A “Billionaire Minimum Income Tax” is included in President Joe Biden’s budget proposal for the fiscal year 2023.
According to the budget, all households worth more than $100 million will pay at least 20% in taxes on both income and “unrealized appreciation,” or the increase in the value of an unsold investment.
“The Billionaire Minimum Tax is fair, and it raises $360 billion in revenue that can be used to cut the deficit and lower costs for families,” Biden said at a press conference on Monday.
The proposal aims to reform a tax code that “has rewarded wealth, not work, and contributed to growing income and wealth inequality in America,” according to the White House. According to the White House, the current tax code allows the nation’s wealthiest to pay a lower tax rate than middle-class Americans.
The new minimum tax “would end the ability of ultra-high-net-worth households’ unrealized income to go untaxed for decades or generations.”
The tax would only apply to the wealthiest 0.01 percent of households, with the White House estimating that revenue from billionaires will account for about half of the $360 billion in revenue raised over the next decade.
According to the White House, the country’s more than 700 billionaires increased their wealth by $1 trillion in 2021 and paid roughly 8% of their income and unrealized gains in taxes.
“A firefighter and a teacher pay more than double” the tax rate that a billionaire pays, Biden said. “That’s not right. That’s not fair.”
In Biden’s proposal, wealthy households would be able to defer some payments on unrealized income for nine years, and then for five years on new income.
The goal of deferring payment for several years is to smooth out year-to-year fluctuations in investment income while still ensuring that the wealthiest people pay a minimum tax rate of 20%.
The White House stated, “In effect, the Billionaire Minimum Income Tax payments are a prepayment of tax obligations these households will owe when they later realize their gains.”
“This approach eliminates the inefficient sheltering of income for decades or generations by requiring the very wealthiest Americans to pay taxes as they go, just like everyone else.” A tax on America’s wealthiest people has gained traction in recent years, but it’s unclear whether Biden’s proposal would gain enough support to pass the Senate’s evenly divided chamber, given that Democratic senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have previously objected to proposals to tax the ultra-rich.
Planned new taxes on the super-rich have also been slammed by top Republicans in the past.
According to a Pew Research Center poll conducted last year, the majority of Americans are concerned that some corporations and wealthy individuals do not pay their “fair share” of taxes.
That poll was conducted before a ProPublica report outlined how the wealthiest Americans can legally pay income taxes that are a fraction of their annual fortunes. The “true tax rate” of the 25 wealthiest Americans was calculated by comparing how much tax they paid each year to how much Forbes estimated their wealth grew during the same time period. Warren Buffett’s true tax rate was 0.10 percent, Jeff Bezos’ was 0.98 percent, and Elon Musk’s was 3.27 percent, according to the report.