant, but apparently not unhappy paying a trillion dollars a year in interest expense putting us at a growing risk. if investors start demanding a better return for US debt, we are heading for crisis mode.
Instead of reserving deficits and debt to deal with national crisis, like war and depression, we have made it a way of life like a family maintaining a lavish lifestyle on credit cards.
I agree with you, RDQ, in not taxing unrealized gains.
I wonder, however, could changes to the US capital gains tax laws result in more taxes collected overall? Billionaires, as I understand, borrow against appreciated assets rather than selling them, to avoid taxes. Imagine if they sold the assets instead, they would be paying the government and not the banks and perhaps in the process easing some of the country’s budget woes.
I made the “mistake” decades ago to buy and hold tech stocks. This has led to concentrated positions in my taxable account that I would prefer to liquidate were it not for tax considerations. I would begin selling immediately, to lowers risks, if capital gains on equities were, for example, taxed like qualified dividends and not as income. Given the current tax code, and assuming I continue to hold, the government will never collect on my gains because of the stepped-up basis upon death.
The tax rate for 95% of taxpayers on capital gains is only 15% or 0%. The issue for the super wealthy is also dilution of their company ownership by selling shares.
I continually hear “tax the rich, tax the rich”! How many Americans are aware that the top 10% pay over 70% of all federal income tax?
The gap between the very wealthy and everyone else is wide and growing. Allowing very wealthy individuals to pay little or no tax because they fund their lifestyle by borrowing against their equities is gaming the system. My wife and I, retirees, are comfortable and have no worries about running out of money as we age. We would gladly pay additional taxes to ensure that there is more affordable housing and fewer people struggled from paycheck to paycheck. Yes, the top 10% pay 70% of the income taxes. They should be glad that they have enough to eat and have housing they can afford.
Here’s a relevant podcast: https://www.nytimes.com/2026/04/17/opinion/ezra-klein-podcast-ray-madoff.html?smid=nytcore-android-share
I’ve got no problem debating the merits of taxing the rich, but to me, taxing unrealized gains makes even less sense than a flat tax. Consider that many HumbleDollar readers probably hold a million bucks or more, and that they have at least half of that, say $500K, in the stock market. The S&P is up about 27% in the last year, so this person could easily have unrealized gains of $135,000, which would be added to their taxable income. I do not think that this taxpayer is going to be very happy about supporting a tax on unrealized gain.
Neither do I.