The President is getting ready to roll out his proposed budget for fiscal year 2023 this week and if he has his way, Elizabeth Warren will be over the moon with delight. A document released by the White House yesterday indicates that Joe Biden will be asking for a new “Billionaire’s tax” to be included in the budget, setting a minimum tax rate of 20% on some of the wealthiest Americans. But as with most everything that emerges from the swamp these days, the name of the new tax doesn’t match with what it actually does. And while this proposal will certainly boost Biden’s support with the Squad and the rest of the Democratic Socialists, dredging up enough votes for such a proposal, even among members of his own party, isn’t going to be a walk in the park. The downstream effects of putting this plan on the table will probably also make Democrats in marginal midterm races very nervous. (CNN)
The White House is set to unveil a new minimum income tax for billionaires Monday as part of President Joe Biden’s budget proposal for FY2023, according to a White House document released Saturday.
The “Billionaire Minimum Income Tax” would require households worth more than $100 million to pay at least 20% on their full income, including unrealized investment income, the White House said in a fact sheet, with over half of the revenue coming from billionaire households.
“The Billionaire Minimum Income Tax will ensure that the very wealthiest Americans pay a tax rate of at least 20 percent on their full income, including unrealized appreciation,” the White House said.
This isn’t technically a “billionaire’s tax” because it hits anyone making more than $100 million. That’s a staggering amount of money for most of us, but not everyone who brings in $100 million actually has a billion dollars in wealth laying around. That’s sort of a nitpick, I admit, but it’s worth pointing out.
Just as a reminder, under the current system, the top ten percent of earners in the United States (those making more than $151K per year) pay more than 70% of the taxes collected by the government. The top one percent (making more than $546K) pay nearly 40% by themselves. The idea that high earners aren’t “paying their fair share” is simply a display of intentional ignorance.
Another detail of the proposed tax hike should also run into opposition and a likely court challenge. The description of the amount of “income” to be taxed includes the phrase “unrealized investment income.” In other words, if the shares comprising your retirement plan or your stock portfolio go up by a given percentage, that increase will be treated as income and you’ll be taxed on it even though you haven’t cashed it in yet.
Let’s consider what that means. Let’s say you have amassed a healthy 401K over the years and the stock market rebounds to show significant gains, causing the total value of the fund to increase by one million dollars. You’ll have to pay the $200K bite out of that figure to Uncle Sam in what the White House is describing as “a prepayment of tax obligations these households will owe when they later realize their gains.” So what happens if the market tanks again the following year and all of those gains disappear? Will you get your $200K back? It certainly doesn’t sound like it. The reality is that “unrealized investment income” isn’t really income at all. It’s only potential income until it’s realized.
Here’s another thing to remember about those people with incomes at those levels. They don’t just pay a lot of taxes. They also tend to be max donors to political campaigns and to PACs as well, including to Democrats. I imagine they will all be watching closely to see how each member of Congress plans to vote on this and those planning to vote for it probably shouldn’t expect those donors to be whipping out their pens and checkbooks for them in the midterm races.
Manchin and Sinema have already come out against any big tax hikes while the nation is reeling under the current Bidenflation levels. It would be stunning if you could find a single Republican to vote for it. This sort of “eat the rich” tax proposal is the stuff of dreams on the left, intended to make the Democratic Socialists sequel with delight. But it’s not a serious proposal and you probably shouldn’t start getting your hopes of seeing it pass into law too far up just yet.