Please ensure Javascript is enabled for purposes of website accessibility

Will the Unrealized Capital Gains Tax Proposal Apply to Most Investors?

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Three Motley Fool contributors answer a member's question.

Should talk of an unrealized capital gains tax that's recently been floated by lawmakers have retail investors concerned? In this segment of Backstage Pass, recorded on Oct. 27, Fool contributors Rachel Warren, Brian Withers, and Trevor Jennewine discuss. 

10 stocks we like better than Walmart
When our award-winning analyst team has an investing tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

Stock Advisor returns as of 6/15/21

Rachel Warren: Okay. I think before we dive into our next question, we do have a couple of questions in Slido from the last hour. Global asks, Democrats are trying to pass a bill to tax unrealized capital gains on a yearly basis. If it passes, what is the point in investing in the stock market? Do either of you have thoughts on that?

Brian Withers: I've been thinking about this one. I think this is a non-starter and as much as there's a number of bills and a number of approaches going around Congress right now of how to capture more money in taxes. This one is a really challenging one just from a math standpoint. I mean, I think I had a ton of unrealized capital gains last year and if I had to pay taxes on that, I would have had to sell stocks. Just it's just hard to do. I hope it doesn't go anywhere

Rachel Warren: Right [laughs].

Brian Withers: It certainly wouldn't turn me off from investing to tax a portion of your gains over time. But it just seems really complicated and really challenging and I think when you are collecting taxes, the easier it is to do it. You know, like point-of-sale, you pay an X% tax. That's the things that I think are easy ways to do it, and this one to me is super-hard.

Trevor Jennewine: Let me ask you guys a question or maybe Global can chime back in too, I tried to bring this up and the only thing that I'm seeing is that that tax would be applied to billionaires. The Wall Street Journal wrote an article saying that probably about a 1,000 people in the United States would fall into the category where they would actually have that as tax apply to them.

Rachel Warren: I was reading that earlier. Yeah, OK, I wasn't sure if that's what it was talking about.

Trevor Jennewine: I don't think it would be levied across every single person. If you fall into the a billionaire category, that's fantastic. 

Rachel Warren: Yeah. [laughs]

Trevor Jennewine: But like Brian said, either way, it wouldn't dissuade me from investing, but I do think this is just essentially a wealth tax.

Rachel Warren: I agree. I think if it was going to be more applied across the board, it wouldn't stop me from investing, but I mean, let's face it, that would disincentive some people from getting in the market.

But yeah, that's good to know. I think it's only going to apply to a very small fraction of people if indeed it passes. I believe that wasn't going to go into effect until 2022, if I read correctly. 

The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.