Biden proposes new minimum tax on billionaires, unrealized gains
Biden's billionaire tax would reduce deficit by $360B over next 10 years
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President Biden on Monday unveiled a new minimum tax targeting billionaires as part of his 2023 budget request, proposing a 20% rate that would hit both the income and unrealized capital gains of the wealthiest Americans.
The "Billionaire Minimum Income Tax" would establish a 20% minimum tax on all U.S. households worth more than $100 million, or about 0.01% of Americans. The White House projected that more than half the revenue generated by the tax would stem from the country's 700 billionaires.
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If enacted, the tax would reduce the deficit by about $360 billion over the next decade, representing more than a third of the Biden team's plan to trim the spending gap by $1.3 trillion.
President Biden on March 15, 2021, in Washington, D.C. (AP Photo/Patrick Semansky / AP Images)
"President Biden is a capitalist and believes that anyone should be able to become a millionaire or a billionaire," the White House said in a statement. "He also believes that it is wrong for America to have a tax code that results in America’s wealthiest households paying a lower tax rate than working families."
Under the proposal, the top sliver of U.S. households would be required to pay a tax rate of at least 20% on their full income, or the combination of wage income and whatever they made in unrealized gains. If a billionaire is not paying 20% on their income, they will owe a "top-up payment" that makes up the difference to meet the new minimum.
Households that are paying 20% will not be required to pay an additional tax.
Because many of the ultra-rich derive their vast wealth from the soaring value of assets like stock and property – which are not considered to be taxable income unless that individual sells – they are able to legally store their fortunes and reduce their tax bite. Under current law, a gain is only taxed if and when the owner sells the asset.
Night falls at the Capitol in Washington, Thursday, Dec. 2, 2021. ( AP Photo/J. Scott Applewhite / AP Newsroom)
"As a result, this new minimum tax will eliminate the ability for the unrealized income of ultra-high-net-worth households to go untaxed for decades or generations," the White House said in the budget proposal.
Although Biden did not endorse a billionaires' tax during the 2020 presidential campaign, he threw his support behind the idea this past year after Sen. Joe Manchin, D-W.Va., killed a different spending plan that included tax hikes on well-off corporations and Americans earning more than $400,000.
It remains unclear whether congressional Democrats will approve of Biden's plan to tax billionaires and ultra-millionaires.
Manchin called a different billionaires' tax proposal from Sen. Ron Wyden, D-Ore., "convoluted," but has since suggested that he could support some type of levy targeting the richest Americans.
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Biden also proposed raising the corporate tax rate to 28% from 21% as part of his budget request and pitched a global minimum tax that's designed to crack down on offshore tax havens.
Under his envisioned budget, the nation's deficit would shrink by more than $1 trillion over the next decade. In fiscal year 2021, the federal deficit reached nearly $2.8 trillion, according to the Congressional Budget Office, while the national debt ballooned past $30 trillion.