Biden’s tax on billionaires is about fundamental fairness | Editorial

Published: Mar. 30, 2022

Since the start of the pandemic, America’s more than 700 billionaires have increased their wealth by $1.7 trillion, as ordinary folks bore the economic pain.

That’s an immense sum that could pay for all the enticing stuff President Biden and the Democrats are proposing – from hiring more cops to funding climate efforts, while still reducing the federal deficit, as economist Robert Reich pointed out. And it would leave these billionaires as flush as they were in 2019.

So why shouldn’t we tax them fairly?

That’s what Biden is now aiming to do, with his so-called “Billionaire Minimum Income Tax.” The budget blueprint he released on Monday proposes a new minimum tax of 20 percent on households worth more than $100 million.

This tax would apply only to the top 1 percent of the top 1 percent of households, with more than half of its proceeds coming from billionaires – which the White House says would reduce the federal deficit by $1 trillion over a decade.

Yes, we would invest the revenue to benefit the rest of us. But above all, this is about tax fairness. Our current system is badly broken, allowing the ultra-rich to avoid paying income tax as their fortunes grow by hundreds of billions a year. Ask yourself: How is it fair that firefighters and teachers can pay double the tax rate the super wealthy do?

The answer amounts to a sleight of hand: Billionaires don’t live off their paychecks, like regular people do; they live off their wealth – their stock portfolios and properties. And the individual income tax, our main federal tax, does a lousy job of taxing income derived from wealth.

Otherwise, the system functions basically like it’s supposed to: The income tax raises roughly half of federal revenue and is based on your ability to pay – so as your income rises, you tend to pay at a higher rate, and pay more. This works relatively well for professionals and most affluent people.

But it suddenly goes into reverse when you reach the very tippy-top of the income scale: The uber-rich. The federal government does not tax the increase in the value of their stock holdings until those assets are sold. So billionaires can borrow against their holdings without triggering federal taxes on their vast accumulations of wealth, and when they die, pass most of it off to their kids tax-free.

It goes on like this, generation after generation. That’s not how anyone would set out to design a tax system. “You just wouldn’t set up an income tax where the richest people don’t pay it. So, it just needs to be fixed. And this is a very good fix, a very thoughtful fix,” the director of federal tax policy for the Center on Budget and Policy Priorities, Chuck Marr, told us of Biden’s plan.

It would tax billionaires on the increase in their wealth, a gain that could be considered income. That should pass muster and appeal to conservative Democrats like Sen. Joe Manchin, who’s said he supports reducing the federal deficit and boosting taxes on the richest Americans.

“He remains seriously concerned about the financial status of our country and believes fighting inflation by restoring fairness to our tax system and paying down our national debt must be our first priority,” Manchin’s spokesperson, Sam Runyon, told the AP.

And for all the money the uber-rich invest in lobbyists and politicians, it still hasn’t bought them a good counterargument. “It’s hard to see how any politician from any side can argue that the richest people in the country shouldn’t pay income taxes,” Marr said. “I think it’s a very hard thing to defend.” Indeed.

So if they do still oppose Biden’s plan for tax fairness, we’ll know exactly who they are defending.

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published this page in News and Politics 2022-04-01 03:26:15 -0700