U.S. President Joe Biden plans to propose a “minimum wealth tax” on billionaires that will stand at 20% and be levied on American households worth more than $ 100 million. This means the White House will impose a direct tax on the 700 richest Americans as part of the budget proposal The Washington Post reports that the Biden administration’s goal is to raise about $ 360 billion over a ten-year period from a group that actually pays much lower taxes than middle-class Americans.
The White House plans to unveil the ‘minimum income tax on the ultra-rich’ on Monday as part of Biden’s 2023 budget plan, according to the Washington Post. However, the proposal will have to pass in Congress to become law and is expected to be an easy path for some legislators.
The 20% tax will be applied to the “full income” of billionaires, including salaries and unrealized gains on investment portfolios, including shares and debentures, from which no profits are currently taxed until they are sold, and a profit is recorded on them. Therefore, billionaires who pay less than 20% in taxes under this extended definition will not be liable for additional taxes, the post reported.
“The minimum income tax for billionaires will ensure that the richest Americans pay a tax rate of at least 20% of their full income,” a White House document obtained from the Washington Post said. “The minimum tax will make sure the richest Americans no longer pay less taxes from teachers and firefighters.”
Closing a loophole that benefits billionaires
The proposal is intended to close a seemingly benevolent loophole with some 700 billionaires in the United States, many of whom hold most of their capital in shares.
The White House Budget and Management Office, which is responsible for preparing the annual budget proposal, and the president’s economic advisory board estimate that 400 billionaire households paid an average of 8.2 percent of their federal tax revenue between 2010 and 2018 – a lower rate than most ordinary Americans. Although the new bill affects all U.S. households worth more than $ 100 million, the White House said most of the new tax revenue would come from billionaires.
The last two years, since the outbreak of the corona plague, have shown more and more how the gaps between the simple Americans, the “firefighters and teachers,” as Biden used to call them, and the rich Americans are only growing. This is while the tax burden weighs on most Americans while the ultra-rich and the giant corporations pay less taxes than them.
I have no problem with millionaires and billionaires. I believe in American capitalism. I want everyone to succeed, “Biden said last April,” but here’s the thing, right now a middle-class couple, a firefighter or a teacher with two kids, who together earn $ 110,000 to $ 120,000 a year, pay 22 cents for every extra dollar they earn in federal tax. But an international corporation that sets up a factory outside the U.S. borders and moves their goods here, pays nothing … we’ll raise their taxes. “
An analysis by Americans for Tax Fairness last month showed that 664 billion Americans benefited from a $ 1.3 trillion increase in their fortunes during the corona period to $ 4.3 trillion – a 44% jump in less than a year Since March 18, 2020. This amount, $ 4.3 trillion, is almost double the total wealth held by the lower half of the American population of 165 million people and stands at $ 2.4 trillion.
How much will Musk, Bezos and Buffett pay?
What would happen if the tax of 20% on the ultra-Wealthy people like Elon Musk, Jeff Bezos and Zuckerberg would have been imposed as early as 2021?
Alon Musk, the richest man in the world, had to pay about $ 24.2 billion in taxes based on an increase in his personal value of $ 121 billion, according to the Bloomberg Billionaires Index. Facebook CEO Mark Zuckerberg had to pay about $ 4.86 billion; Warren Buffett owed $ 4.28 billion; Bill Gates had to pay $ 1.43 billion in taxes; and Jeff Bezos, whose profits that year were the lowest compared to the ten richest people Worldwide, owed a relatively modest sum of $ 908 million.
The Associated Press first reported that Biden’s 2023 budget proposal also aims to cut the federal deficit by $ 1 trillion over the next decade.
Several previous attempts to collect tax from billionaires have failed. Senator Ron Weiden (Democrat from Oregon) unveiled a billionaire income tax in October that was supposed to tax profits on stocks and other “unrealized assets” on an annual basis, but House Speaker Nancy Pelosi opposed the plan and defined it as a publicity stunt.
Since taking office, Biden has faced calls from his party’s progressive wing to impose some new tax aimed at the very rich, but so far it has not been clear how exactly this will be done.
As inequality in the country increases, billionaires’ tax advocates have pointed out that the wealthiest Americans often pay an actual tax rate that is much lower than the middle class, if their unrealized stock earnings are treated as income.
Most of the money is held in stocks
The richest people in the world, including Musk and Bezos, hold much of their capital as shares. When stocks rise in value, they can finance a luxurious lifestyle by taking out loans for which their stocks serve as collateral. But loans are not taxed as much as income, and in many cases interest payments are tax deductible.
The rising value of holdings in stocks – what is recognized as unrealized gains – is also not taxed as income. Capital gains taxes are only imposed when the shares are sold.
As a result, the 400 billionaire families paid a federal tax at an average rate of only 8% of their total income between 2010 and 2018, according to an estimate by the White House Office of Management and Budget and calculations by the Economic Advisers Council.
However, critics of the “wealth tax” argue that treating unrealized gains as income is unfair and can lead to unintended consequences. According to them, if billionaires are forced to pay taxes on the rising value of their shares, even before they sell them at a profit, they may have to relinquish control of the companies they founded in order to pay their tax bills.
Another critique focuses on the question of how to assess the “unrealized profits” of shareholders in private companies, which are not traded in markets and it can be difficult for the government to stick a price tag on them. Under Biden’s new program, billionaires who already pay more than 20 percent in federal taxes will not have to pay additional taxes, according to the Washington Post.
The taxes paid in favor of the minimum tax will be counted for what the billionaires owe at any time they sell their shares and they will pay ordinary capital gains tax. “The minimum income tax for billionaires will ensure that the richest Americans pay a tax rate of at least 20% on their full income,” the White House document said in a post.
“This minimum tax will ensure that the wealthiest Americans no longer pay a lower tax rate than teachers and firefighters pay,” the document said.
Biden’s challenge: to persuade all members of the Democratic Congress
Although Biden’s Democratic Party now controls the House of Representatives and Senate, their slim majority in the Senate is the biggest challenge in passing the new plan.
“Moderate” Democrats who are more inclined to Republicans in their views, and have even halted major legislative initiatives by Biden in the past year, such as Joe Manchin and Kirsten Cinema will have to sign the law to pass it.
According to various reports, in December Manchin told the White House privately that he would support a billionaire tax to fund the Build Back Better program which cost 1.75 trillion and was currently abandoned.