With rapid inflation and a lot of global economic uncertainty, investing in businesses has become an increasingly costly and risky endeavor. Yet a proposal included in President Joe Biden’s budget, and fervently pushed for by Sen. Bernie Sanders (I-VT) in the Senate, would add even more risk and uncertainty to investments. The proposal in question would impose a 25% tax on “unrealized capital gains” — otherwise known as a wealth tax in sheep’s clothing.

Biden’s proposed wealth tax misunderstands the nature of investing and is almost certainly unconstitutional. He, like many others on the Left, seems to think that America’s billionaires store up wealth in hundreds of millions of dollars in gold coins stowed away in a vault like Scrooge McDuck . However, this could not be further from the truth — especially when it comes to “unrealized” wealth.

If a wealthy investor has a stock portfolio worth $100 million, for example, that does not mean he or she has that amount of money in cash laying around. As University of California, Irvine, economics professor Richard McKenzie noted , “A stock portfolio of $100 million is best approximated by the present discounted value of its firms’ future profit streams.”

In other words, investors’ stock money is little more than a down payment on cheaper access to future profits that a particular company might produce. The investor does not have immediate access to that money, and future profits are far from guaranteed. That’s why a tax on unrealized capital gains is, in essence, a tax on profits that may never materialize at all. It would amount to the federal government asking investors to assume the tax burden of large profits without any of the actual benefits.

Under such a system, long-term investing would cease to become worthwhile for many people. An investor would not willingly pay millions in taxes for an investment that might end up losing money in the long run. If such a proposal were passed, the United States should expect to see a steep drop-off in investments in American companies and a subsequent drop in economic performance and innovation.

Proponents of a tax on unrealized capital gains point to their stringent net worth requirements, claiming this will only affect the “super rich” in society. But again, this misrepresents the nature of wealth and fails to consider the smaller businesses that will miss out on access to capital investments even if they do not fit into the “super rich” category.

Indeed, small businesses will be the most adversely affected by this tax. To be sure, society’s most wealthy will be inconvenienced, but they will have enough resources to be able to adjust their strategies and move forward. Small businesses, on the other hand, rely on investments of this sort as their lifeblood. The reduction in investment that will come as a result will be the end for so many would-be innovators and entrepreneurs.

Beyond being economically flawed, Biden’s wealth tax is constitutionally questionable at best and outright illegal at worst . Article I, Section 9 of the Constitution states, “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” Direct taxes are paid directly to the government based on income or profit, whereas an indirect tax is based on a product, good, or service. The latter is typically the only one that stands up to original constitutional muster, which is why the 16th Amendment was passed in order for the government to enact a national income tax.

A tax on unrealized capital gains would be a direct tax. However, it would not fall under the same category as an income or profits tax. That’s because no income has been generated from the investment and profits, as the name of the tax proposal clearly indicates, have not been realized. The 16th Amendment was a specific exception to Article I, Section 9, and capital gains taxes would not fall under its purview.

If lawmakers want a wealth tax, they will need to pass their own constitutional amendment or find a way to make sure that the revenue they generate from each of the 50 states is proportional to each state’s population. Given the concentration of these types of investors in states such as California and New York, this type of tax would require a handful of different tax rates to satisfy the proportionality clause. This would be a policymaking nightmare.

Biden’s wealth tax would be a disaster for many reasons. It would be difficult to implement and would devastate investment in American companies and entrepreneurs. With a sputtering economy, now is an especially poor time to breathe life into this proposal.

Dan Savickas is the director of policy at the Taxpayers Protection Alliance.