Business

Column: No, folks, Harris isn't planning to tax your unrealized capital gains — but a wealth tax is still a good idea

Published

1 year ago

August 23, 2024

Column: No, folks, Harris isn't planning to tax your unrealized capital gains — but a wealth tax is still a good idea

That fetid gust of hot air you may have detected wafting from Republican and conservative social media postings over the last day or two was a fabricated claim that Kamala Harris is plotting to tax everyone’s unrealized capital gains if she becomes president.

That would be a departure from current law, which taxes capital gains only when the underlying assets are sold, or “realized.”

That it’s a mythical allegation hasn’t stopped right-wingers and GOP functionaries from hand-wringing over the economic implications of any such change, and over the purportedly horrible impact on average Americans.

Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right.

— Thomas Jefferson

Here, for instance, is the far-right blowhard Mike Cernovich, in tweeting Tuesday on X: “If you own a house, subtract what you paid for it from the Zillow estimate. Be prepared to pay 25% of that in a check to the IRS. That’s your unrealized capital gains taxed owed under the Kamala Harris proposal.”

And Chicago venture investor Robert Nelson: “Taxing unrealized gains is truly the most insane, economy destroying, innovation killing, market crashing, retirement fund decimating, unconstitutional idea, which was probably planted by Russia or China to destroy the economy. Dems need to run away from this wildly stupid idea.”

All right, guys, take a deep breath. Harris hasn’t proposed taxing your unrealized capital gains, or mine. What she has said, as the Harris campaign told me, is that she “supports the revenue raisers in the FY25 Biden-Harris [administration] budget. Nothing beyond that.”

So what’s in that Biden-Harris administration budget for fiscal year 2025?

The budget plan does indeed call for taxation of unrealized capital gains held by the country’s uber-rich. That’s part of its proposal for a 25% minimum tax on the annual income of taxpayers with wealth of more than $100 million — a wealth tax. If you’re a member of that cohort, lucky you. But at that level of affluence you don’t have grounds to complain about paying a minimum 25% of your annual income.

Anyway, there aren’t very many of you “centi-millionaires,” as the category is known—10,660 in the U.S., according to a 2023 estimate. That includes a handful of centi-billionaires such as Elon Musk ($249 billion, according to Forbes), Jeff Bezos ($198.5 billion) and Mark Zuckerberg ($185.3 billion). It’s doubtful that anyone in this category is poring over Zillow estimates to calculate the sale value of his or her house (or houses).

Several other proposals in the budget plan are relevant to taxes on the wealthy. One would restore the top income tax rate of 39.6%, which was cut to 37% in the Republicans’ 2017 Tax Cut and Jobs Act; Biden proposed to allow that cut to expire as scheduled next year. The restored top rate would apply to income over $731,200 for couples, $609,350 for singles, starting with this year’s income.

Another provision would raise the tax rate on capital gains and dividends to the same rate charged on ordinary income — but only on annual income exceeding $1 million for couples ($500,000 for single filers). Under current law, capital gains and dividends get a huge break: The top rate is 20%, though it’s zero for couples with income of $89,250 or less ($44,625 for singles), and 15% for those with income more than that but less than $553,850 ($492,300 for singles).

The preferential rates on cap gains “disproportionately benefit high-income taxpayers and provide many high-income taxpayers with a lower tax rate than many low- and middle-income taxpayers,” the White House explains. They also “disproportionately benefit White taxpayers, who receive the overwhelming majority of the benefits of the reduced rates.”

The proposal would also eliminate the notorious step-up in basis enjoyed by heirs. Currently, if those inheriting stocks, bonds, real estate or other capital assets sell those assets, they’re taxed only on the difference between what they were worth at the time of the original owner’s death and their value upon the subsequent sale — not the difference between what they cost when purchased (the “basis”) and what they were worth when ultimately sold.

This process turns the capital gains tax into what the late Ed Kleinbard, the tax expert at USC, called America’s only voluntary tax. Since owners of capital assets don’t pay tax on their appreciation in value until they’re sold, they can defer the tax indefinitely by simply not selling. When they die, the step-up in basis extinguishes the prior capital gains liability forever, leaving only a tax on any gains for the heirs reaped starting from the date of their inheritance.

And rich families can enjoy the benefits of their capital portfolio by borrowing against it, never having to sell. That’s an option seldom available to the ordinary taxpayer, who may have to sell to make ends meet. This is how those families perpetuate their fortunes without paying their fair share of income tax.

The Biden plan would repeal the step-up for heirs by levying the capital gains tax on the bequeathed asset, calculated from the original purchase and charged to the decedent’s estate. Inheritances by spouses would be exempt, and the existing exemption of $250,000 in gains per person on the transfer of a principal residence would remain in effect.

Biden’s plan also would increase the net investment income tax and Medicare tax rates to 5% each from the current 3.8% on income over $400,000. That would bring the top capital gains rate to 44.6%.

Is that a lot? Too much? Not enough? It’s true that the capital gains tax has typically been lower than the tax on ordinary income, reaching as high as 40% only briefly in the 1970s. Overall, however, it’s a relative pittance in postwar terms: The top tax rate on ordinary income was 90% or higher from 1944 through 1963, 70% from 1965 through 1981, and 50% from 1981 through 1986. Americans enjoyed unexampled prosperity throughout most of that time span.

That brings us back to the wealth tax idea, which terrifies the rich and their water-carriers in the press and punditocracy. Noah Rothman of the right-wing National Review, for example, got especially exercised over Michelle Obama’s critique of “the affirmative action of generational wealth” in her speech at the Democratic convention Tuesday night.

“The idea that accumulating material wealth and bequeathing it to your offspring with the hope that they build on it and do the same for their children is one of the fundaments of the American social compact,” Rothman grumbled. “Trying to make that sense of industry into a source of shame is absurd.”

The idea that the offspring of millionaires and billionaires are building on their inherited wealth is pretty, but in practice rare. As the wealth management firm UBS reported, last year for the first time in the nine years that it had been tracking extreme wealth, billionaires “accumulated more wealth through inheritance than entrepreneurship.” This “great wealth transfer,” it added, “is gaining momentum.”

As I’ve written before, the concentration of wealth in America has reached levels that make the gilt of the 19th century Gilded Age look like dross. In the U.S. there were 66 billionaires in 1990, and about 750 in 2023.

Critics of a wealth tax often assert that it’s unworkable because it’s hard to value non-tradable assets — think artworks, or almost anything other than stocks, bonds and real estate, which can be valued at a market price. The Biden plan has an answer to that. Non-tradable assets would be valued at their purchase price or their value the last time they were borrowed against or invested in, with an annual increase based on Treasury interest rates.

As for those who think there’s something un-American in a wealth tax, they can take up the issue with the Founding Fathers, who considered generationally accumulated wealth to be inimical to a free republic.

“Whenever there is in any country, uncultivated lands and unemployed poor,” Thomas Jefferson wrote to James Madison in October 1785, “it is clear that the laws of property have been so far extended as to violate natural right.”

Madison in 1792 viewed the duty of political parties as acting to combat “the inequality of property, by an immoderate, and especially an unmerited, accumulation of riches.” Benjamin Franklin urged the Constitutional Convention in Philadelphia, albeit unsuccessfully, to declare that “the state has the right to discourage large concentrations of property as a danger to the happiness of mankind.”

They didn’t seem concerned that fighting the immoderate accumulation of riches would be complicated or unnecessary. Quite the opposite: They would appear to agree, were they with us today, with the line beloved of equality advocates that “every billionaire is a policy failure.”

Put it all together, and it sounds almost as if Michelle Obama was channeling the Founders. And if Kamala Harris supports the provisions in the Biden budget plan aimed at requiring the super-rich to pay their fair share of taxes — as her campaign confirms — she’s channeling them too.

Business

The rise and fall of the Sprinkles empire that made cupcakes cool

Published

1 hour ago

January 11, 2026

Press Room

The rise and fall of the Sprinkles empire that made cupcakes cool

After the dot-com bubble burst in the early 2000s, Candace Nelson reevaluated her career. She had just been laid off from a boutique investment banking firm in San Francisco’s tech startup scene, and realized she wanted a change.

From her home, she launched a custom cake service that soon morphed into an idea for a cupcake-focused bakery. Nelson and her husband — whom she met at the Bay Area firm where she had worked — then pooled their savings, moved to Southern California and together opened Sprinkles Cupcakes from a 600-square-foot Beverly Hills storefront.

The store quickly sold out on opening day in 2005, and over the next two decades, the Sprinkles brand exploded across the country, opening dozens of locations of its specialty bakeries as well as mall kiosks and its signature around-the-clock cupcake ATMs in several states.

“It was an unproven concept and a big risk,” Nelson told the Times in 2013, at which point the business had 400 employees at 14 locations and dispensed upward of a thousand cupcakes a day from its Beverly Hills ATM alone.

But now, the iconic cupcake brand is no longer.

Sprinkles abruptly shut down all of its locations on Dec. 31, leaving hundreds of retail employees across Arizona; California; Washington, D.C.; Florida; Nevada; Texas; and Utah in a lurch with little notice, no severance and scrambling to fulfill a surge of orders from customers clamoring to get their last tastes.

Candace Nelson, the founder of Sprinkles cupcakes, in Beverly Hills in 2018.

(Mel Melcon / Los Angeles Times)

Although Nelson long ago exited the company, having sold it to private equity firm KarpReilly LLC in 2012, she shared her disappointment with its fate on social media.

“As many of you know, I started Sprinkles in 2005 with a KitchenAid mixer and a big idea,” Nelson said in the post. “It’s surreal to see this chapter come to a close — and it’s not how I imagined the story would unfold.”

The company, now headquartered in Austin, Texas, made no formal announcement regarding the closures and Nelson has not said more than what she posted online. The company did share a comment with KTLA, saying “After thoughtful consideration, we’ve made the very difficult decision to transition away from operating company-owned Sprinkles bakeries.” Neither Nelson nor representatives of Sprinkles and KarpReilly responded to The Times’ requests for comment.

Sprinkles’ demise comes at a tough time for the food and beverage industry. At brick-and-mortar food retail locations, the non-negotiable ingredient and labor costs can be high. And shifting consumer sentiments away from sugar-filled sweets and toward more healthy and functional options, strained pocketbooks, as well as pushes by federal and state governments to nix artificial colors and flavoring, are creating uncertainties for businesses, those in the food industry said.

A 24-hour cupcake ATM at Sprinkles Cupcakes in Beverly Hills in 2012.

“Over the last 10 years the consumer has wizened up tremendously and is looking at the back of the label and choosing where to spend their sweets,” said David Jacobowitz, founder of Austin-based Nebula Snacks, an online food retailer.

At the same time, it’s also not uncommon for businesses owned by private-equity firms to close on a whim, where relentlessly profit-driven decisions might be made simply to pursue more lucrative projects. In recent years, private-equity deals have been seen to milk businesses for profit by slashing costs and quality, and have appeared to play a role in the breakup of some legacy retail brands, including Toys ‘R’ Us, Red Lobster, TGI Fridays and fabrics chain JoAnn Inc. On the flip side, private equity can help infuse much-needed cash into a business and extend its life.

Stevie León and her co-workers received a text the night before New Year’s Eve informing them the franchise Sprinkles location in Sarasota, Fla., where they worked would close permanently after their shifts the next day.

León, 33, said her position as a scratch baker mixing batter and frosting cupcakes overnight had been a dream job, since she had been searching for ways to develop baking skills without paying for expensive schooling.

“I really thought it was my forever job and it was taken away literally in a day,” she said. “I’m just taking it one day at a time.”

Ivy Hernandez, 27, the general manager at the Sarasota store, said that after the news was delivered to her boss, the franchise owner, they rushed to learn their options to keep the store afloat but quickly learned it could be legally precarious to continue operating. The store had been open less than a year.

A nearby corporate store, Hernandez said, had been in disarray for months, with employees contending with broken fridges and lapsed ingredient shipments, as managers implored higher-ups to pay the bills so the business could operate properly.

“It really felt like they were trying to do everything they could to screw everyone over as hard as possible until the end,” Hernandez said.

Sprinkles did not respond to questions about the franchise program or allegations of mismanagement in the lead-up to the closure.

A person walks by Sprinkles on the Upper East Side in New York City in 2020.

The obsession with tiny cakes in paper cups traces back to an episode of “Sex and the City” aired in 2000 showing Miranda and Carrie savoring cupcakes on a bench outside a West Village bakery called Magnolia’s Cupcakes.

“Big wasn’t a crush, he was a crash,” Carrie says to Miranda as she peels down the wrapper on a cupcake topped with bright pink buttercream frosting. She punctuates the quip by taking a big bite, leaving a glob of frosting on her face.

The scene sparked a tourism phenomenon for the bakery — which went on to create a “Carrie” line of cupcakes — and helped propel the burgeoning cupcake industry and companies like Sprinkles Cupcakes, Crumbs Bake Shop and Baked by Melissa to new heights.

Within a decade there was already talk of a “Cupcake Bubble,” coined by writer Daniel Gross in a 2009 Slate article where he argued that the 2008 economic recession laid the groundwork for a proliferation of cupcake stores across America, because a lot of people could figure out how to make tasty cupcakes cheaply and scale up without a huge capital investment.

Amid the decimation of many other local retail businesses, one could take over storefronts in heavily trafficked areas for cheap. As a result, “casual baking turned into an urban industry,” Gross said.

The cupcake fervor hit its peak when Crumbs, which had started as a single bakery on Manhattan’s Upper West Side in 2003, went public in a reverse merger worth $66 million in 2011. The wildly popular mini-cakes were selling at $4.50 a pop. But it became clear very quickly that it had grown too large, too fast. It closed in 2014 after it lost its stock listing on Nasdaq and defaulted on about $14.3 million in financing.

Analysts at the time said consumers were cooling on opulent desserts and suggested tougher times were ahead for bakeries that focused solely on cupcakes.

But Baked by Melissa has thus far proved those analysts wrong. The company has remained privately owned, and according to its founder, is focused on nationwide e-commerce operations — and on expanding the brand beyond sweets. Founder Melissa Ben-Ishay has gained a following on social media by sharing recipes for nutritious, easy-to-make meals.

“Businesses that prioritize quick value increases to get acquired often crash,” Ben-Ishay told Forbes last year. “We’re committed to maintaining product quality and steady, long-term growth.”

Before its unceremonious and sudden closure, Spinkles company leadership had pushed to diversify its business as part of a strategy to recover from a pandemic-era lull.

Chief Executive Dan Mesches told trade publication Nation’s Restaurant News in 2021 that comparable sales had grown since pre-pandemic years. He said the company had ramped up its direct-to-consumer and off-premises offerings and created a line of chocolates made to look like the tops of their cupcakes. The company also introduced a new franchise program with the goal of opening some 200 locations in the U.S. and abroad over three years.

“Innovation is everything for us,” Mesches said.

Sprinkles was known for, among other things, inventive and somewhat corny methods of customer delivery. Besides the trademark ATMs, the company’s vending machines found at many airports made loud, attention-drawing jingles, drawing dramatic complaints and jokes from TikTok travelers. In the 2010s, the company debuted a custom-built truck — “the Sprinklesmobile” — to deliver cupcakes to cities without physical locations.

Frances Hughes, co-founder of online wholesale marketplace Starch, said there’s no question that gourmet sweet treats are still in vogue. But brick-and-mortar locations are much more risky, with more unpredictability. Having large fixed costs makes a business “extremely sensitive to small changes in traffic or frequency,” while online or e-commerce models can be more flexible.

“I think cupcakes as a product still have demand. But the novelty paths that support that rapid retail expansion have passed,” Hughes said.

When Nelson, the Sprinkles founder, posted her somber message about the closure, she asked people to share memories of the company. Many offered heartfelt responses, her comments flooded with stories, for example, of poor college students making the trek to the Beverly Hills location for a limited number of first-come, first-served free cupcakes.

But many of the comments also criticized Nelson’s sale to private equity.

“You sold it to PE and expected it to not close?? What planet are you living on? I don’t begrudge you for selling as that’s entirely your choice but to think any PE firm cares about a company in the slightest is insanity,” one Instagram user said.

Nicole Rucker, an L.A.-based pastry chef and owner of Fat+Flour Pie Shop, said she didn’t observe a decline in the quality of the product after the private-equity takeover. She has been a longtime admirer of the company, driving up from San Diego to sample the cupcakes when its store opened. The simple attractiveness of the box and the logo, and the consistency in the way cupcakes were decorated, “was inspiring,” she said.

“It had a strong hold on people for years,” Rucker said.

Rucker said however that when a private-equity-owned business shutters, she doesn’t feel sadness: “I would rather give my money to a fellow small-business owner, because I would rather know that every dollar and every sale matters.”

Michelle Wainwright, the owner and founder of Indiana-based bakery Cute as a Cupcake! said that although the niche cupcake industry may no longer be in its heyday — with “Sex and the City” no longer airing and competitive baking show “Cupcake Wars” (which Candace Nelson served as a judge on) now canceled — they are still versatile treats, with great potential for creativity.

And they are sentimental to her, because she uses her grandmother’s recipe.

“Cupcakes are still a winner,” Wainwright said. “It’s my belief that a life with out cupcakes is a life without love.”

Business

Bay Area semiconductor testing company to lay off more than 200 workers

Published

13 hours ago

January 11, 2026

Press Room

Bay Area semiconductor testing company to lay off more than 200 workers

Semiconductor testing equipment company FormFactor is laying off more than 200 workers and closing manufacturing facilities as it seeks to cut costs after being hit by higher import taxes.

The Livermore, Calif.,-based company plans to shutter its Baldwin Park facility and cut 113 jobs there on Jan. 30, according to a layoff notice sent to the California Employment Development Department this week. Its facility in Carlsbad is scheduled to close in mid-December later this year, which will result in 107 job losses, according to an earlier notice.

Technicians, engineers, managers, assemblers and other workers are among those expected to lose their jobs, according to the notices.

The company offers semiconductor testing equipment, including probe cards, and other products. The industry has been benefiting from increased AI chip adoption and infrastructure spending.

FormFactor is among the employers that have been shedding workers amid more economic uncertainty.

Companies have cited various reasons for workforce reductions, including restructuring, closures, tariffs, market conditions and artificial intelligence, which can help automate repetitive tasks or generate text, images and code.

The tech industry — a key part of California’s economy — has been hit hard by job losses after the pandemic, which spurred more hiring, and amid the rise of AI tools that are reshaping its workforce.

As tech companies and startups compete fiercely to dominate the AI race, they’ve also cut middle management and other workers as they move faster to release more AI-powered products. They’re also investing billions of dollars into data centers that house computing equipment used to process the massive troves of information needed to train and maintain AI systems.

Companies such as chipmaker Nvidia and ChatGPT maker OpenAI have benefited from the AI boom, while legacy tech companies such as Intel are fighting to keep up.

FormFactor’s cuts are part of restructuring plans that “are intended to better align cost structure and support gross margin improvement to the Company’s target financial model,” the company said in a filing to the U.S. Securities and Exchange Commission this week.

The company plans to consolidate its facilities in Baldwin Park and Carlsbad, the filing said.

FormFactor didn’t respond to a request for comment.

FormFactor has been impacted by tariffs and seen its growth slow. The company employs more than 2,000 people and has been aiming to improve its profit margins.

In October, the company reported $202.7 million in third-quarter revenue, down 2.5% from the third quarter of fiscal 2024. The company’s net income was $15.7 million in the third quarter of 2025, down from $18.7 million in the same quarter of the previous year.

FormFactor’s stock has been up 16% since January, surpassing more than $67 per share on Friday.

Business

In-N-Out Burger outlets in Southern California hit by counterfeit bill scam

Published

1 day ago

January 10, 2026

Press Room

In-N-Out Burger outlets in Southern California hit by counterfeit bill scam

Two people allegedly used $100 counterfeit bills at dozens of In-N-Out Burger restaurants in Southern California in a wide-reaching scam.

Glendale Police officials said in a statement Friday that 26-year-old Tatiyanna Foster of Long Beach was taken into custody last month. Another suspect, 24-year-old Auriona Lewis, also of Long Beach, was arrested in October.

Police released images of $100 bills used to purchase a $2.53 order of fries and a $5.93 order of a Flying Dutchman.

The Los Angeles County District Attorney’s Office charged Lewis with felony counterfeiting and grand theft in November.

Elizabeth Megan Lashley-Haynes, Lewis’s public defender, didn’t immediately respond to a request for comment.

Glendale police said that Lewis was arrested in Palmdale in an operation involving the U.S. Marshals Task Force. Foster is expected in court later this month, officials said.

”Lewis was found to be in possession of counterfeit bills matching those used in the Glendale incident, along with numerous gift cards and transaction receipts believed to be connected to similar fraudulent activity,” according to a police statement.

A representative for In-N-Out Burger told KTLA-TV that restaurants in Riverside, San Bernardino and San Diego counties were also targeted by the alleged scam.

“Their dedication and expertise resulted in the identification and apprehension of the suspects, helping to protect our business and our communities,” In-N-Out’s Chief Operations Officer Denny Warnick said. “We greatly value the support of law enforcement and appreciate the vital role they play in making our communities stronger and safer places to live.”

The company, opened in 1948 in Baldwin Park, has restaurants in nine states.

An Oakland location closed in 2024, with the owner blaming crime and slow police response times.

Company chief executive Lynsi Snyder announced last year that she planned to relocate her family to Tennessee, although the burger chain’s headquarters will remain in California.