As the country turns over a new leaf under the leadership of President Joe Biden, the Senate Democrats have unveiled a plan that taxes the gains billionaires make on their assets as a way to help cover President Biden’s social spending plan.
With how much can be earned through billionaire tax, the senate can raise hundreds of billions of dollars to offset the final bill, estimated around $1.5 trillion. The proposal is part of a broader tax framework that will include a new minimum tax on large corporations. The billionaires’ tax proposal, along with the new corporate minimum tax, will provide alternative revenue sources that President Biden needs to win over key figure Senator Krysten Sinema of Arizona, who rejected the party’s early proposal of reversing tax breaks on corporations and the wealthy during Trump’s term to raise revenue.
For the past months, Democrats have been at an impasse, arguing about the details of the party-line social spending proposal. However, leaders have been backing down from plans to spend as much as $3.5 trillion, instead shifting their focus on a far narrower bill with narrower tax provisions to help pay for it.
The billionaire tax proposal would only apply to over 700 taxpayers, especially to people who earn more than $100 million annually or people with more than $1 billion in assets for three straight years. It would require them to give the IRS a detailed account of how much the assets they own gained or lost yearly, otherwise a process called mark to market. The tax application varies for complicated assets like real estate or business interests, known as non-tradable assets. However, those would only be taxed when the asset is sold and will include an additional fee like an interest payment.
With the weight of the proposal in taxing, the legislation has added details that cover scenarios of billionaires attempting to avoid the tax by moving money to different companies or trusts, or simply giving the money away as a gift. Democrats have expressed their presumption that the bill could potentially raise hundreds of billions of dollars, but they are yet to receive an official estimate from nonpartisan scorekeepers in Congress.
The billionaire tax proposal is part of other controversial tax elements in the evolving spending package, prompting some House members to voice their skepticism on its administration. House Ways and Means Committee Chair Richard Neal, D-Mass., expressed his concerns to reporters on Tuesdays about the plan. The billionaire tax was released after Senate Finance Committee Chair Ron Ryden, D-Ore., and other democrats raised a proposal to impose a 15% minimum tax on over 200 companies that are generating more than $1 billion in profits.
However, the plan will not be changing the top corporate tax rate as initially proposed by Biden. Instead, the measure will be targeted on companies that have previously avoided paying tax at all. Sen. Elizabeth Warren, D-Mass., one of the plan’s sponsors, explained that it is designed to make avoidance more difficult. “Giant corporations have been exploiting tax loopholes for too long,” said Warren, “It’s about time to pay their fair share to help run this country, just like everyone else.”