If you are a successful entrepreneur, small business owner or a high net worth individual who has accumulated wealth through your innovation, hard work and smart investing, the government is coming for you.
The Biden administration rolled out a major tax reform proposal last week called the “Billionaire Minimum Income Tax.” This aggressive proposal would result in a huge tax hit on America’s high-net worth households if enacted, and it’s not just the billionaires who would feel the pain.
When you look at the details of this new tax championed by progressives – it turns out most of the people impacted are multi-millionaires. This extraordinary tax proposal attempts to redefine “wealth” and “income” and ultimately is a new form of taxation on the rich.
New tax proposals like this offer a reminder to all Americans that there are discreet and private methods to protect your wealth through investments in tangible assets like rare coins and bullion. These private precious metals assets can be stored in your home safe, a bank safety deposit box or even outside our country’s borders at a facility like the International Depository Services (IDS) of Canada, a precious metals depository in Toronto. Assets are stored here in an international personal custody account, which is off depository balance sheets and beyond the reach of the U.S. government. But, we’ll discuss this more later…
First…here’s how this new wealth tax would work.
The 20% minimum tax rate would apply to both your ordinary income and the increase of the value of your assets over the past year.
This is an entirely new structure of taxation that taxes your unrealized capital gains.
In today’s tax code, you aren’t taxed until assets are sold and you realize that income. You don’t pay taxes when an asset increases in value! This new tax proposal stretches the actual definition of wealth – and calls “unrealized gains” your income.
Under this new tax scheme, taxpayers would be required to report their assets to the IRS annually. Assets you own would be valued at their market value and that’s the amount you would owe taxes on.
It’s not just stock portfolios, this proposal would include assets including your businesses and real estate holdings. The market value of these non-tradeable assets would be calculated by a “conservative floating annual return” calculated by the five-year Treasury rate plus 2 percentage points.
What about losses in future years? It’s not clear in the current proposal if losses in future years would offset annual gains.
Here’s an example of what that could mean. Perhaps a high-net worth individual might have to pay a $2 million tax on an unrealized gain in 2022 of $10 million. But, then if the assets declined by $10 million in 2023, you are out of luck. The government has their take. You’ve paid taxes on an unrealized gain, which has now disappeared into thin air.
For now, the proposed tax will only apply to households with a net worth of $100 million or more.
Beware, these new taxes always start out applying to a few and then spread wider to impact more and more Americans in other brackets of wealth or income.
This proposed wealth tax has been put forth as a brand new revenue stream that would bring in roughly $360 billion over 10 years.
Gold is an excellent vehicle for the private preservation of wealth.
The tax tide is turning and the government is looking for more ways to tax wealthy Americans. If these proposals become law it is valuable to understand how it will affect you and why it could be useful to increase your allocation to gold and rare coins now before the tax plan passes.
Fortunately, there is time for you to diversify your wealth to get in front of these proposed tax changes to protect your assets.
Gold bullion and rare coins have long been touted by trust attorneys as an efficient and discreet method of transferring wealth from one generation to another. These tax proposals would significantly reduce the wealth you can give to your heirs – as the government will take a much larger portion of you and your family’s money with this unrealized capital gains tax.
If you or your family could be impacted by the proposed shift in the tax law, don’t wait. Contact a Blanchard portfolio manager for a confidential portfolio review – and to learn strategies to protect and preserve your wealth. Read more about options for storing your tangible assets here.
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