Democrats Want to Tax Unrealized Gains, Badly

Instead of Slavery, They Advocate for Socialism

The other day, I watched Steven Spielberg’s movie “Lincoln”. The movie wasn’t great, but the debate over the issues was. It was mildly interesting to see history that I was decently well read on retold in a dramatic form.

A good friend of mine who is one of the top “deal attorneys” around sent me a communique I’d like to share with you to make a point. He’s on top of cutting-edge developments. I have known him for years. This person is a great attorney, a Harvard Law grad when it was prestigious to go to Harvard Law back when they taught objective law. I have excerpted his email, but if you need to talk to him privately get a hold of me and I will put you in touch.

As I checked on the original sources, my friend is not fanning a fire that isn’t there. It’s burning. He is correct that a Federal court ruled it unconstitutional. But, when did the bureaucracy or the current administration worry about the Constitution? Biden forgave student debt unconstitutionally, even after the Supreme Court ruled that he was out of line. They don’t care about the Constitution.

From the above linked Forbes article:

In a 53-page ruling, Judge Liles C. Burke determined that the CTA "transcends the limits imposed by the Constitution on the legislative branch and lacks a strong connection to any enumerated power to serve as a necessary or appropriate means to achieve Congress’ policy objectives." This judgment was based on the argument that

the CTA goes beyond Congress' legislative authority as outlined in the Constitution. While the court did not delve into the potential violations of the First, Fourth, and Fifth Amendments by the CTA, the focus was on Congress surpassing constitutional boundaries.

I guess what I am trying to get at is the following isn’t hyperbole. If you want to accuse me of hyperbole, fine. My reading of it is at the end of the blog.

The Initial Rule

In short, the National Corporate Transparency Act (“CTA”) requires that persons file ownership information for entities as follows:

• Many (likely most) entities formed after January 1 must report the ownership of the entity to the U.S. Department of Treasury’s Financial Crimes Enforcement Network within 90 days of formation.

• Many (likely most) entities already existing as of January 1, 2024 must file the same ownership information by December 31, 2024.

• Firms must update the filings within 30 days of the change (including minor matters such as any new addresses for existing equity holders).

• Penalties for non-compliance include civil $500-per-day fines up to $10,000 and criminal penalties of up to two years in prison.

• There are almost two-dozen exemptions for certain entities (such as those with most types of Federal registrations such as banks and brokerages), non-profits, publicly-held companies, and firms with more than 20 employees and $5 million in revenue.

Partial Suspension by Federal Court

On Friday, March 1, an Alabama Federal court suspended the enforcement of the rule against any business member of the National Small Business Association.  More rulings could come any day.  Or, an appeals court could revoke and reinstate enforcement within days or weeks.

Here is the thing that I see. There is a gigantic undercurrent inside the Democratic Party to tax unrealized capital gains. Occasionally, you hear people like Senator Warren talk about it, but when she makes her points you understand that she has exactly zero understanding of how business or the world works.

As my friend aptly points out, the GOP joined with Democrats in passing the law. There are Republicans in the Republican party who don’t ever act like Republicans when it counts. Marco Rubio and Chuck Grassley pushed it through on the Republican side. They ought to be ashamed of themselves.

Some of this feels like it is an extension of “homeland security”. The homeland security bills passed back in 2001 after the destruction of the World Trade Center towers were some of the worst legislation we have ever passed as a country. Obamacare was up there and so was Dodd-Frank. We had a 10-year run of horrible legislation.

It looks like the current jamokes in Washington don’t want to be outdone.

Why should anyone have to file ownership in any private corporation or LLC? If it’s public, and they are a major shareholder, it’s in the SEC record. If the company is private, it’s private. Private companies don’t have to do the same things as public companies. Guess what, they also can’t access public capital markets, so they automatically put a constraint on themselves. That constraint is a trade-off for the benefits of being private.

The other point I see is that both parties want to know who owns private companies for political reasons. They can enforce their system of social credit on them. They can lobby them for money. They can put pressure on them politically. There is no reason to see who owns what, unless it’s in the national defense or security interest. That means a private defense or intelligence contractor doing business with the US government.

The US government can ask a company who their investors or shareholders are when they try and transact business with the government. Until then, it’s none of their business.

On the Republican side, they are mistakenly trying to track foreign capital that might be finding its way into American funds, or American companies. That’s wrong. It’s anti-capitalistic. On the Democratic side, it’s about taxing everyone on all their wealth. Democrats are no fan of individual liberty, property rights, or capitalism either.

In the Lincoln movie, the issue was slavery. It’s kind of amazing how many Democrats there were in the Senate and House during the Civil War. Democrats favored slavery and after the war, enforced the vicious Jim Crow statutes and racism in the North.

Today, the issue is socialism. You cannot vote for a Democrat because their motivation is to institute socialism, and intensely broad government power over every aspect of your life.

Turns out, some Republicans are stupid enough to vote along with them.