Dutch House Approves 36% Tax on Unrealized Gains, Igniting US Wealth Tax Talks

• Dutch House approved 36% tax on unrealized asset gains starting 2028.
• Tax targets stocks, bonds, crypto without requiring sales.
• US Constitution bars unapportioned taxes on unrealized income.

The Dutch House of Representatives voted to advance a bill imposing a 36 percent flat tax on actual returns from savings and investments, including unrealized capital gains on assets like stocks, bonds, and cryptocurrencies. This measure, known as the Actual Return in Box 3 Act, passed with 93 votes, exceeding the required 75-vote threshold. It replaces a previous system based on presumed returns, which the Dutch Supreme Court ruled unfair in 2021. The reform aims to tax annual value increases even if assets remain unsold, with a tax-free return allowance of 1,800 euros per person.

Critics argue this could drive investors away, prompting capital flight to lower-tax jurisdictions. Proponents claim it ensures fairer taxation by focusing on real gains rather than assumptions. The bill exempts real estate and startup shares from unrealized taxation, taxing them only upon sale. If approved by the Senate, it takes effect January 1, 2028, potentially reshaping how Dutch residents manage portfolios.

Senate approval is expected, but opposition lingers.

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US Senator’s Response and Constitutional Concerns

US Senator Mike Lee reportedly described the unrealized capital gains tax as straight-up wealth confiscation in a tweet quoting the Dutch development. He emphasized that Congress is constitutionally prohibited from imposing such a tax in the United States. This view aligns with historical precedents where unrealized gains have not been treated as taxable income without realization. Lee’s statement highlights ongoing US debates over similar proposals, like those in recent federal budgets.

In the 2024 Supreme Court case Moore v. United States, justices upheld a one-time tax on realized corporate earnings attributed to shareholders but avoided ruling directly on unrealized gains. A dissent by Justice Thomas argued that realization is essential for income under the Sixteenth Amendment, requiring apportionment otherwise. This leaves open whether broad unrealized taxes violate Article I’s direct tax clause.

Realization defines income constitutionally.

Past attempts to legislate unrealized taxes, such as bills prohibiting them, underscore the issue’s sensitivity. Experts note that without sale or distribution, gains lack the derivation needed for unapportioned taxation. While some argue the Sixteenth Amendment allows flexibility, most analyses affirm apportionment for non-income direct taxes.

Global Implications

The Dutch move has sparked investor concerns worldwide, with reports of potential relocations. In the US, it revives discussions on wealth taxation amid fiscal pressures. Comparable reforms elsewhere have faced legal challenges, emphasizing the balance between revenue needs and economic incentives.

Media reporting for this story: 31% Left | 36% Right | 19% Center | 14% Unrated