An act relating to applying personal income tax to unrealized gains
If enacted, this bill will amend existing Vermont taxation statutes and create a new chapter addressing unrealized gains. It expands the taxable base to include previously non-taxable assets while providing structure for determining personal liability based on residents' net worth. Additionally, the implementation of optional deferral accounts intends to present a mechanism for taxpayers to defer their tax liabilities by adhering to specific contractual agreements with the state, mitigating immediate taxation while ensuring future tax compliance.
House Bill H0827 introduces a mechanism for the taxation of unrealized gains for high net worth individuals in Vermont. Specifically, the bill targets individuals with a net worth exceeding $10 million and proposes to tax 50% of unrealized gains on their assets. This taxation is capped at 10% of the worth of the net assets exceeding the $10 million threshold. The bill aims to ensure that wealth inequality is addressed by putting a financial obligation on the state’s wealthiest residents to contribute fairly to the state's revenue, primarily through the income tax system.
The bill has sparked considerable debate primarily around the fairness and practicality of taxation based on unrealized gains. Proponents argue that high net worth individuals should contribute a fair share to taxation and that this bill addresses inherent wealth inequality. Opponents, however, raise concerns about the feasibility of defining and valuing unrealized gains accurately and argue that it might create an excessive administrative burden both for taxpayers and the state. Furthermore, they worry this could lead to flight of wealthy individuals from Vermont, undermining the state's economic stability.