Senator Ron Wyden, D-Ore. Gave a speech at the Senate Finance Committee Nomination Hearing on February 23, 2021.
Greg Nash | Pool | Reuters
Americans are increasingly supporting wealth taxes on the ultra-rich. However, despite the rise in proposals, these policies are struggling to gain momentum.
Biden’s Billionaire Minimum Income Tax requires a 20% tax on households worth more than $ 100 million, which applies to “total income” including so-called unrealized capital gains or asset growth.
But, like previous wealth tax proposals, plans can struggle to gain widespread support. Legal issues that may arise if enactedPolicy experts say.
According to Steve Rosenthal, a senior researcher at the Urban Blue Kings Tax Policy Center, a wealth tax proposal has been made in response to growing inequality.
He said the federal government used to rely on real estate taxes to tax wealth, but many of the wealthiest households avoid these taxes through sophisticated real estate planning strategies.
“We have some very wealthy American families,” Rosenthal said. “But the inheritance tax is so porous that we are not collecting that wealth.”
In addition, many of the wealthiest families Pay a relatively low tax on your income This is because tax law prioritizes returns from investments such as interest, dividends, capital gains and rent.
Currently, the maximum marginal income tax rate is 37%, but the highest income earners pay 20% for long-term capital gains, and more. 3.8% Obama Care Extra Charge..
Warren demanded a 2% annual “super millionaire tax” on Americans if their net worth exceeds $ 50 million and their wealth exceeds $ 1 billion to fund their social spending programs. ..
Sanders Counter with a more aggressive planWe take a step-by-step approach starting at 1% for wealth over $ 32 million and up to 8% for net worth over $ 10 billion.
Warren and Sanders then, along with other Democrats, enacted the Millionaire Tax Act in March 2021. 3% annual tax on wealth over $ 1 billion..
“Wealth taxes are popular among both voters for good reason, because they understand that the system is wealthy and equipped to benefit large corporations,” Warren said. Said. statement..
According to 2020, about 64% of Americans support wealth taxes on the ultra-rich, including 77% of Democrats and 53% of Republicans. Reuters / Ipsos Poll.. But the plan couldn’t gain momentum in Congress.
Garrett Watson, senior policy analyst at the Tax Foundation, has recently shifted slightly from plans to tax wealth directly and is concerned about whether the proposal “will withstand the convocation of the judicial system.”
If enacted, the court may discuss what counts as income, as outlined in the Article 16 Amendment that codified national tax on income.
But the bigger problem is the definition of “billionaire” and the calculation of net worth, legal experts say.The problem is Direct tax It needs to be divided between states based on population, but this is not possible because there are no millionaires in some places.
Ron Wyden, Chairman of the Senate Finance Committee, D-Ore. teeth, Taxation on millionaires In October, it affected Americans with wealth of over $ 1 billion, or adjusted total income of over $ 100 million for the third consecutive year.
Weiden argued that the annual tax on asset growth is constitutional because the annual tax on capital gains is already part of the tax law. But his proposal lost momentum among the Democrats.
Biden’s budget is also Taxation on asset profits at the time of deathWas withdrawn during negotiations on the previously proposed Buildback Better Bill.
Currently, heirs may postpone taxes on inheritance growth until they sell their property. They also basically receive a so-called step-up that adjusts the purchase price of the asset to the value on the day of death.
“These megabillionaires, who are currently accumulating huge amounts of wealth, can avoid paying taxes for life and avoid paying taxes at the time of death,” Rosenthal said.
France is one of five members of the Organization for Economic Co-operation and Development, which collects tax revenues from net worth. The photo is the Eiffel Tower in Paris.
Travelpix Ltd | Stone | Getty Images
The United States is not the only country struggling with wealth taxes. Politicians around the world are struggling to implement such taxes and keep them on the books.
In 2020, only five members of the Organization for Economic Co-operation and Development, Colombia, France, Norway, Spain and Switzerland, raised their net worth from the 12 peak countries of 1996. Tax Foundation Analysis..
According to Watson, one of the problems in Europe was the ability to avoid taxation by moving from one country to another, and various exclusions that erode the tax base over time.
“From a revenue-gathering perspective, there wasn’t much success there,” he said.
Over time, some countries have abolished net wealth tax for a variety of reasons, including economic benefits, the Tax Foundation has discovered.
Biden’s billionaires’ minimum income tax outlook is bleak, but experts believe they will continue to see wealth tax proposals resurface.
John Gimiliano, head of federal legislative services at accounting firm KPMG, said these proposals are generally popular and will probably never go away.
In general, many Americans approve higher taxes on the ultra-rich. Almost two-thirds support a minimum 20% tax on income in excess of $ 100 million in March 2022. YouGov PLC survey found.
Also, about 60% of individuals worth more than $ 1 million support wealth taxes on people over $ 10 million. CNBC’s 2021 Millionaire Survey..
“in reality [levies on wealth] It represents such a deviation from tax norms, “he said, explaining that it may take some time for policy makers to” grasp “to make it politically functional, including enactment and enforcement.” bottom.
Still, these ideas could come back in the mid-term and beyond, including whether Biden will run for reelection in 2024, Gimigliano said.
“This proposal will be what he discusses in the course of the campaign,” he added. “I am very convinced of that.”