On The Other Hand, A Wealth Tax Would Be Better
Well... maybe it's good news. We'll see if conservative Democrats team up with the GOP and kill the Biden adminstration's proposal to promulgate a minimum tax on billionaires. Biden will unveil the plan Monday when he's back from Europe, but it target the 700 wealthiest families in America, billionaires that don't pay their share of income tax. "The exploding wealth divide in the United States is a feature of the system, not a bug," Long Island progressive congressional candidate Melanie D'Arrigo told me today. "For decades, billionaires have paid millionaires in Congress to write laws to increase their wealth at the expense of millions of working-class families struggling to survive. It is long past time that billionaires start paying their fair share. This is a great start, but it has to be just that... a start."
Although some progressives in Congress feel that the marginal tax rate on billionaires should be between 70% and 90%, Biden's "Billionaire Minimum Income Tax" establishes a mere 20% minimum tax rate on all American households worth more than $100 million. They claim that "the majority of new revenue raised by the tax would come from billionaires." Simplistically, Jeff Stein reported that "Biden has long favored higher taxes on the wealthiest Americans, but the White House has not introduced a tax plan specifically designed to hit billionaires until now. The plan comes amid signs that the administration’s negotiations with Sen. Joe Manchin III (D-WV) over stalled White House economic proposal may be reviving. But all previous efforts to tax billionaires have failed amid major political head winds, and it is unclear if Manchin and Sen. Kyrsten Sinema (D-AZ) will go along with the plan.
Many billionaires can pay far lower tax rates than average Americans because the federal government does not tax the increase in the value of their stock holdings until those assets 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 White House Office of Management and Budget and Council of Economic Advisers estimated this fall that 400 billionaire families paid an average federal tax rate of just over 8 percent of their income between 2010 and 2018. That rate is lower than the rate paid by millions of Americans.
The White House plan would mandate billionaires to pay a tax rate of at least 20 percent on their full income, or the combination of traditional forms of wage income and whatever they may have made in unrealized gains, such as higher stock prices.
Billionaires paying a rate below that will have to pay the difference between what they pay now and the 20 percent rate. Billionaires already paying more than 20 percent would not owe additional taxes. The taxes paid toward the minimum tax would count toward whatever billionaires owe once they have to pay ordinary capital gains taxes.
“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,” the White House document says. “This minimum tax would make sure that the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters.”
White House officials estimate the tax would raise roughly $360 billion in new revenue over the next 10 years if enacted, according to the document. The proposal was developed by Biden aides at the Office of Management and Budget, the Treasury Department and the White House National Economic Council.
The White House is expected to release a budget Monday that includes increases in defense and nondefense spending, with a focus on mental health, child care, other social programs, and reducing the deficit, two other people familiar with the matter said. These people spoke on the condition of anonymity to reflect planning not yet made public.
Biden’s budget proposal will also cut the federal deficit by more than $1 trillion over the next decade, according to a White House document. News of the deficit reduction was first reported by the Associated Press.
The outcry over the low tax rates of the financial elite has emerged as a key flash point in American politics, particularly after liberal Democrats in the 2020 presidential election sought to tackle wealth inequality by targeting billionaires.
Tax experts have long debated how best to turn that aspiration into reality. Sen. Elizabeth Warren (D-MA) proposed a wealth tax during that campaign that would have levied an annual 2 percent tax on all assets in excess of $50 million. Senate Finance Chair Ron Wyden (D-OR) this fall <https://www.propublica.org/article/when-billionaires-dont-pay-taxes-people-lose-faith-in-democracy>unveiled<> a “billionaire income tax” that would have taxed on an annual basis the gains in value of stocks and other “unrealized assets.”
...It also remains unclear if even the more nuanced approach to taxing billionaires will be approved by Democrats in Congress. House Speaker Nancy Pelosi (D-CA) was among the Democrats who in private objected to Wyden’s billionaire tax plan, suggesting it amounted to a publicity stunt. Manchin denounced the billionaire tax as divisive last fall, though he later told The White House he could support such a measure.
San Diego progressive Joaquin Vazquez, the candidate running for a seat held by corrupt New Dem Juan Vargas. "I find it interesting," he told me this afternoon, "and yet, hard to believe that this is being proposed by Biden. Last time this was tried in the Senate, it did not get enough votes. Going into an election cycle, it remains to be seen what his true intentions are. Whether this is an attempt to encourage progressives to turn out to vote, while knowing fully that his version of the billionaire tax won't make the cut, or whether he truly plans to fight for this and get his whole party on board. The latter still does not convince me, coming from Biden, as he has deep rooted relationships with the billionaire donor class. If he does push for it, this might just be the money source he is looking for to ramp up military spending and prepare the U.S. with all the latest weapons as the Russia-Ukraine-NATO conflict intensifies. Arms manufacturers will love it. We know too well that if Biden positions his optics as a strong leader who has no fear in going outright militant, America will rally around the flag come November 8, and the party in power will have a strong showing at the ballot. Wish I could be more hopeful about this, but his track record over his five-decade political career speaks for itself."
Simi Valley City Councilwoman and congressional candidate Ruth Luevanos wrote a little essay about this today. Please consider contributing to Ruth's, Melanie's, Neal's, Joaquin's and Jason's campaigns by clicking on the Blue America 2022 congressional thermometer above (it's a live link).
Shut Down Billionaire Tax Shelters
As we are in the middle of the 2022 tax season and quickly approaching the deadline to file taxes there are millions of Americans who will wait until the very last day to file. As we see the wealth gap widen with billionaires raking in even more money while hourly and salaried workers struggle to even keep up with basic needs due to stagnant wages and increasing inflation the question of equitable tax rates is heavy on everyone's minds. While many middle class Americans are paying 35% tax rate it is unconscionable that 400 billionaires have an 8% rate. President Biden's proposal of a minimum 20% tax rate is at least one step in the right direction towards closing the billionaire tax shelters whereby they are able to simply avoid paying taxes by getting paid in stock.
It hurts to know that while millions of families are having to choose between buying gas, buying groceries, and buying life saving prescriptions drugs that billionaires continue to deny their workers a living wage while failing to pay the same tax rate that their workers have to pay. As a teacher in a two earner household it is shameful that I only get to write off $250 in expenses as a public servant while the average teacher spends $750 per year on school supplies and 30% of teachers spend $1,000 or more. You can count me in the $1,000 or more category for the over 22 years I have been a public school teacher. My fellow educators and I do not get the full tax benefit of buying notebooks, toilet paper and cleaning supplies for our students which we would not have to do if billionaires paid their fair share of taxes which could be used to fund these basic supplies for our students. It is time that we shut down billionaire tax shelters like stock options and demand that the billionaires who are raking in record profits finally contribute to the financial and social infrastructure that every other taxpayer has to pay into at a higher rate.
Neal Walia, the Denver progressive challenging Diana DeGette, told me that while he appreciates "the spirit of President Biden's proposal, the likelihood of Congress legislating his proposal into reality is slim to none given the vice grip corporate PACs and the wealthy donor establishment has on both parties. Rather than putting the ball on Congress's court, I would much rather see President Biden pursue bold executive action and implement the recommendations the Congressional Progressive Caucus has sent him. Specifically, President Biden should seek to (1) curb abuse of the Tax Cuts and Jobs Act’s Opportunity Zone program (2) close the carried interest loophole that Wall Street exploits, (3) require reporting by financial institutions on large deposits related to business transactions without encroaching on the financial privacy for average account holders (4) reverse Trump administration regulations that further expanded the offshore tax loopholes created by the Republican Tax Cuts and Jobs Act (5) promulgate new regulations to close transfer pricing loopholes, prevent earnings stripping, reform the abuse of foreign tax credits, and protect and expand the U.S. source taxation base, and (6) advance corporate transparency through a Securities and Exchange Commission rule requiring public companies to disclose information about their exposure to climate-related risks, including: the company’s direct and indirect greenhouse gas emissions; the total amount of fossil fuel-related assets the company owns or manages; the company’s expected valuation if climate change continues at its current pace or greenhouse gas emissions are restricted to meet the 1.5 degrees Celsius goal; and the company’s risk management strategies related to the physical risks and transition risks posed by the climate crisis."
Washington state progressive, Jason Call, seemed pleasantly surprised by what Biden is trying to accomplish-- at least as far as it goes. This evening he told me "First, let me say unequivocally that this is a solid proposal and comes at a time where struggling Americans are wondering when the rich are going to 'pay their fair share'. But let’s not have the framing of this be overly generous. This legislation (whatever it turns out to finally be) is not a 20% premium on what the very rich are paying right now. It is simply ensuring that those people do not pay less than an overall 20% tax rate on income. It’s not a wealth tax. Most of us pay a 25-33% tax rate. I’d like to see the target number raised to that level of tax assurance. The very wealthy sometimes pay nothing in federal income tax due to vast opportunities for write-offs and loopholes. It would be nice to see Jeff Bezos pay a 33% rate that he can’t loophole out of. And as you know, the IRS targets poor people for audits, because they don’t have access to the lawyers to fight audits. But we also mustn’t mix up the narratives. The national debt stands at $30 trillion. Is this tax going to make a dent? No. We’re still spending annually at a massive deficit, yet the war machine still wants more money than ever. This should reinforce the fact that the federal government can and will spend on whatever it wants, regardless of the debt or deficit. We don’t need the money of the rich to pay for things we need. The federal government can pay for things. The tax proposal is just about fairness, nothing more. We still need to demand Congress prioritize spending to establish Medicare For All and the Green New Deal, as well as vastly reduce military spending."
UPDATE: Billionaires Need To Pay Their Fair Share
Former Orlando Congressman, Alan Grayson, the progressive running for Marco Rubio's Senate seat, offered another perspective on this today: "Well, first, the US economy is wildly out of balance, with the trade deficit taking $1 trillion each year out of the demand for US goods and services, and stock buybacks wiping out another trillion dollars each year. This is being made up entirely through debt (federal, corporate and personal) and printing money. So something has to be done, and this proposal reduces debt and money-printing almost dollar for dollar.
"But second, the Biden proposal shows that now, billionairess pay only 8% in taxes, and only when they choose to sell their stock. Otherwise, they pay nothing. In other words, the taxation system is hopelessly screwed by minuscule taxes on capital, and this is barely a drop in the bucket. This raises the tax rate on billionaires, when they choose to pay, “all the way up” to the same tax rate on someone who works for a living and makes $20 an hour. The situation has become completely ridiculous."