It’s high time to tax billionaires, but there’s a better way – Mother Jones

Elon Musk, currently America’s richest man.Kiichiro Sato / AP

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Speech in the street, or in the hurry, anyway, is that the tax billionaires Democrats envision to help pay for their ambitious social policy and the climate package is in trouble. Hell i’m coming published a book on American super-wealth and its consequences, and I don’t understand.

I mean I get the feeling. In their book 2019, University of California, Berkeley, economists Gabriel Zucman and Emmanuel Saez noted that the top 400 Americans pay a lower percentage of their income in combined federal, state, and local taxes than any other economic group. This should piss everyone off. Meanwhile, a lot of super rich people shy away from income (and therefore income tax) almost entirely by taking out low-interest loans on their investment assets in lieu of a salary.

When these assets – stocks, private equity, real estate, paintings, jewelry, vintage cars, etc. But even then, they’re taxed at a much lower maximum rate (23.8%) than the current maximum rate that the IRS charges on regular work income (37%).

Senator Ron Wyden (D-Ore.) On Wednesday presented a proposal to tax, for the first time, the unrealized capital gains of billionaires. The details, as always, will be a work in progress, but the Washington post reports that initial revenue projections range from $ 250 billion to $ 500 billion over 10 years, of which about half, according to Zucman’s estimate, would come from just 10 prominent names – Elon Musk, Jeff Bezos, Bill Gates, Mark Zuckerberg, Warren Buffett and their ilk.

With the proper safeguards, taxing unrealized gains – and certainly taxing billionaires – makes sense, even if those who are taxed will say the proposal is unconstitutional. But tax alone billionaires is both delicate and arbitrary. Are Wyden and the other architects of the plan suggesting that families with $ 950 million – or $ 150 million, for that matter – are too small to bother? To steal Biden’s favorite expression, “Come on, man!”

In 2019, before the pandemic made the rich insanely richer, I described the richest 0.01% in the introduction to my book as “a group of 18,300 families with at least $ 157 million each. – a level of wealth at which business is developing much more complicated:

Covering, diversifying and insuring your assets is a major concern today, as is navigating the minefields that this level of wealth can create in your family relationships. In addition, you are entering an area of ​​legal planning with a strong focus on bypassing that $ 23.4 million estate tax exemption. It’s very doable, but you’ll need to keep a close watch on your accountants, lawyers, and fund managers to make sure they don’t bleed you dry.

My point is that even simple The Hundreds of Millionaires are a very financial savvy group who employ white shoe professionals to maximize their returns and minimize their tax burden through tactics inaccessible to most Americans. Combined with a tax code designed to favor the rich, this allows super-rich Americans to grow their portfolios at public expense – and keeping those unrealized capital gains untaxed is key to that. Why not tax them all? Well, probably because they have too much political influence.

There are a lot of issues with a billionaire tax that need to be addressed. For example, Silicon Valley venture capitalist David Sacks complained in a Twitter thread Monday that Wyden’s plan “would effectively end companies run by founders” because if a fast growing company goes public, the founder will have to sell about “half of his stake each year to pay his tax bill … successful founders to relinquish ownership of their businesses to those who have demonstrated no equivalent ability.

The new proposal solves that problem by allowing a founder to exempt up to $ 1 billion on a single share, although guys like Mark Zuckerberg and Jeff Bezos are hit with a really huge initial tax bill. Another concern is that billionaires will start moving their money from easily quantifiable investments like stocks and bonds to, like Mitt Romney. suggested the other day, paintings – or other assets that are more difficult to value and therefore exempt from Wyden’s proposal – except that if and when those assets were eventually sold, the owners would be liable for years of (currently low) interest on the assets. deferred taxes on capital gains.

Steve Rosenthal, senior researcher at the Urbans-Brooking Tax Policy Center, describes Wyden’s plan as “ambitious but problematic”. Senator Kyrsten Sinema’s antipathy to rising corporate and personal tax rates has prompted Democrats to look for ways to show they can pay even for a reduced program. At the end of the game, as Biden prepares to attend the United Nations Climate Conference next week in Glasgow, desperate Democrats throw spaghetti at the wall to see what sticks. “They had some fantastic tax increases at the start: corporate tax increases, surtaxes and higher tax rates, this death gain proposal to eliminate the ‘gross up’. But it’s hard to pass real tax changes, ”says Rosenthal, who was involved in an equally tense battle of reconciliation during the Clinton years. “The only bipartisan deal that exists is when you don’t pay for things – you shift the burden to future generations. “

In a blog post on Monday, Rosenthal underline that a billionaire’s tax can be difficult to enforce, especially with the IRS in its current weak state. How to determine who is billionaire, given difficult to value assets? How many people would need to value their aggregate holdings each year to prove they weren’t billionaires – and how many would engage in games and court battles to avoid officially falling into that category? What if it was impractical or impossible for a business owner to raise the cash needed to pay the tax? What if the tax is enacted and then repealed by Congress or rejected by the Supreme Court?

Billionaire Tax Stays On The Table For Now — Sen. Joe Manchin is already grumpy about that. But a better solution, Rosenthal writes, would be to simply adopt Biden’s proposal to remove the “step-up” rule. Currently, when you die, the value of all your invested assets is reset, for tax purposes, to the current fair market value. The rule allows a person to accumulate billions of dollars in untaxed earnings over several decades, then leave those assets to the children so that neither the estate nor the heirs will pay a dime in income tax or the heirs. capital gains.

Not only should these unrealized gains be taxed on death, he argues, but they should be taxed at the same rate as ordinary income. This would discourage people from accumulating assets until death and also help to bring dynastic wealth under control. You could include a generous exemption – Rosenthal suggests $ 50 million – to protect farms and small businesses: “Yes, it’s a death tax, pass it! If we don’t tax this capital gain on death, then it won’t be taxed forever. “

There is only one catch. What “should” happen will not happen. Eliminating the increase rule “comes nowhere near the required number of votes,” a Wyden aide informed me.

And there is the catch. There are many sane ways to tackle inequality while tackling climate change – strategies that are very much in keeping with the anti-aristocratic sentiment that inspired the American Revolution. Yet wealthy families who risk becoming a little less wealthy as a result – and the lawyers, accountants, lobbyists and fund managers they employ – tend to make what makes sense not politically acceptable. . “Even tax increases that are very popular with the public, you can’t do it,” Rosenthal concedes. “You don’t have Republicans and you have a few Democrats with loose screws. I think, in part, that just reflects the strength of the lobby group.”

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