The United States is debating a new tax that would target the ultra‑wealthy: a 25 % levy on unrealized capital gains for individuals whose net worth exceeds $100 million. If enacted, the tax would be credited against future capital‑gain income, and taxpayers could spread payments over an eight‑year period, with a possible four‑ to five‑year deferral option that carries interest if certain criteria are met.
How the proposal differs from a traditional wealth tax
- Unrealized‑gain focus – Rather than taxing the total value of assets each year, the measure would tax the increase in value that has not yet been realized through a sale.
- Threshold – Only applies to those with net assets above $100 million, effectively targeting the billionaire class.
- Payment structure – Installments over up to eight years, with a limited deferral window that may allow interest‑bearing payments.
In contrast, a classic wealth tax (as attempted in Norway, France and other jurisdictions) levies an annual percentage on the total net worth of high‑income households. Those experiences have shown the tax to be highly distortionary, prompting capital flight and administrative complexity.
Existing U.S. exit tax and its interaction with the proposal
U.S. citizens and long‑term residents who renounce their citizenship are already subject to an “exit tax” when they are covered expatriates—generally those with a net worth over $2 million or who meet certain income thresholds. The exit tax treats all worldwide assets as if they were sold on the day of expatriation, imposing tax on the unrealized gains.
- For a tech founder whose shares have risen from near‑zero to a $500 million valuation, the exit tax could require liquidating a substantial portion of the holdings to cover the tax bill.
- The new unrealized‑gain tax would add another layer of cost for those who stay, potentially making the combined tax burden comparable to—or higher than—the exit tax.
Potential consequences for high‑net‑worth individuals
- Increased incentive to expatriate – If the tax is applied to assets that remain in the U.S., many wealthy individuals may choose to renounce citizenship rather than pay the ongoing levy.
- Capital flight – A wave of departures could shift significant wealth to jurisdictions that do not tax based on citizenship.
- Pressure on alternative residency programs – Demand for “golden visas” and citizenship‑by‑investment schemes is likely to rise, though program costs have already risen sharply (e.g., Caribbean citizenship programs have roughly doubled in price).
Practical considerations for those at risk
- Assess citizenship status – Green‑card holders who have not yet naturalized may retain more flexibility; prolonged residency can trigger the same tax treatment as citizens.
- Explore backup residency options – Golden‑visa programs (e.g., in Portugal, Spain, Greece) or citizenship‑by‑donation routes can provide a safety net, but be aware of rising fees and limited availability.
- Plan for liquidity – Since the tax may require cash to settle unrealized gains, maintaining liquid assets or pre‑arranged financing can mitigate forced sales of illiquid holdings.
- Monitor legislative timelines – Although the proposal is not expected to pass immediately, political pressure suggests it could materialize within the next election cycle. Early planning is advisable.
Risks and caveats
- Legislative uncertainty – The tax has not been enacted; political dynamics could alter or abandon the proposal.
- Valuation challenges – Determining the fair market value of illiquid assets (private equity, real estate, art) could lead to disputes and additional compliance costs.
- International coordination – While the U.S. taxes based on citizenship, other countries may adopt similar measures, potentially compounding the tax burden for expatriates.
In summary, a 25 % unrealized capital‑gains tax on assets above $100 million would represent a significant shift in U.S. tax policy, likely prompting wealthier individuals to reconsider their citizenship and residency choices. Those approaching the thresholds should evaluate exit strategies, maintain liquidity, and stay informed about both the proposed legislation and alternative residency options.
