President Joe Biden is prepared to pursue a new minimum tax that would mostly target billionaires in his 2023 budget. The proposal, dubbed the “Billionaire Minimum Income Tax,” would impose a minimum 20% tax rate on households worth over $100 million, and much of the revenue would be from billionaires.
The administration says the new tax will ensure that the wealthiest are not taxed at rates “lower than teachers and firefighters.” Its rationale is that unrealized income of the very wealthy may be untaxed for decades or even generations as stocks are untaxed until sold for a capital gain.
If a household is already paying 20% or more on their total income, there will be no additional tax under the proposal. Anything lower than 20% for the wealthiest filers will spur an additional tax to reach that threshold.
Biden’s 2023 budget is expected to be released on Monday, and the White House calculates the proposed minimum tax would cut the deficit by $360 billion over the next decade. Prospects for his new minimum tax are unclear as Senate Democrats in 2021 proposed their own “billionaire’s tax,” but it did not move forward.
In fact, high-profile Democrats such as House Speaker Nancy Pelosi and Sen. Joe Manchin of West Virginia slammed earlier attempts to implement such a tax, calling them a “publicity stunt” that would likely fail in Congress.
The nation is coming off a year when a full 57% of American households paid no income taxes, a situation credited to pandemic relief spending that experts say is temporary. The rate for 2020 was even higher at 61.1%. The pre-COVID-19 rate of 2019 was 44%.
The Tax Policy Center notes that the U.S. tax system is very progressive and increasingly becoming a means to provide social benefits. Case in point are the long-term expansions in the Child Tax Credit and Earned Income Tax Credit programs.
The U.S. has over a quarter of the world’s 2,755 billionaires, with 724, but China — including Hong Kong and Macao — is now right behind at 698. The White House touts the proposed tax on billionaires as applying only to the top 0.01% of U.S. households. And while presidential budgets are highly unlikely to pass through Congress, they do signal the White House’s priorities for the coming year.