If Kamala Harris becomes POTUS and moves forward with her ill-conceived proposal to tax unrealized gains, it will be a disaster for the CRE industry. Wealthy investors, particularly those involved in commercial real estate, must be fully aware of the severe financial fallout that this reckless policy could unleash.
Harris’s proposal aims to apply capital gains taxes to unrealized gains for the wealthy. In simple terms, this means CRE investors will be taxed on the increase in the value of their property, even if they haven’t sold it. Imagine this: you’re holding onto a property, maybe you’ve owned it for 10 years, and it has appreciated on paper by 7% annually over time. You haven’t sold the asset, you haven’t pocketed a single dollar from that appreciation, but under Harris’s proposal, the IRS would treat you as if you had benefited financially – forcing you to write a huge check on unrealized capital gains taxes now.
Here’s where it gets truly absurd. Commercial real estate is cyclical, and values can fluctuate dramatically depending on market conditions, economic cycles, tenancy, and other external factors. Imagine getting taxed on a property that temporarily appreciates in a boom market, only to watch its value plummet in the next downturn. The government would have already taken its cut while you’re left scrambling to make up the loss. Of course, you know that should asset values plummet as described above, the IRS will not rebate the tax you previously paid.
This policy would wreak havoc on the industry and the wider economy. Some commercial real estate investors would be hit hardest. They’ve spent years building their hard-earned wealth by reinvesting profits, taking significant risks and growing their portfolios. Harris’s proposal could force them to sell properties prematurely just to pay off these unfair taxes, undermining their long-term investment strategies, destabilizing the real estate market & effectively stealing money from their kids, grandkids & future generations.
The ripple effects would be devastating. Commercial real estate investors are not just sitting on piles of cash; they invest in properties that provide jobs to American citizens, house businesses, and contribute to the overall health of the economy. Taxing unrealized gains would severely limit investors’ ability to reinvest in new developments, improve existing properties, limiting job creation in the numerous industries that have a symbiotic relationship while stifling economic growth across the board. Furthermore, this policy might cause investors to begin 'fire selling' their properties to avoid this tax thus lowering the market value on most, if not all, properties.
Though her divisive class-warfare Marxist proposal initially targets the wealthy, there are slippery-slope concerns that this radical mindset could insnare a less affluent segment of Americans in the future. If this were to occur, such a policy would disproportionately impact middle-market investors. These are not the ultra-wealthy individuals or giant corporate funds who could more readily absorb the shock of new taxes. These are business owners and mom-and-pop investors, many of whom operate on tight margins and rely on their real estate holdings to provide steady income. They would suddenly be forced to find liquid capital to pay taxes on unrealized gains, leading to distressed sales, lower property values, and widespread financial instability.
It’s no secret that politicians like Harris refuse to moderate government spending & are eager to find new ways to tax the wealth of Americans, but this proposal shows a complete lack of understanding of how commercial real estate operates. Taxing unrealized gains is not just a bad idea—it’s a threat to the CRE industry, your family’s wealth, the American economy while virtually eliminating future opportunities for many other Americans to rise up from the lower or middle class.
As a commercial real estate investment advisor, I urge you to be vigilant & vote accordingly in November. Let’s stay informed, stay engaged, and be prepared to fight back against policies that could severely damage American’s financial future. Let’s make sure this proposal never sees the light of day.
