President Joe Biden has proposed a new tax on the ultra-wealthy as part of his 2023 federal budget, aiming to reduce the deficit by about $360 billion.
Some experts say it’s unlikely to gain traction in Congress.
The “billionaire minimum income tax” calls for a 20% levy on households with a net worth of more than $100 million, affecting the top 0.01% of earners, according to a White House fact sheet.
The 20% tax applies to “total income,” including taxable earnings and so-called unrealized capital gains, or asset growth, with installment payment options and a credit to avoid paying tax on the same wealth twice, the U.S. Department of the Treasury outlined.
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The administration says the plan will raise roughly $360 billion over the next decade. However, the proposal already faces pushback.
“The billionaire tax and how they’ve put that forward doesn’t make much sense,” Rep. Josh Gottheimer, D-N.J., co-chair of the Problem Solvers Caucus, told CNBC’s “Squawk Box’ on Wednesday, stressing to the challenges of taxing unrealized gains.
“I really don’t think that proposal is going anywhere,” he added.
Senate Democrats floated a similar billionaire tax in October to help fund their domestic spending agenda. However, the proposal failed to gain broad support within the party.
I think it’s gonna be a tough sell for him, honestly.Howard Gleckmansenior fellow at the Urban-Brookings Tax Policy Center
Moreover, if the levy had survived negotiations, it may have faced legal challenges, according to some policy experts, and the overburdened IRS may have struggled to enforce the law.
Biden’s version of the billionaire tax may create administrative challenges for certain taxpayers, such as business owners who fall above the $100 million threshold, according to Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.
“Their assets are in their businesses,” he explained. “And it’s very difficult to value those assets.”
Many European countries have abandoned similar taxes due to the burden of assessing individual wealth, Gleckman said.
“I think it’s gonna be a tough sell for him, honestly,” he said, pointing to pushback within the Democratic Party.
The budget includes other revenue raisers affecting individuals, such as hiking the top marginal tax rate, higher levies on capital gains for earners above $1 million and treating property transfers like a sale, among others.
However, many of these provisions have previously faltered, and there’s limited time for Democrats to pass their legislative agenda before the focus shifts to midterm election campaigns.