U.S. President Joe Biden plans to suggest a 20 percent minimum tax rate on households worth $100 million or more.
By Edward Segal, Valley Life Editor
People worth nine figures or more could be required to pay 20 percent in taxes if President Joe Biden’s 2023 budget proposal is approved by Congress.
In an effort to improve the economy and ensure that wealthier individuals pay more taxes than the middle class, Biden will look to knock out two birds with one stone through his billionaire tax proposal.
“The tax code currently offers special treatment for the types of income that wealthy people enjoy,” said Biden in the plan. “To finally address this glaring problem, the budget includes a 20 percent minimum tax on multimillionaires and billionaires, who so often pay indefensibly low tax rates.”
According to CBS News, there are about 700 families in the United States worth at least one billion dollars, and almost 30,000 worth over $100 million. According to the Financial Times, the plan, which includes taxes on income and unrealized investments, will raise $360 billion over the next decade to help families who struggle with finances.
Taking a page out of the book of Senator Elizabeth Warren (D-Mass.), who, along with two representatives, proposed her “Ultra-Millionaire Tax” last March on those worth over $50 million, Biden will attempt to carry the tax to fruition.
A study done by White House economists in September 2021 revealed that the “Forbes 400,” the 400 wealthiest families in the U.S., paid an 8.2 percent tax rate from 2010 to 2018. According to the Tax Foundation, the average individual income tax for all Americans in 2018 was about 13.3 percent. Biden is looking to counteract the bills that widened the gap between the rich and middle class.
Implementing strategies such as “borrowing” their assets in the form of loans so as to not have to pay taxes, the wealthiest people in the nation have worked their way around paying the government. Biden plans to use the revenue from his upper-class tax hike to cover increased spending in areas such as defense and humanitarian aid.
According to the Financial Times, firefighters and teachers pay twice the rate in taxes as America’s billionaires.
As of right now, people only pay taxes on realized assets, or those that are sold for profit. Under this new law, households would also be required to pay taxes on unrealized assets, such as stocks and bonds, which have not been sold.
Another loophole the nation’s wealthiest citizens have exploited is the step-up basis, which comes into effect when the owners of certain assets pass away. The assets are then passed on to their descendants as gifts and as such, are tax exempt.
According to Business Insider, the United States loses about $50 billion a year in tax revenue because of the step-up basis, which is a big part of the tax gap that Biden wants to do away with.
Many have voiced their disapproval with the 46th president’s idea.
“The problem with that particular tax is that it’s a tax on unrealized gains,” Senator and member of the Finance Committee John Thune (R-S.D.) told The Hill. “It’s essentially taxing people before they actually get the income, and that seems like a really dangerous precedent in tax law because if you have a gain one year and then a huge loss the next year, how’s the government going to pay people back for their losses?”
Biden and his administration are attempting to circumvent some of the problems raised by a similar tax in France, arguing that in the United States, people can still be taxed if they leave the country.
“France's wealth tax contributed to the exodus of an estimated 42,000 millionaires between 2000 and 2012, among other problems,” said the National Public Radio. “It was expensive to administer, it was hard on people with lots of assets but little cash, it distorted saving and investment decisions, it pushed the rich and their money out of the taxing countries—and, perhaps worst of all, it didn't raise much revenue.”
French President Emmanuel Macron removed the tax from his nation in 2017, leaving Norway, Spain and Switzerland as the only European countries that have not yet done away with the legislation, while nine others have already removed it.
The tax rate of America’s wealthiest citizens will be in the hands of Congress once Biden releases his 2023 budget proposal.