"The tax would require that American
households worth more than $100 million pay a rate of at least 20 percent on
their income as well as unrealized gains in the value of liquid assets like
stocks.
WASHINGTON — The White House will
ask Congress on Monday to pass a new minimum tax on billionaires as part of a
budget proposal intended to revitalize President Biden’s domestic agenda and
reduce the deficit.
The tax would require that American households worth more
than $100 million pay a rate of at least 20 percent on their income as well as
unrealized gains in the value of their liquid assets, such as stocks and bonds,
which can accumulate value for years but are taxed only when they are sold.
Mr. Biden’s proposal to impose a tax
on billionaires is the first time he has explicitly called for a wealth tax.
While many in his party have advocated taxes that target an individual’s wealth
— not just income — Mr. Biden has largely steered clear of such proposals in
favor of increasing the top marginal income tax rate, imposing a higher tax on
capital gains and estates, and raising taxes on corporations.
The “Billionaire Minimum Income Tax”
would apply only to the top one-hundredth of 1 percent of American households,
and over half of the revenue would come from those worth more than $1 billion.
Those already paying more than 20 percent would not owe any
additional taxes, although those paying below that level would have to pay the
difference between their current tax rate and the new 20 percent rate.
The payments of Mr. Biden’s minimum
tax would also count toward the tax that billionaires would eventually need to
pay on unrealized income from assets that are taxed only when they are sold for
a profit.
The tax proposal will be part of the
Biden administration’s budget request for the next fiscal year, which the White
House plans to release on Monday.
In a document outlining the minimum tax, the White House
called it “a prepayment of tax obligations these households will owe when they
later realize their gains.”
“This approach means that the very wealthiest Americans pay
taxes as they go, just like everyone else,” the document said.
As the administration grapples with
worries over rising inflation, the White House also released a separate
document on Saturday saying that Mr. Biden’s budget proposal would cut federal
deficits by a total of more than $1 trillion over the next decade.
The idea of imposing a wealth tax
has gained traction since Mr. Biden was elected as Democrats have looked for
ways to fund their sweeping climate and social policy agenda and ensure that
the wealthiest Americans are paying their fair share.
Senator Elizabeth Warren, Democrat
of Massachusetts, and Senator Ron Wyden, Democrat of Oregon and the chairman of
the Finance Committee, released separate proposals last year that would tax the
wealthiest, albeit in different ways. Ms. Warren had championed the idea of a
wealth tax in her unsuccessful presidential campaign.
The decision by the administration
to call for a wealth tax also reflects political realities over how to
finance Mr. Biden’s economic agenda.
Moderate Democrats, including
Senator Kyrsten Sinema of Arizona, have balked at raising the corporate tax
rate or lifting the top marginal income tax rate to 39.6 percent from 37
percent, leaving the party with few options to raise revenue.
Still, Senator Joe Manchin III,
Democrat of West Virginia, slammed the idea of taxing
billionaires after Mr. Wyden’s proposal to do so was released, although Mr.
Manchin has since suggested he could support some type of billionaires’ tax.
Top Biden administration officials
have expressed skepticism about wealth taxes in the past.
Treasury Secretary Janet L. Yellen
said last year that a wealth tax was “something that has very difficult
implementation problems.” And Natasha Sarin, the Treasury
Department’s counselor for tax policy and implementation, was a co-author of an
opinion essay published by The Washington Post in 2019 that argued that a
wealth tax would present “a revenue estimation
puzzle.”
Legal questions about such a tax
also abound, particularly whether a tax on wealth — rather than income — is
constitutional. If Congress approves a wealth tax, there has been speculation
that wealthy Americans could mount a legal challenge to the effort.
Steven M. Rosenthal, a senior fellow
at the Tax Policy Center, said the White House proposal raised complicated
questions about how taxpayers and the Internal Revenue Service would assess the
value of assets that are not publicly traded and how investments that lose
money would be handled.
He said the proposed tax would be
constitutionally “suspect,” particularly given the right-leaning makeup of the
Supreme Court.
“Is there value in scoring hundreds
of billions of revenues if we never collect them?” Mr. Rosenthal asked.”
