Wyden: Tax billionaires' income sources to pay for Biden agenda
U.S. Sen. Ron Wyden has unveiled another version of a proposal to raise federal taxes on income other than wages, and would raise money for an array of social and climate-change programs envisioned in President Joe Biden's Build Back Better budget plan.
But the proposal made Wednesday, Oct. 27, by the Oregon Democrat, who leads the Senate Finance Committee, may stall before it emerges for any vote.
West Virginia Sen. Joe Manchin promptly criticized it as divisive. All of the 50 Democrats must agree if any proposal is to have a chance in the evenly divided Senate. Republicans are opposed, and Democrats have control of the chamber only because of the tie-breaking vote of Vice President Kamala Harris.
But Wyden has said repeatedly that income generated from sources other than wages — such as stocks and other tradable assets more commonly owned by wealthier households — should not get favorable treatment in the federal tax code.
His statement on Oct. 27:
"There are two tax codes in America. The first is mandatory for workers who pay taxes out of every paycheck. The second is voluntary for billionaires who defer paying taxes for years, if not indefinitely.
"Two tax codes allow billionaires to use largely untaxed income from wealth to build more wealth, while working families struggle to balance the mortgage against groceries and utilities, and against saving for the future. That's why it's time for a billionaires' income tax."
The tax would apply to those with at least $1 billion in assets or who get $100 million in income for three consecutive years.
Tradable assets such as stocks would be marked to market prices every year, not the original purchase prices, and the tax would apply to the market prices. People would pay taxes on gains and take deductions on losses; they could carry forward losses, and in some cases carry back losses, for three years.
An initial one-time tax by Congress, according to The New York Times, would hit an estimated 700 billionaires such as Mark Zuckerberg of Facebook, Elon Musk of Tesla and Jeff Bezos of Amazon, whose shares of the companies they created were initially worth zero.
Nontradable assets, such as real estate and business interests, would not be taxed every year. When people sold such assets, they would pay taxes on profits known as capital gains, plus an interest charge. The charge, termed a "deferral recapture amount," is the amount of interest that would be due on tax owed if the asset had been marked to market each year and the tax had been deferred until sale. The interest rate is the applicable federal short-term rate plus one point. That rate is currently 0.22%, so the interest rate applied would be 1.22%.
Wyden's release quoted from a letter sponsored by more than 100 national organizations:
"The billionaires' income tax is a popular, progressive and robust funding source for the Build Back Better plan's vital investments…. Because of the way most billionaires make their money, many could remain virtually untouched by BBB tax reform unless it includes the billionaires' income tax. Exempting billionaires from reform would not only forego hundreds of billions of dollars in revenue but be a moral outrage."
A separate proposal by Massachusetts Sen. Elizabeth Warren would impose a minimum tax of 15% on corporations. About 200 publicly traded companies, each with at least $1 billion in profits, no longer would be able to escape taxation. The proposal would fall in line with a standard set by the Organization for Economic Cooperation and Development to try to end tax havens, such as Ireland, that attract companies such as Apple.
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