A long-standing proposal from President Joe Biden’s administration has reignited the debate over whether the government should tax capital gains that exist only on paper.

The proposal to tax unrealized gains has drawn criticism from Republicans, who criticize presidential candidate and Vice President Kamala Harris for supporting Biden’s proposed policy. Republicans say the policy would discourage investment and slow economic growth — but some critics ignore the fact that it would only apply to people who are already extremely wealthy.

“Think about the ordinary Americans in this country,” said former Republican presidential candidate Vivek Ramaswamy on CNBC Beginning of the month. “This means that as a farmer or as a small business owner, you have to pay taxes with cash that you literally don’t have in your pocket to pay those taxes.”

Who would be subject to capital gains tax?

This is true in that the richest 0.01 percent are “ordinary Americans.” The proposal, presented as part of the administration’s 2025 budget, called for a “billionaire tax.” The 25 percent minimum tax would be levied on the unrealized gains of people with assets of $100 million or more — that’s just 9,850 people nationwide, according to an estimate by wealth advisory firm Henley & Partners.

The proposed tax is intended to reduce wealth inequality. Because billionaires grow their wealth not through salaries and wages but through the value of their investments, which increases over time, the Biden administration argues that the current tax law “allows many of the wealthiest Americans to pay lower tax rates on all their income than many middle-class households.”

What would change as a result of the proposal?

Currently, you only have to pay taxes on your investments when you sell them. The tax rate is based on the increase in value of your assets while you own them.

Critics of a wealth tax, including the libertarian Cato Institute, argue that taxing unrealized gains would be “economically destructive.” Opponents say this could lead to strange situations, such as the government having to pay people like Elon Musk a large tax refund if the value of his assets falls.

Economists are already debating the pros and cons of a wealth tax. However, any proposal would still have to pass Congress – something the Biden administration has so far failed to do.