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Biden Wants to Raid the Billionaires’ Club

His budget proposal to tax the wealth of America’s top plutocrats may face an uphill battle in Congress, but it signals a new midterm message.

Chip Somodevilla/Getty Images

Presidential budgets are, at best, aspirational. They are nonbinding guidelines, which don’t so much make demands of Congress as they do make polite requests. One of the few elements of a presidential budget that ends up being fulfilled, and even exceeded, by Congress is proposed defense spending, an amount that is consistently increased each year.

“Budgets are statements of values,” President Joe Biden said in a statement accompanying the release of his budget on Monday, in an acknowledgment that budgets are not announcements of material things that will actually come to pass, “and the budget I am releasing today sends a clear message that we value fiscal responsibility, safety and security at home and around the world, and the investments needed to continue our equitable growth and build a better America.”

Biden’s $5.8 trillion budget proposal echoes the priorities the president announced in his State of the Union address at the beginning of the month, in a pivot away from the sweeping goals of his first year in officewhich came to be defined by the Build Back Better Act: an ambitious proposal to significantly boost social and climate spending that failed to earn enough Democratic votes to pass. With that measure now effectively dead, the White House is pushing toward the issues the administration is betting will define the midterm elections: rising inflation and economic concerns, health care costs, and community violence. Biden is also requesting $773 billion for the Defense Department, which will likely rankle progressives in Congress. (“At a time when we are already spending more on the military than the next 11 countries combined, no, we do not need a massive increase in the defense budget,” said Senator Bernie Sanders, the chair of the Senate Budget Committee, in a statement.)

Biden’s budget reflects the reality of his political situation: an evenly divided Senate, an almost as narrow Democratic majority in the House, an upcoming midterm election in which Democrats are at a structural disadvantage, and sinking approval ratings. It also includes several salvos to moderate Democrats, such as a focus on cutting the federal deficit by $1 trillion over 10 years and an increase in funding for police departments.

But the budget is not without its progressive elements. The White House proposes cutting the deficit in part through higher taxes on corporations and a “Billionaire Minimum Income Tax” targeting the wealthiest 0.01 percent of households. The White House estimates that the 20 percent minimum tax rate on Americans making more than $100 million would generate $361 billion over a decade, with the majority of revenue coming from billionaires. An analysis by the left-leaning Americans for Tax Fairness released this month found that billionaires’ collective wealth increased by $1.7 trillion, or 57 percent, in the two years since March 2020.

Billionaires often pay a lower rate of taxes than average Americans, in part because the majority of their income comes not from a paycheck but from assets such as stocks. These assets are not taxed unless they are sold, and those capital gains are taxed at a lower rate than wage-based income. If a billionaire’s stock holdings increase but they do not sell those assets, the federal government does not tax those “unrealized” gains. Under the stepped-up basis provision, if a billionaire never sells stock that increases in value, those investment gains are ignored for income tax purposes when assets are passed on to their heirs. An analysis by the White House Office of Management and Budget and the Council of Economic Advisers released late last year found that 400 billionaire families paid an average annual tax rate of 8.2 percent, lower than the rate for millions of Americans.

In remarks outlining his budget priorities, Biden noted that firefighters and teachers were often paying higher tax rates than billionaires. “That’s not right. That’s not fair,” he said.

The proposed billionaire tax would require the wealthiest Americans to pay a minimum 20 percent tax rate on their “full income”: the standard taxable income they earn from wages and what they have made in their unrealized gains in unsold assets. If they are already paying that amount, they won’t be hit with additional taxes, but billionaires who have not been paying taxes on their full income would have five years to comply with the new rules. The White House plan was first reported by The Washington Post over the weekend.

The proposal would dramatically change what the wealthiest Americans pay in taxes. Under the White House plan, Elon Musk would pay an additional $50 billion in taxes and Jeff Bezos $35 billion in taxes, according to Gabriel Zucman, an economist at the University of California, Berkeley.

Democrats in Congress have released similar proposals. In October, Senator Ron Wyden, the chair of the Senate Finance Committee, released a proposal to tax around 700 billionaires on their unrealized capital gains. Senator Elizabeth Warren has also proposed taxing the accumulated assets of the ultrawealthy. In a statement to The New Republic, Wyden called Biden’s plan a “solid proposal.”

“There’s no way to fix our broken tax code without getting at the problem of billionaires avoiding taxes for decades, if not indefinitely,” Wyden said in a statement to The New Republic. “While there are differences between the president’s proposal and the Billionaires Income Tax, we’re rowing in the same direction. I look forward to working with President Biden and my colleagues to move these reforms forward.”

However, it’s unclear how much support a billionaire tax could muster, even among Democrats. With unified opposition expected from Republicans, Biden would need all 50 Senate Democrats on board to pass any legislation using the reconciliation procedure. Wyden proposed his tax as a revenue stream for the Build Back Better Act, Biden’s massive public spending bill that was torpedoed by moderate Democratic Senator Joe Manchin, in large part due to Manchin’s concerns about the bill’s price tag. Manchin appeared to dismiss the idea of a billionaire tax in the fall, calling it “divisive.” However, The Washington Post reported in December that Manchin had told the White House he would be open to some version of a tax on the wealthiest Americans. Other Democrats also had reservations about Wyden’s plan, including House Ways and Means Committee Chair Richard Neal and, reportedly, Speaker Nancy Pelosi.

Moreover, a billionaire tax would likely face legal challenges, as there are questions as to whether a tax imposed on wealth—as opposed to on income—is constitutional. The White House argues that the tax is an income tax, meaning that it is constitutional under the 16th Amendment. But a Supreme Court with a solid conservative majority might not agree with that assessment.

Sanders announced that the Budget Committee will hold a hearing on the president’s wish list—ahem, budget proposal—on Wednesday. Whether the billionaire tax, or any other element of the presidential budget, will be incorporated into the legislative agenda remains to be seen.