In his budget proposal for the next fiscal year, President Joe Biden is set to announce a new minimum income tax for billionaires.
For the first time, the 700 richest Americans will be taxed separately, the Washington Post report. The new “Billionaire Minimum Income Tax” specifies that households worth more than $100 million would have to pay a minimum of 20%.
“The Billionaire Minimum Income Tax will ensure that the very wealthiest Americans pay a tax rate of at least 20 percent on their full income, including unrealized appreciation,” the White House stated.
“This minimum tax would make sure that the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters,” its statement continued
Billionaires often pay lower taxes than average Americans because the government does not tax stock gains until the stocks are sold.
“Billionaires are able to borrow against their accumulated gains without triggering taxes on capital gains, enabling huge accumulations of wealth to go virtually untaxed by the federal government,” the Washington Post states.
Although the tax doesn’t only target households worth over $1 billion, the majority of the new revenue generated by the tax applies to the top one-hundredth of 1 percent of American households.
Those who are subject to the tax and already pay at least 20% in taxes won’t be liable for any additional taxes, but those below that rate will have to pay the required to reach the 20-percent threshold.
Going forward, taxes would suddenly be raised on the country’s wealthiest individuals. According to calculations by Gabriel Zucman, an economist at the University of California Berkeley, Elon Musk would have to pay an additional $50 billion in taxes, while Jeff Bezos would have to pay an additional $35 billion.
As per the Slate report, Democratic Party base members, who have long argued for higher taxes on the wealthiest Americans, are likely to support the new tax. Although some lawmakers have balked at the idea of raising taxes on the wealthiest. As such, it is unclear whether the proposal will pass Congress. Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona are certainly far from supporting the plan in particular. They wouldn’t be the only ones who would be skeptical of this new tax.
The Biden administration has also publicly acknowledged the difficulty of implementing any kind of wealth tax. Further, experts have said that any form of wealth tax could lead to legal challenges regarding the constitutionality of taxing wealth instead of income.