How does President Joe Biden's 'billionaire tax' help America?

To help pay for his grand socio-economic agenda, President Joe Biden is looking to where the money is: billionaires.

President Joe Biden delivers a speech promoting the "Build Back Better" program in Kearny, New Jersey October 25, 2021. Photo: AP

Mr. Biden never endorsed a "wealth tax" (a tax on the wealth of billionaires) when he campaigned last year. But his plan to raise taxes on the incomes of large corporations and the richest Americans has hit a roadblock.

That has led to a special tax on the wealth, not the income, of billionaires being proposed by Senate Democrats as a possible means to help pay for child care. , child tax credits, family leave and environmental initiatives.

President Biden has pledged that his actions will not add a dime to the deficit, which means he is pushing Congress and voters a 0.005% tax on wealth. of the Americans.

Basically, billionaires make most of their money... their assets. It can be from stocks, or seaside villas, precious works of art, antiques when sold.

According to a description obtained by the AP, the "billionaire tax" will only apply to people with assets of at least $1 billion, or income of $100 million a year for three consecutive years. These standards mean that only about 700 taxpayers face the additional tax on their wealth.

With tradable assets like stocks, billionaires will still have to pay taxes even if they keep the assets. They will be taxed with any increase in value and withheld tax if they suffer a loss. (Under applicable law, such properties are taxed only when they are sold.)

Billionaires will also face an additional tax on real estate when those properties are sold.

President Biden meets during a promotional event for "Build Back Better" on December 25, 2021. Photo: AP

How much money the government will collect from the "billionaire tax"

House Speaker Nancy Pelosi estimates the new tax will bring in between $200 billion and $250 billion. That's a significant number, but it's nothing short of nearly $2 trillion in additional spending proposals over the next 10 years, currently being negotiated.

Forecasts of revenue from property taxes are controversial. "It can't be done," said Allison Schrager, a senior fellow at the Manhattan Institute. There's a lot of evidence that these things don't work, and I've never heard an explanation of how it might work."

Why did Mr. Biden choose this tax?

In fact, the President of the United States wants to increase the corporate and income tax rates for wealthy individuals. That was his initial proposal, but the American leader had to appease West Virginia Senator Joe Manchin and Arizona Senator Kyrsten Sinema. Those are the two Democratic votes that make or break the balance in the Senate. Mr. Sinema opposes higher corporate and income taxes, so the wealth tax (which is levied on the wealth of billionaires) is used by the President as an alternative.

This idea was introduced after the book "Capital in the 21st century" by French economist Thomas Piketty was published. Massachusetts Senator Elizabeths Warren has made a 2% wealth tax her "brand" policy in the 2020 Democratic presidential primary race. The candidate runs alongside her. Bernie Sanders, the Vermont senator, also proposed his own wealth tax.

Massachusetts Senator Elizabeths Warren introduced a wealth tax when running for President in the 2020 primary.

Mr. Biden never joined that wealth tax advocacy group. But he made an important promise to the wealthy that no one earning less than $400,000 would pay more in taxes.

Are billionaires really that rich?

In the United States, there is a legitimate debate about optimal forms of taxation. Is it better for the economy to invest their wealth in new businesses? Or, would it be better if some of their money went to the government to help fund programs like childcare, switching to renewable energy?

What is clear is that the rich have money to pay taxes, if the government wants to do that.

America's billionaires have seen their fortunes increase 70% since the pandemic began, to a total of more than $5 trillion, according to an analysis by American Tax Fairness and the Institute. Policy Research on Inequality. The money they collected between March 18, 2020 and September is equivalent to President Biden's spending plan for more than 10 years.

Frank Clemente, CEO of American Tax Fairness, said: "Currently, billionaires don't have to pay a penny in taxes on the substantial gains from holding stocks during the pandemic. Billionaires' income tax is only levied on the increase in the value of those assets each year just as workers' wages are taxed."

When the COVID-19 pandemic began, the United States had only 614 billionaires, this number has now increased to 745.

Another thing that makes COVID-19 unique is that many of the poorer Americans are also getting... richer, only they're getting rich at a much slower rate than billionaires. Federal Reserve data shows that the net worth of the bottom 90% of Americans - including the middle class - has increased by about 22%. For many Americans, the rise in wealth reflects a rising stock market, higher home values, and unprecedented government bailouts in the form of direct payments and secured loans to Small Business.

Can billionaires evade taxes?

They've found ways to do that before. They can hire lawyers, accountants and others to minimize their tax burden.

ProPublica news agency revealed various tax havens earlier this year, and the recent Pandora Records show there is a global industry for hiding the assets of the politically powerful and extremely wealthy.

Since the outbreak of the COVID-19 pandemic, the number of US dollar billionaires has increased from 614 to 745.

ProPublica's investigation found that billionaire investor Warren Buffett paid taxes at an average rate of 19%. Amazon founder Jeff Bezos pays 23%, while Tesla's Elon Musk is around 30%. The highest tax rate on income earned from labor is 37%, but the tax on capital sources is only 20% lower and that benefits the super rich, as well as encouraging investment in companies. new, thereby helping the economy grow.

A September White House analysis found that America's 400 wealthiest families paid an average federal income tax of 8.2% between 2010 and 2018. The administration's basic message President Biden said this low tax rate is unfair because middle-class families often pay a larger percentage of income tax.

The key question for Democratic lawmakers is how to close or at least narrow the doors to tax evasion by the super-rich. Writing the tax law and implementing it will determine the success of the wealth tax, and perhaps the fate of President Biden's "Build Back Better" grand agenda.

Google Tech News - AP