No, U.S. Won't Tax YOUR Unrealized Capital Gains
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No, U.S. Won't Tax YOUR Unrealized Capital Gains

7 months ago

Some on Crypto Twitter are furious at plans unveiled by U.S. Treasury Secretary Janet Yellen, even though she explicitly said they will only target billionaires.

No, U.S. Won't Tax YOUR Unrealized Capital Gains

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Treasury Secretary Janet Yellen has revealed that the U.S. is exploring plans to tax unrealized capital gains — sparking fierce criticism on Crypto Twitter.

Speaking to CNN on Sunday, the former Federal Reserve chair said the measures would target “liquid assets held by extremely wealthy individuals.”

Yellen argued that capital gains are an “extraordinarily large part” of the incomes of high net worth individuals — but claimed they often escape taxation. 

One popular account on Twitter — @CryptoWhale — said: 

“This means stock gains will be taxed even when they have not been sold. It also means that taxes will be owed when the value of a home appreciates, even though it has not been sold.” 

Inevitably, given their analysis of the situation, it would also have consequences for those who are holding on to cryptocurrencies such as Bitcoin and Ether.

Even though it is difficult to know exactly how a tax on unrealized capital gains would be introduced or enforced, the tweet by @CryptoWhales is misleading. Yellen’s interview firmly centered on how these measures would target billionaires — and not everyday investors.

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A Bigger Concern

Perhaps the more insightful part of Yellen’s interview on State of the Union concerned inflation, which currently stands at 5.4% — a 13-year high. This involves higher prices eroding the spending power of wages, and current levels are far and beyond the Fed’s target of 2%.

The economist insisted that the U.S. is not losing control of inflation — and that she expects levels to return to normal by the latter half of 2022.

Bitcoin has been regarded by some as an appealing investment because of how it could serve as a hedge against inflation. 

On Friday night, Twitter’s pro-Bitcoin CEO Jack Dorsey tweeted:

Although inflation is higher than many central bankers would like, talk of hyperinflation is a big claim to make — not least because of how this can bring down economies.

Hyperinflation tends to occur during times of turmoil. Supply squeezes cause the price of basic goods to surge, and this often coincides with central banks injecting high volumes of cash into the economy.

Although some argue that the current climate has set the stage for such a scenario to happen, hyperinflation usually involves prices rising by more than 50% per month. 

While things are far from ideal right now, they aren’t that bad yet.

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