Seven out of ten Democrats oppose taxing unrealized gains, according to the most comprehensive study ever conducted on the issue.
The poll and study by Professor Zachary D. Liscow of Yale University Law School and Edward G. Fox of the University of Michigan Law School is titled The Psychology of Taxing Capital Income: Evidence from a Survey Experiment on the Realization Rule.
Across all demographic groups, Americans strongly oppose taxing unrealized gains:
69% of respondents identifying as Democrats are opposed to taxing unrealized gains.
76% of respondents identifying as independents are opposed to taxing unrealized gains.
Overall, Americans oppose taxing unrealized gains by a 3 – 1 ratio, 75% – 25%.
President Biden and congressional Democrats led by Sen. Ron Wyden hope to impose a tax on unrealized capital gains. This “mark to market” regime would force Americans to pay taxes every year on the paper gain in value of assets.
The study involved 5,000 respondents. The researchers found:
Respondents strongly prefer to wait to tax gains on publicly-traded stocks until sale versus taxing unsold gains each year: 75% to 25%. Though this opposition is strongest among those who are wealthier or own stocks, all demographic groups oppose taxing unsold gains by large margins. This opposition persists and is often strengthened when looking across a variety of other assets and policy framings.
The study notes:
There is significant concern that unsold gains are not yet real in a sense. As shown in Table 4, the word most distinctively associated with opponents is “actual”—as in, taxpayers have not “actually” received income “yet.” Likewise, they note that the stock has not yet yielded “cash,” or anything in the taxpayer’s “hand.”
As shown by the study, taxing unrealized gains cuts deeply against Americans’ sense of fairness and common sense.
Americans for Tax Reform has also identified ten problems with taxing unrealized gains.