The meaning of the move, which will be revealed this Monday, is that the White House will impose a direct tax on the 700 richest Americans.
US President Joe Biden plans to propose a ‘minimum wealth tax’ on billionaires, which will be 20% and will be imposed on American households worth more than $100 million. This means that the White House will impose a direct tax on the 700 richest Americans as part of the budget proposal His until 2023, the “Washington Post” reported. 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 through Congress to become law and is expected to have a difficult road with some legislators.
The 20% tax will be applied to the “full income” of billionaires, including salaries and unrealized profits in investment portfolios, which include stocks and bonds, which are currently not taxed on profits from them, until they are sold, and a profit is recorded on them. Therefore, billionaires who pay less than 20% in taxes according to this expanded definition will not owe additional taxes, the Post reported.
“The minimum income tax for billionaires would ensure that the wealthiest Americans pay a tax rate of at least 20% of their full income,” said a White House document obtained by The Washington Post. “The minimum tax will ensure that the wealthiest Americans no longer pay less in taxes than teachers and firefighters.”
Closing a loophole that benefits billionaires
The proposal is intended to close a loophole that allegedly benefits about 700 billionaires in the US, many of whom hold most of their wealth in stocks. If the tax were in effect in the 2021 tax year, the richest people in the country would pay huge amounts in federal taxes.
The White House’s Office of Budget and Management, which is responsible for preparing the annual budget proposal, and the President’s Council of Economic Advisers, estimate that 400 billionaire households paid an average of 8.2% of their income in federal taxes between 2010 and 2018 – a lower rate than most ordinary Americans. Although the new bill affects all American households worth more than $100 million, the White House said most of the new income the tax would bring would come from billionaires.
The last two years, since the corona epidemic broke out, have shown even more clearly how much the gap between ordinary Americans, the “firemen and teachers”, as Biden usually calls them, and America’s rich is only growing. And this at a time when the tax burden weighs heavily on most Americans while the ultra-rich and 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 make a combined $110,000-$120,000 a year, pays 22 cents for every extra dollar they earn in federal taxes. But an international corporation that sets up a factory outside the borders of the US and transfers their goods here, pays nothing… we will raise their taxes.”
An analysis by the organization “Americans for Tax Fairness” from last month showed that 664 American billionaires enjoyed an increase in their capital amounting to approximately $1.3 trillion during the Corona period to $4.3 trillion – a jump of 44% in less than a year Since March 18, 2020. This amount, $4.3 trillion, is almost double the total wealth held by the bottom half of the American population, which includes 165 million people, and it stands at $2.4 trillion.
How much will Musk, Bezos and Buffett pay?
What would happen if the 20% tax on the ultra-rich like Elon Musk, Jeff Bezos and Zuckerberg was already imposed in 2021?
Elon Musk, the richest man in the world, had to pay about $24.2 billion in taxes based on an increase in his personal worth 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 taxes of $1.43 billion; and Jeff Bezos, whose profits for that year were the smallest compared to the ten richest people Globally, a relatively modest sum of $908 million was owed.
The AP news agency reported for the first time that Biden’s budget proposal for 2023 also aims to cut the federal deficit by a trillion dollars in the coming decade.
Several previous attempts to collect tax from billionaires have failed. Sen. Ron Wyden (D-Oregon) unveiled a billionaire income tax in October that would have taxed stock gains and other “unrealized assets” on an annual basis, but House Speaker Nancy Pelosi opposed the plan, calling it a publicity stunt.
Since taking office, Biden has faced calls from the progressive wing of his party to impose some kind of new tax to target the very wealthy, but until now it was unclear exactly how that would be done.
As inequality in the country has grown, billionaire tax advocates have pointed out that the wealthiest Americans often pay an effective tax rate that is much lower than middle-class people, if their unrealized stock gains are treated as income.
Most of the money is held in stocks
The world’s richest people, including Musk and Bezos, hold much of their wealth in stocks. As the shares rise in value, they can finance a luxury lifestyle by taking out loans that are secured by their shares. But taxes are not paid on loans like on income, and in many cases the interest payments are tax deductible.
The rising value of stock holdings – 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 an average federal tax 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 according to calculations by the Council of Economic Advisers.
However, critics of the “wealth tax” argue that treating unrealized gains as income is unfair and can lead to unintended consequences. They say that if billionaires are forced to pay taxes on the rising value of their shares, even before they sell them at a profit, they may be forced to give up control of the companies they founded in order to pay their tax bills.
Another criticism focuses on the question of how to evaluate the “unrealized profits” of shareholders in private companies, which are not traded on the markets and it can be difficult for the government to put a price tag on them. Under Biden’s new plan, billionaires who already pay more than 20% in federal taxes will not be required to pay additional taxes, according to the Washington Post.
The taxes that will be paid in favor of the minimum tax will be counted towards what the billionaires owe whenever they sell their shares and they will pay ordinary capital gains tax. “The minimum income tax for billionaires would ensure that the wealthiest Americans pay a tax rate of at least 20% on their entire income,” said a White House document seen by The Post.
“This minimum tax will ensure that the wealthiest Americans no longer pay a lower tax rate than teachers and firefighters,” the document said.
Biden’s challenge: convince all Democratic members of Congress
Although Biden’s Democratic Party currently controls the House and Senate, their slim majority in the Senate is the biggest challenge to passing the new plan.
“Moderate” Democrats who are more Republican in their views, and have even blocked key Biden legislative initiatives in the past year, such as Joe Manchin and Kirsten Sinema will have to sign the bill to pass it.
According to various reports, in December Manchin told the White House privately that he would support a billionaires’ tax to fund the now-abandoned $1.75 trillion Build Back Better plan.