Democrats Set to Unveil Billionaire Levy in Bid for Tax Deal
Democrats Set to Unveil Billionaire Levy in Drive for Tax Deal
(Bloomberg) -- Senate Finance Chair Ron Wyden aims soon to unveil the details of a so-called billionaires’ tax, potentially a linchpin in the attempt by Democrats to transform President Joe Biden’s economic agenda into legislation.
The tax intended to hit the unrealized capital gains of the ultra wealthy has emerged as an alternative to raising revenue by increasing income tax rates on top earners and corporations. Wyden Tuesday evening released a plan for a new minimum corporate tax that would also help fill the revenue needs to offset a major expansion of social spending.
Tax policy is one of the issues that has been hindering an agreement among Democrats on an expansive package that includes spending on social programs and addressing climate change. Democratic Senator Kyrsten Sinema has blocked Biden’s original plan to raise rates on individuals and companies.
But the billionaires’ tax is hitting resistance from some Democrats in the House and Senate. Michigan Representative Dan Kildee called it a “stunt,” and Ways and Means Chair Richard Neal of Massachusetts has questioned whether it is feasible. Tax experts have warned of difficulty in implementation and a likely constitutional legal challenge.
“This is not an insurmountable problem for the IRS, this is a manageable undertaking,” said Elizabeth Warren, a Massachusetts Democrat who serves on the Finance panel, said at a briefing on a separate, corporate-tax proposal Tuesday evening. She said that more than 60% of the wealth of billionaires is held in easy-to-value marketable securities.
Wyden said at the same briefing that there’s a section of the tax code that supports the concept of mark-to-market valuations.
The Finance panel estimates the levy would hit about 700 of the richest Americans -- those with $1 billion in assets, or three consecutive years of $100 million or more in income. It would apply to assets like stocks, bonds, real estate and art, with gains in value taxed on an annual basis, even if the asset is not sold.
Senate Republican leader Mitch McConnell has denounced it as a “harebrained scheme.” GOP Senator Chuck Grassley questioned whether such a tax would be constitutional.
Senate Banking Committee Chair Sherrod Brown dismissed the idea a billionaires’ tax wouldn’t meet the guidelines set by the 16th amendment, which codified the income tax into the Constitution. Republicans have argued that unrealized capital gains don’t count as income. “This is the first I ever heard of that,” Brown said.
Still, Democratic Senator Mark Warner of Virginia said, “The devil is in the details” for the billionaires’ tax. He said that one idea could be to look at when billionaires borrow against the assets and consider it a taxable event.
“I think we all want to make sure those who have done extraordinarily well pay a fair tax but how you do it is really important,” Warner said.
Democrats are driving to reach a deal among themselves by this week, before Biden leaves for meetings with other world leaders in Europe.
But getting a deal this week appears unlikely given the differences that remain between House and Senate Democrats on some key issues -- including taxes, healthcare and measures to address climate change, and considering the complexity of the legislation. Progressive Democrats are continuing to insist that they won’t vote on a separate infrastructure bill without a firm deal on the larger package.
“We are just missing two things. What exactly is going to be in the bill and how we’re going to pay for it? Other than that we are good to go,” Pennsylvania Representative Brendan Boyle said.
In an effort to push the process along, top Biden officials met at the White House with several groups of Democratic lawmakers Tuesday. Several House members said as they left the meeting that they are ready to move forward, even though it will be substantially less than the $3.5 trillion originally envisioned.
Democrats have been inching toward an agreement on a version of the spending plan that can pass Congress with their razor-thin majorities. Sinema and Senator Joe Manchin of West Virginia, whose votes are pivotal in the 50-50 Senate, have been holding out for changes that are shrinking the cost and scope of the plan.
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