Doug Casey on Rapidly Rising Taxes and 3 Other Imminent Dangers to Your Wealth

Doug Casey on Rapidly Rising Taxes and 3 Other Imminent Dangers to Your Wealth by Doug Casey for International Man

International Man: President Biden’s Treasury Secretary—and Obama Fed Chair—Janet Yellen recently floated the idea of taxing unrealized capital gains through a “mark-to-market” mechanism.

What is going on here?

Doug Casey: When you tax unrealized capital gains—as they do with foreign stocks in a number of countries, like New Zealand, where it made my life expensive and miserable while I was living there—any stock market assets that you have are marked to market annually. This is a big disincentive to own them because whether you sell the asset or not, you’re going to pay taxes as if you’d sold it.

This is why very few Kiwis own foreign stocks. They’re liable to be taxed on gains, whether or not they sell and actually pocket the gains. I presume that’s what Yellen is talking about. It would make it pointless to buy a stock like Berkshire Hathaway and just hold it for decades to escape capital gains taxes. But the bright side is that if this law was in force, Warren Buffett would no longer be able to whine about the injustice of paying fewer taxes than his secretary.

I question whether the proposal will be enacted, though, simply because it’s so stupidly destructive. It’s clear that Yellen needs to collect on some more six-figure speeches to gain a proper understanding of it and get off that hobby horse.

It’s not just Yellen, though. Perhaps she can be excused because she’s a clueless and corrupt academic with about zero experience in the real world. The real problem is the comments I’ve seen from fund managers. Many are disturbingly stupid. By that, I mean that few seem to question either the economic sanity or, more importantly, the morality of the State adding on another layer of taxes. It’s almost as if they view themselves as sheep that should be shorn. They accept their status as serfs with bovine complacence.

What may be in the back of Janet’s mind is the realization that if the rich—i.e., people with assets—get too rich as a result of her money printing, it could foment a revolution. The proposal amounts to an indirect wealth tax. I suspect it’s mostly about social engineering, not revenue. With the government running $2, $3, or $4 trillion per year deficits, at this point, tax income isn’t—relatively speaking—very important anymore. The government is getting its funding mostly by selling debt to the market and printing money.

The next step is a formal wealth tax, as well as a value-added tax (VAT). When the government is not only bankrupt but running giant deficits that are a significant portion of the GDP, financed by printing money, nothing is off the table.

International Man: Recently, Business Insider put out an article titled “The US should copy Argentina and pass a new tax on the wealthy to help deal with the COVID crisis.”

What do you make of this idea of copying Argentina and the fact that such ideas are sprouting up even in ostensible business publications?

Doug Casey: It’s testimony to the fact that the publication is run by either knaves or fools—almost certainly both. The Onion could have a headline like that, except Boobus americanus is so ignorant of economics, nobody would get the joke.

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Doug Casey

For over a quarter of a century, legendary investor and best-selling author Doug Casey and his team at Casey Research have been helping self-directed investors to earn superior returns through innovative investment research designed to take advantage of market dislocations..