WASHINGTON — The White House will ask Congress on Monday to pass a new minimum tax on billionaires as part of a budget proposal aimed at revitalizing President Biden’s domestic agenda and reducing the deficit.
The tax would require U.S. households worth more than $100 million to pay a rate of at least 20% on their income as well as unrealized gains on the value of their liquid assets, such as stocks and bonds, which can accumulate value for years but are taxed only when 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 for taxes that target an individual’s wealth — not just income — Mr. Biden has largely avoided such proposals in favor of raising the top marginal tax rate. , the imposition of higher capital gains and inheritance taxes, and increased corporate taxes.
The “billionaire minimum income tax” would only apply to the one-hundredth of 1% of the wealthiest American households, and more than half of the income would come from those worth more than a billion dollars. Those who already pay more than 20% should pay no additional tax, although those who pay below that level should pay the difference between their current tax rate and the new 20% rate.
Mr. Biden’s minimum tax payments would also factor into the tax billionaires would eventually have to pay on unrealized income from assets that are only taxed when sold for 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 describing the minimum tax, the White House referred to it as “prepayment of tax obligations that these households will have to pay when they later realize their gains.”
“This approach means that the wealthiest Americans pay taxes as they go, like everyone else,” the document says.
As the administration grapples with concerns about rising inflation, the White House also released a separate document Saturday saying that Biden’s budget proposal would cut federal deficits by more than $1 trillion. dollars over the next decade.
The idea of imposing a wealth tax has gained traction since Mr Biden’s election as Democrats have sought ways to fund their sweeping climate and social policy agenda and ensure that Americans wealthier pay their fair share.
Sen. Elizabeth Warren, Democrat of Massachusetts, and Sen. Ron Wyden, Democrat of Oregon and 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 during her unsuccessful presidential campaign.
The administration’s decision to call for a wealth tax also reflects the political realities of how to fund Mr. Biden’s economic agenda.
Moderate Democrats, including Senator Kyrsten Sinema of Arizona, balked at raising the corporate tax rate or raising the top marginal tax rate to 39.6% from 37%, leaving the party with few options to increase income.
Yet Senator Joe Manchin III, Democrat of West Virginia, criticized the idea of taxing billionaires after Mr Wyden’s proposal was published, although Mr Manchin has since suggested he might support some type tax on billionaires.
Senior 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 issues”. And Natasha Sarin, the Treasury Department’s adviser on tax policy and enforcement, was co-author of a 2019 Washington Post opinion piece that argued a wealth tax would present “an income estimation puzzle.”
Legal questions regarding such a tax also abound, particularly whether a wealth tax – rather than income – is constitutional. If Congress approves a wealth tax, there has been speculation that wealthy Americans could challenge the effort in court.
Steven M. Rosenthal, senior fellow at the Tax Policy Center, said the White House proposal raises complicated questions about how taxpayers and the Internal Revenue Service would assess the value of assets that are not publicly traded and on how investments that lose money would be treated. .
He said the proposed tax would be constitutionally “suspicious,” especially given the right-wing makeup of the Supreme Court.
“Is there any value in scoring hundreds of billions in revenue if we never collect it?” Mr. Rosenthal asked.
Alan Rappeport contributed report.