On September 12, 2019, Senate Finance Committee Ranking Member Ron Wyden, D-Oregon, introduced a bill that would eliminate the current preferential rates for long-term capital gains and would require certain taxpayers to “mark to market” their assets and pay tax annually on any appreciation.

Under current law, the highest U.S. federal income tax rate applicable to wages and other ordinary income is 37%, while long-term capital gains generally are taxed at a 20% rate.  Wyden’s proposal would tax long-term capital gains at the same rate as ordinary income.

In addition, under current law, taxpayers are required to pay capital gains taxes only when they sell an asset, and can avoid taxes entirely if they pass the asset to their heirs instead of selling it.  Wyden’s proposal would require individuals with at least $1 million in income or at least $10 million in assets to “mark to market” their tradable assets and pay tax annually on any unrealized gain, or take a deduction for any unrealized loss. Wyden’s proposal also anticipates imposing a “look-back” that approximates a mark-to-market system of taxation with respect to any non-tradable assets, although the proposal does not include details on this look-back approach.