Democrats' New Strategy: Novel Tax on Billionaires

It would require the richest of the rich to pay taxes on assets even if they don't sell them
By John Johnson,  Newser Staff
Posted Oct 26, 2021 11:02 AM CDT
A New Tax Plan Requires a Fundamental Shift
Jeff Bezos would likely pay more in taxes under the plan.   (AP Photo/Tony Gutierrez)

Democrats in Congress are still trying to figure out how to pay for President Biden's wish list, and it looks like they're settling on a plan to levy a novel penalty on the very richest of Americans. Coverage:

  • The idea: The proposal being worked out would require about 700 billionaires to pay taxes on assets such as stocks that gain in value in their portfolios. The key change is that they would pay even if they don't sell the assets, explains the New York Times. Under current rules on capital gains, people only owe such taxes when they sell. The plan would affect only people with more than $1 billion in assets, or who make $100 million per year for three straight years.

  • The reason: The proposal could raise up to $250 billion and would satisfy Democratic holdout Sen. Kyrsten Sinema of Arizona, who opposes raising traditional tax rates to pay for social programs, per the Hill. Another holdout, Sen. Joe Manchin, says he is on board as well. Democratic Sen. Ron Wyden, chair of the Senate Finance Committee, is expected to unveil it as early as Tuesday.
  • An example: Say a family has a net worth of $10 billion. If that amount increased to $11 billion in a year, the family would owe $200 million in taxes based on the 20% capital gains rate, according to the Times. The analysis notes that the proposal is somewhat similar to a "wealth tax" proposed by Sen. Elizabeth Warren and others, which would require the wealthy to pay a certain percentage of their net worth in taxes each year.
  • Rationale: "It would help get at capital gains, which are an extraordinarily large part of the incomes of the wealthiest individuals, and right now escape taxation," Treasury Secretary Janet Yellen said on CNN over the weekend. An investigation by ProPublica found that the wealthiest Americans typically pay only a "tiny fraction" of their wealth in taxes, compared to working-class Americans.
  • Opposition: Such a change would surely face a challenge in the courts, notes Reuters. "It's a stupid idea," says billionaire Leon Cooperman, who predicted "unnatural" economic reactions. For example, billionaires at risk of paying the new tax may find new ways to make their wealth harder to track. "The progressives are out to lunch," he says. Mitch McConnell calls the plan "harebrained," per the AP.
(Read more billionaires stories.)

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