'Billionaire Minimum Income Tax': Is Biden right to propose?
- On March 28, 2022, President Biden proposed a Billionaire Minimum Income Tax as part of his fiscal year 2023 budget to require “the wealthiest American households to pay a minimum of 20 percent on all of their income [to make] America’s tax code fairer and reduce the deficit by about $360 billion in just the next decade.”
- The World Inequality Report for 2022 found that “since 1995, the share of global wealth possessed by billionaires has risen from 1% to over 3%.”
- Statista reported the average income tax rate for Americans was 13.29% in 2019, 25.57% for the top 1%, and 19.89% for the top 10%.
- A 2021 Pew Research Center study reveals that 'Roughly three-in-ten Americans (29%) now say the fact that there are some people who have personal fortunes of a billion dollars or more is a bad thing for the country, up from about a quarter (23%) in January 2020.'
Billionaires didn't become so in a vacuum. While they are Titans of industry who have built incredible things through hard work and vision, they have also benefited from years of corporate tax cuts, lax regulation, and a willingness on the part of society to allow almost anything in the name of profit. They have also used natural resources and harmed the environment, which belongs to everyone. It's only fair that these billionaires, who have seemingly distorted and bent society to their will, should finally pay a significant amount of tax.
Biden's proposal to tax unrealized gains is novel and practical. Billionaires, by definition, have more money than they will ever need to lead fabulously comfortable lives and, as a result, frequently park large portions of their assets in the market. This essentially takes large amounts of liquid cash out of the economy and shields it from taxation. Biden's proposal would tax a fair amount on these gains, which is basically the money billionaires are simply sitting on anyway.
Critics may claim billionaires will find loopholes and tax dodges or that taxation will reduce charitable giving, but this is no reason not to try. We should put our best and brightest people on this issue and find the best ways to use this revenue to benefit all of society. Using this money to fund social programs that create wealth in the middle class will ultimately help the very billionaires paying this tax as a more robust middle class would have more purchasing power and contribute to the stability and security of the nation. The bottom line is that billionaires can afford to pay the most, and it's time they do.
A billionaire minimum income tax is unconstitutional, further burdening an already corrupt taxation system. If theft is the non-consensual seizing of one's justly owned or earned property, and taxation is seized by force of the government (otherwise, it would be a donation), taxation is then, by definition, theft. But it’s also unconstitutional, as Pollock v. Farmers Loan and Trust Company ruled that income tax on one's property is unconstitutional as this direct tax was not apportioned by state population. Without amending the US Constitution, the Supreme Court would probably strike it down.
It is fundamental to capitalism that anyone, even if only a few, are able to generate and grow their wealth. This is a system that benefits everyone. But a billionaire wealth tax presents more problems than it solves, especially in how one's assets are valued. If Jeff Bezos or Elon Musk, for example, were taxed an additional 20% of their net worth, they would have to sell off assets, such as their stocks, to pay the tax, which is levied on their unrealized gain. When Tesla or Amazon stock inevitably flood the market due to enormous taxes and the inability to pay upfront with cash, supply would exceed demand, lowering the real-time valuation of the assets.
Further still, if this tax proposal were to move forward without being stopped by SCOTUS, what's to keep the IRS from moving the bar lower than households with $100M or more in assets? History shows us that once a power is allotted to the government, it is very seldom rescinded. The top 1% already pay 40% of all taxes in America, more than their 'fair share' when compared to the bottom 90%. This idea of 'tax the rich' is fundamentally counterproductive, unethical, and hampers economic progress for all.