Dear Reader—
Welcome to Spring. It’s starting to look pretty green around our office, making everyone feel a little happier and lighter. Hopefully you’ve been able to get outside as often as possible this past week.
Conventionally we assume Northern states impose higher tax burdens on their citizens than Southern states. But a few years ago North Carolina legislators attempted to steal some of New York’s thunder by asking the North Carolina resident-beneficiaries of a trust based in New York to pay income tax on trust income the North Carolina resident-beneficiaries never actually received. And last week the US Supreme Court heard about it. We’ll give North Carolina’s General Assembly credit for its ingenuity, but based on the oral arguments, we’d be surprised if the Supreme Court allows this law to stand.
This isn’t a political newsletter. In fact, we hope that this weekly briefing is a bit of a respite from the normal news cycle in which political headlines dominate. But since we’re entering the beginning of another presidential race and because taxes are the result of political decisions, we think it’s worth highlighting one news item with a minor political note. We promise we’re not taking a side—just bringing it to your attention.
Earlier this month Senator Ron Wyden of Oregon proposed taxing capital gains annually through a “mark-to-market” approach. Currently when you sell an asset (real estate, stocks) for more than what you paid for it, you pay a capital gains tax on the difference. Historically, the requirement to pay that tax arises at the time the gain is realized—i.e., when you get the check. Senator Wyden, who as far as we know is not running for president in 2020, is seeking to change that by requiring that the capital gains tax be paid each year based on the increase in value of the asset, even if the asset has not been sold and no one’s received a check. Some commentators analogize this proposal to a property tax: as we pay increased property taxes on the value of our homes as they appreciate, so investors holding stocks that appreciate in value will pay taxes as the value of the stocks increase. This is a very different type of proposal than what most of the major presidential contenders have floated so far, and one we hadn’t heard of before (
although apparently it’s been around for a while
).
Regardless of what happens to the capital gains tax in the next few years, we’re here to help make sure that your estate and its beneficiaries don’t pay any more than is required. Let us know if we can help.
Happy Friday,
Jeremy
