Joe Biden proposed a new tax on America’s wealthiest households when he unveiled his latest budget on Monday.
The Biden administration wants to impose a minimum tax of 20% on households worth more than $100 million. The proposal would raise more than $360 billion over the next decade and “would ensure that the wealthiest Americans no longer pay a lower tax rate than teachers and firefighters,” according to one. fact sheet published by the White House.
The plan – called the “Billionaires’ Minimum Income Tax” – is the administration’s most aggressive move yet to tax the wealthiest Americans.
The tax is part of Biden’s $5.8 billion budget proposal for 2023, which also provides billions for the police and military as well as investments in affordable housing, plans to tackle the issues of US supply chain and gun violence.
“Budgets are statements of values, and the budget I release today sends a clear message that we value fiscal responsibility, safety and security at home and around the world, and the investments needed to continue our equitable growth. and build a better America,” Biden said in a statement.
The wealth of billionaires has increased dramatically during the coronavirus pandemic, helped by soaring stock prices and a tax regime that charges investors less on their earnings than those taxed on their income.
“In 2021 alone, America’s 700+ billionaires saw their wealth increase by $1 billion, but in a typical year, billionaires like these would only pay 8% of their total realized income and not realized in taxes. A firefighter or a teacher can pay double that tax rate,” the White House fact sheet notes.
Under the plan, households worth more than $100 million would have to provide detailed accounts to the Internal Revenue Service on how their assets performed during the year. Those who pay less than 20% on these earnings would then be subject to an additional tax that would raise their rate to 20%.
The Biden administration calculates that the tax would only affect the wealthiest 0.01% of US households, those worth more than $100 million, and that more than half of income would come from households worth more than $1 billion. of dollars.
The budget also appears poised to tackle another issue that some economists say is contributing to widening income inequality: stock buybacks.
In recent years, cash-rich companies including Apple, Alphabet, Meta and Microsoft have used their funds to buy back huge amounts of their own shares, driving up their stock prices. Last year, S&P 500 companies repurchased a record $882 billion of their own stock and Goldman Sachs estimates that figure will rise to $1 billion this year.
Critics say the purchases divert money from hiring new employees, raising salaries and research and development.
Securities and Exchange Commission (SEC) research shows that there is “clear evidence that a significant number of corporate executives today are using buyouts as a chance to get cash out.”
Biden’s proposal would bar executives from selling their shares for three years after a buyout is announced.
Biden tried to impose a 1% tax on stock buybacks last year, but the proposal failed in Congress. Biden’s billionaire tax and stock buyback proposal will also face strong opposition in Congress.