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Congress once again must take action to increase the debt ceiling while the federal government grapples with the nation's ever-growing deficit. The debate on how best to right our fiscal ship continues to swirl while our economy remains challenging. But some of the ideas coming out of Washington, particularly related to tax reform, motivate me to speak out.
During his State of the Union Address, President Joe Biden renewed his interest in a new federal asset tax, and I could not be more opposed to this idea. Families who work hard to build multi-generation businesses that create jobs and serve the public should not be penalized for their success, and that is exactly what an asset tax would do. President Biden's proposed federal asset tax is an unfair, unconstitutional and irresponsible way for the government to raise revenue.
I'm in the business of helping people succeed financially and grow their wealth to meet their life and retirement goals. I know how hard it can be to build a solid financial base, and I have admiration for people who create businesses and large farms that can be passed on to future generations.
As a former lawmaker, I realize the rules and tax policies governments adopt have a direct impact on people's abilities to be successful. That is why I am firmly opposed to a federal tax on the accumulated value of assets. Taxing profits realized when assets are sold is an accepted tax policy, but taxing the increase in value of unsold assets is not -- and never should be.
Think of the impact this could have on a business like a large West Virginia farming operation. Growers might have assets such as land or machinery that are worth a lot of money, but that does not equate to money in the bank. With a federal asset tax, their cash on hand easily could be insufficient to cover a big asset tax bill from the IRS. Family farms might even have to sell off land to pay their taxes, hindering their ability to maintain production levels and making it less likely their children will be able to keep the business in the family in years to come.
Furthermore, there is a strong argument to be made that an asset tax is unconstitutional. As the Wall Street Journal reported, the 16th Amendment, passed by Congress in 1909, gave the federal government the right to tax income. A change in the value of held assets is hardly income, because it exists only on paper until the land, buildings, patent rights or whatever that asset consists of is sold. Congress has no right to tax it, and enacting a new asset tax only would open up a protracted, expensive legal battle if they tried.
Sen. Joe Manchin came out against a similar tax on unrealized gains belonging to higher-income taxpayers when President Biden proposed it last year. His West Virginia constituents should let him know that we expect him to oppose it again this time as well. We must not adopt new tax policies that punish families for investing wisely and planning for the future.
Andy McKenzie is a financial advisor in Wheeling. He also is Wheeling's former mayor and a former W.Va. state senator.