Jason Torrisi

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Dutch House of Representatives just passed a 36% unrealized gains tax. What happens when markets crash and people already paid tax on fake gains? This is incredibly reckless.

The Netherlands is about to commit financial self-destruction. Their parliament just passed a 36% tax on unrealized gains for investments. This will cause wealthy people to move to another tax jurisdiction. People will avoid launching a new business. Stock market investing will dry up. There is too much downside risk, very little upside potential. The govt is confiscating most of the potential upside, but leaving the investor with the downside risk. The politicians know this, they have discussed it and they are concerned about it. But they did it anyways to close a short term budget gap of roughly $2 billion. As with other countries that attempted a wealth tax, it will likely backfire and result in less tax collected after wealthy people leave. The results will be so negative, the govt will reverse course within a few years. But by then the damage is already done.

The Netherlands is about to commit financial self-destruction. Their parliament just passed a 36% tax on unrealized gains for investments. This will cause wealthy people to move to another tax jurisdiction. People will avoid launching a new business. Stock market investing will dry up. There is too much downside risk, very little upside potential. The govt is confiscating most of the potential upside, but leaving the investor with the downside risk. The politicians know this, they have discussed it and they are concerned about it. But they did it anyways to close a short term budget gap of roughly $2 billion. As with other countries that attempted a wealth tax, it will likely backfire and result in less tax collected after wealthy people leave. The results will be so negative, the govt will reverse course within a few years. But by then the damage is already done.

Taxing the Unrealized: A View on the Netherlands’ Planned 36% Capital Levy 🇳🇱 The Dutch merchant tradition was built on one principle: tax realized trade, not hypothetical valuation. A 36% tax on unrealized capital gains is not a technical tweak — it is a structural intervention into capital formation. I) The Mechanism a) Starting position 500 shares Value Jan 1, 2028: €50,000 Value Jan 1, 2029: €100,000 Unrealized gain: €50,000 You did not sell. The state treats it as income. b) Exemption €3,600 (married) Taxable: €46,400 Tax at 36%: €16,704, payable in May. Liquidity irrelevant. c) Market correction scenario Portfolio falls to €60,000. Tax bill remains €16,704 (based on peak valuation). d) Forced sale After paying tax: €43,296 left. Shares drop from 500 to 360. 28% of ownership permanently gone. e) Economic result Final value: €43,296 Original cost: €50,000 Net: –€6,704 A €10,000 real gain becomes a loss. This is not taxation of profit. It is confiscation of volatility. II) Why This Is Destabilizing a) It Violates the Realization Principle Prices reflect expectations, time preference, and risk. Taxing unrealized gains assumes certainty where none exists. It turns market signals into tax liabilities. b) It Forces Pro-Cyclical Selling Bull markets expand the tax base. Corrections force liquidation into weakness. Volatility is amplified, and long-term holders are penalized. c) It Destroys Compounding Capital formation requires reinvestment and deferred taxation. Annual taxation of appreciation weakens equity ownership and private wealth accumulation. III) Outlook If capital is taxed independent of liquidity, behavior adapts. Migration HNWIs shift domicile toward lower-tax jurisdictions (Switzerland, UAE, Singapore). Holding structures move abroad. Wealth Drain Entrepreneurs delay IPOs, avoid domestic listings, and build offshore. Money Drain Capital rotates from public equities into private vehicles, hard assets, gold, and bitcoin — assets harder to mark annually. Brain Drain Talent follows capital. When upside is taxed before realization, risk-adjusted innovation declines. IV) The Deeper Shift This policy moves: - From taxing transactions → to taxing appreciation itself. - From taxing income → to taxing expectation. The Netherlands 🇳🇱 prospered through merchant accounting, realized profit, and capital preservation. Detaching taxation from realization may raise short-term revenue. - Medium term, it raises emigration. - Long term, it erodes the capital base. - And capital is what sustains prosperity.