On Wednesday, Sen. Ron Wyden (D.Ore.), released details about a controversial billionaire income tax. This revealed how Democrats plan to increase their efforts to expand the middle-class as they look at unprecedented options to pay for a new massive social spending package.
Senator Ron Wyden (Democrat from Oregon) waves goodbye after he votes at the U.S. Capitol...[+] in Washington D.C. 2020 Bloomberg Finance LP
The Key Facts
Capital gains taxes would apply to the appreciation of tradable assets like stocks. This tax starts at 23.8% and goes up to a maximum of 1% for historical changes. Non-tradable assets like real estate or business interests would not be subject to tax annually. However, once they have been sold, billionaires will pay the standard capital gain tax plus a new interest rate of 1% and the federal short term rate currently 0.22% for each year of ownership. According to a 11-page proposal, Politico first reported that taxpayers would be subject to this rule if they earn more than $100million in gross income each year or if their assets exceed $1 billion for three consecutive fiscal years. Wyden stated that the tax would apply to 700 people and generate "a few hundred billion dollars" of revenue. This was in addition to Democrats finishing preparing details for their social-spending package which is estimated to be worth at least $1.5 trillion. The tax will be applied to individuals who qualify until their income or assets fall below 50% for three years. However, exceptions would be made in cases of separation or divorce.
Wyden stated in a statement that we have an historic opportunity to use the billionaires income tax as a way to improve fairness in our tax code and make critical investments in American families. The billionaires income tax would make sure billionaires pay their tax every year, just as working Americans.
Democrats have been trying to resolve disagreements within their party over how big and how much they should spend on spending. This is to prioritize priorities like education, healthcare, and childcare. Sen. Joe Manchin (D-W.V. Sen. Joe Manchin (D-W.Va.) has said that he prefers a package of $1.5 trillion, but Tuesday's comments suggested that he might be open to negotiating a higher amount. Democrats introduced a new corporate tax at minimum 15% for companies earning at least $1 million annually. They also proposed a broadening of the requirements for tax on investment income.
Although a billionaire tax has received broad support from party leaders, including President Joe Biden; some experts argue that the plan will face legal challenges if it is implemented. This is because it would tax market gains on assets not yet sold. Although there are many constitutionally straightforward ways to tax the wealthy, Democrats seem to be focusing on one approach that is constitutionally uncomplicated, Daniel Hemel, a University of Chicago law school professor, said to NBC News.
What to Watch
The lawmakers are working to reach a compromise before Biden leaves for Europe on Thursday.
Wyden completes details for "Billionaires Income Tax" (Politico).
Senators Push To Pay For Social Spending Plan Via New Corporate Tax (Forbes)
Democrats' Spending Plan Could Lead to a $20 Billion Tax Cut for the RichEven with a New Billionaire Tax (Forbes).