WASHINGTON – The White House will ask Congress on Monday to pass a new minimum tax on billionaires as part of a budget proposal intended to revitalize President Biden’s domestic agenda and reduce the deficit.
The tax would require that American households worth more than $ 100 million pay a rate of at least 20 percent on their full income, as well as unrealized gains in the value of their liquid assets, such as stocks, bonds and cash, which can accumulate value for years but are taxed only when they are sold.
Mr. Biden’s proposal to impose a tax on billionaires is the first time he has explicitly called for a wealth tax. While many in his party have advocated taxes that target an individual’s wealth – not just income – Mr. Biden has largely steered clear of such proposals in favor of increasing the top marginal income tax rate, imposing a higher tax on capital gains and estates, and raising taxes on corporations.
The “Billionaire Minimum Income Tax” would apply only to the top one-hundredth of 1 percent of American households, and over half of the revenue would come from those worth more than $ 1 billion. Those already paying more than 20 percent would not owe any additional taxes, although those paying below that level would have to pay the difference between their current tax rate and the new 20 percent rate.
The payments of Mr. Biden’s minimum tax would also count toward the tax that billionaires would eventually need to pay on unrealized income from assets that are taxed only when they are sold for a profit.
The tax proposal will be part of the Biden administration’s budget request for the next fiscal year, which the White House plans to release on Monday. In a document outlining the minimum tax, the White House called it “a prepayment of tax obligations these households will owe when they later realize their gains.”
“This approach means that the very wealthiest Americans pay taxes as they go, just like everyone else,” the document said.
As the administration grapples with worries over rising inflation, the White House also released a separate document on Saturday saying that Mr. Biden’s budget proposal would cut federal deficits by a total of more than $ 1 trillion over the next decade.
The idea of imposing a wealth tax has gained traction since Mr. Biden was elected as Democrats have looked for ways to fund their sweeping climate and social policy agenda and ensure that the wealthiest Americans are paying their fair share.
Senator Elizabeth Warren, Democrat of Massachusetts, and Senator Ron Wyden, Democrat of Oregon and the chairman of the Finance Committee, released separate proposals last year that would tax the wealthiest, albeit in different ways. Ms. Warren had championed the idea of a wealth tax in her unsuccessful presidential campaign.
The decision by the administration to call for a wealth tax also reflects political realities over how to finance Mr. Biden’s economic agenda.
Moderate Democrats, including Senator Kyrsten Sinema of Arizona, have balked at raising the corporate tax rate or lifting the top marginal income tax rate to 39.6 percent from 37 percent, leaving the party with few options to raise revenue.
Still, Senator Joe Manchin III, Democrat of West Virginia, slammed the idea of taxing billionaires after Mr. Wyden’s proposal to do so was released, although Mr. Manchin has since suggested he could support some type of billionaires’ tax.
Top Biden administration officials have expressed skepticism about wealth taxes in the past.
Treasury Secretary Janet L. Yellen said last year that was a wealth tax “Something that has very difficult implementation problems.” And Natasha Sarin, the Treasury Department’s counselor for tax policy and implementation, was a co-author of an opinion essay published by The Washington Post in 2019 that argued that a wealth tax would present “A revenue estimation puzzle.”
Legal questions about such a tax also abound, particularly whether a tax on wealth – rather than income – is constitutional. If Congress approves a wealth tax, there has been speculation that wealthy Americans could mount a legal challenge to the effort.
Steven M. Rosenthal, a senior fellow at the Tax Policy Center, said the White House proposal raised complicated questions about how taxpayers and the Internal Revenue Service would assess the value of property that is not publicly traded and how investments that lose money would be handled .
He said the proposed tax would be constitutionally “suspect,” particularly given the right-leaning makeup of the Supreme Court.
“Is there value in scoring hundreds of billions of revenues if we never collect them?” Mr. Rosenthal asked.
Alan Rappeport contributed reporting.
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