On Monday, the White House unveiled President Joe Biden’s 2023 budget proposal, which includes a minimum tax on the nation’s wealthiest people, a measure that progressive lawmakers and advocates have long called for.
The “Billionaire Minimum Income Tax” would subject households worth over $100 million to a 20 percent minimum tax rate. The tax slightly retools what is considered income for the wealthy, as it would tax salaries as well as unrealized gains from assets like stocks and bonds, making it similar to previous wealth tax proposals from Democratic lawmakers.
The tax is projected to raise roughly $360 billion in revenue, the majority of which would come from the nation’s roughly 700 billionaires. Overall, the proposed budget would lower the federal deficit by more than $1 trillion over the next 10 years.
The proposal will likely have the support of progressive and Democratic lawmakers in Congress, who tried to pass a similar measure last year in the Build Back Better Act, which was sabotaged by Senators Kyrsten Sinema (D-Arizona) and Joe Manchin (D-West Virginia). It’s unclear if the two conservative lawmakers would support Biden’s proposal.
“This minimum tax would make sure that the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters,” the document detailing the tax says. “[T]his new minimum tax will eliminate the ability for the unrealized income of ultra-high-net-worth households to go untaxed for decades or generations.”
Indeed, billionaires often pay tax rates that are very low compared to the level of wealth that they are allowed to accumulate. An analysis from the Office of Management and Budget and the White House Council of Economic Advisers last year found that between 2010 and 2018, the nation’s wealthiest 400 billionaire families paid only 8.2 percent of their income on average, which is lower than even the lowest federal income tax rate of 10 percent for low-income earners.
Moreover, billionaires don’t owe taxes on the vast majority of their wealth; people like Elon Musk and Jeff Bezos deliberately make low salaries on paper so that they can avoid paying federal taxes. They don’t have to pay taxes on their stocks until they sell them, and the taxes on stock sales can be relatively low compared to the amount of money that stocks are sold for.
Because of the nation’s lax tax code for billionaires, the top roughly 0.002 percent are given free license to accumulate more wealth than any individual could ever need.
Earlier this month, a report by Americans for Tax Fairness found that the nation’s billionaires have gained $1.7 trillion in wealth during just the past two years, marking a 57 percent growth in their collective net worth. Those gains alone could nearly pay off the entirety of student debt owed by borrowers in the U.S., but would likely never be taxed under the current tax system.
“In a tax system full of special favors for the wealthy, none is more outrageous than the ability of billionaires with skyrocketing fortunes to go tax free year after year or pay much less than they should owe,” Frank Clemente, executive director of Americans for Tax Fairness, said in a statement on Monday. “President Biden’s Billionaires Income Tax takes a historic step to bringing us closer to a single system in which the ultrawealthy start paying taxes each year on their wealth gains the way workers pay taxes on their paychecks.”
This will likely prove to be a winning proposal for Biden. Polling has found that a majority of likely voters from across the political spectrum believe that billionaires should be subject to more taxes and that those taxes should take unrealized capital gains into account.