The budget proposes that all households worth more than $100 million pay at least 20 percent in taxes on both income and “unrealized appreciation”—the increase in an unsold investment’s value.
“The Billionaire Minimum Tax is fair, and it raises $360 billion that can be used to lower costs for families and cut the deficit,” Biden said at a press conference on Monday.
The proposal is a bid to reform what the White House described as a tax code “that has rewarded wealth, not work, and contributed to growing income and wealth inequality in America.”
America’s current tax code allow the nation’s richest to have a lower tax rate than middle-class Americans, the White House said.
The new minimum tax “would eliminate the ability for the unrealized income of ultra-high-net-worth households to go untaxed for decades or generations.”
Only the wealthiest 0.01 percent of households would be subject to the tax, with the White House estimating that revenue from billionaires will account for about half of the $360 billion it is projected to raise in revenue over the next decade.
The country’s more than 700 billionaires increased their wealth by $1 trillion in 2021, and paid roughly 8 percent of their income and unrealized gains in taxes, according to the White House.
“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.”
Biden’s proposal would allow wealthy households to spread some payments on unrealized income over nine years, and then for five years on new income going forward.
Stretching payment over multiple years is meant to smooth year-to-year variation in investment income, while still ensuring that the wealthiest end up paying a minimum tax rate of 20 percent.
“In effect, the Billionaire Minimum Income Tax payments are a prepayment of tax obligations these households will owe when they later realize their gains,” the White House said.
“This approach means that the very wealthiest Americans pay taxes as they go, just like everyone else, and eliminates the inefficient sheltering of income for decades or generations.”
A tax on America’s wealthiest individuals has gained traction in recent years, but it’s not yet clear if Biden’s proposal would gain enough support to pass the evenly-split Senate since Democratic senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have previously objected to proposals to tax the ultra-wealthy.
Top Republicans have also in the past denounced plans for new taxes on the super-rich.
A Pew Research Center survey last year found that most Americans are bothered that some corporations and wealthy people don’t pay their “fair share” in taxes.
That survey came before a report from ProPublica outlined how the wealthiest Americans can legally pay income taxes that are just a fraction of what their fortunes grow by each year.
ProPublica figured out the “true tax rate” of the 25 richest Americans by comparing how much tax they paid each year to how much Forbes estimated their wealth grew in that same time period. The report said Warren Buffett’s true tax rate was 0.10 percent, Jeff Bezos’ was 0.98 percent and Elon Musk’s was 3.27 percent.
