The Biden administration dubs the new proposal a “billionaire minimum income tax”
Save time by listening to our audio articles as you multitaskThe idea, contained in President Joe Biden’s new budget proposal on March 28th, is that Americans worth more than $100m would pay a minimum tax of 20% on all their income, including, controversially, the appreciation of their investments. If an ultra-rich American makes a paper gain of, say, $10m on his stock portfolio in a year, he would face a liability of $2m.
A simple way to close this loophole would be to recognise all capital gains upon inheritance. Indeed that was Mr Biden’s preference in legislation last year. But opponents tarred it as a “death tax” that would bankrupt family farms. Although that charge was unfair—almost all farms would have been below the tax threshold—the Democrats dropped the idea.
The White House reckons the new tax would bring in $360bn over the next decade, impressive for a levy that hits the wealthiest 0.01% of households. That, however, reflects a windfall for the state when it collects on decades of gains for the likes of Jeff Bezos and Elon Musk. To pay the tax, they may need to sell down stakes in their firms, potentially remaking their ownership structures. The government would cushion the blow by breaking payments into instalments .
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