Last Wednesday, Senate Finance Committee Chair Ron Wyden (D-OR), unveiled an updated version of the “Billionaires Income Tax,” with a two-pronged goal of getting the ultra-wealthy to “pay their fair share” while also providing funding to pay for part of President Joe Biden’s “Build Back Better” social and climate spending package.
While the proposal was conspicuously left out of the Build Back Better framework the White House released last week after Sen. Joe Manchin (D-WV) had raised concerns about it “targeting” a specific group of people, the idea isn’t dead yet.
A group of about 250 millionaires on Monday urged top Democrats to include Wyden’s proposal to tax billionaires’ investment gains annually in their social and climate spending package by way of an open letter sent to Wyden, House Speaker Nancy Pelosi, Senate Majority Leader Chuck Schumer and House Ways and Means Committee Chairman Richard Neal.
The letter was organized by Americans for Tax Fairness, the Patriotic Millionaires and Responsible Wealth.
While acknowledging support for a new surtax on millionaires and closing two major loopholes that owners of pass-through businesses use to significantly reduce taxes—things that were included in the Build Back Better framework—the millionaires say that even with these reforms, billionaires can still pay little or nothing in taxes.
Of the nation’s 130 million households, only roughly 700 billionaire families would be subject to the BIT
“It is neither fair nor smart to limit or exempt the bulk of billionaires’ growth in income from investments from tax reform,” the letter states. “The BIT would tax billionaires’ investment gains even if the underlying assets are not sold. Tax would be due annually on easily priced assets like stocks and bonds. Harder to price assets like real estate and collectibles would be taxed when sold, with interest added for the missed annual tax payments. Large initial tax bills would be payable over five years. Of the nation’s 130 million households, only roughly 700 billionaire families would be subject to the BIT.”
Billionaires generally pay low effective tax rates in part because the value of their company stock holdings is not subject to capital gains taxes until they are sold. Wyden’s proposal would level a 23.8% tax on the increase in stock value even before those assets are sold.
“We have a rare opportunity to reform our broken tax code that has for far too long given the very wealthiest ways to avoid paying their share. Now is the time that we can and must create a more fiscally responsible America. Now is the time to pass the Billionaires Income Tax,” the letter concludes.
The Billionaires Income Tax as proposed by Wyden would apply to taxpayers with more than $1 billion in assets or more than $100 million in income for three consecutive years.
Tradable assets like stocks would be marked-to-market every year. Billionaires would pay tax on gain and take deductions for losses on tradable assets annually. Billionaires would be able to carry forward losses, and, in certain circumstances, carry back losses for three years.
Economists and tax experts project the proposal could raise more than half of its revenue from just 10 people, including Tesla co-founder and CEO Elon Musk and Amazon founder Jeff Bezos. Musk has tweeted that this would mess with his plan to send humanity to Mars.
Musk would pay as much as $50 billion under the tax over its first five years, while Bezos could pay as much as $44 billion, according to Gabriel Zucman, an economist at the University of California at Berkeley.
Citing Zucman and the Bloomberg Billionaires Index, The Washington Post said that collectively, the wealthiest 10 Americans own roughly $1.3 trillion, and the Wyden plan would require them to pay a combined $276 billion in taxes.
According to most recent “Forbes 400” list of the richest people in the U.S., the group collectively was $4.5 trillion in September 2021, 40% more than they were just a year prior. That means they now hold 3% of the nation’s total household wealth of $142 trillion.
SEE ALSO:
• All Retirement Provisions Stripped from Biden’s Big Bill
• ‘Explosion’ in Use of Mega-IRAs by Wealthy Revealed in New Data Released by Wyden, Neal
• ‘Eye-Popping’ Percentage of Americans Paid No Federal Income Tax Last Year