MCViewPoint

Opinion from a Libertarian ViewPoint

Erie Times E-Edition Article-What’s a ‘wealth tax’ and how would it work?

Posted by M. C. on October 27, 2021

Biden has vowed his programs will not add a penny to the deficit,

House Speaker Nancy Pelosi estimated Sunday on CNN the tax would raise $200billion to $250billion. This is a meaningful sum, but it’s well shy of the nearly $2trillion in proposed additional spending over 10 years being negotiated right now. This means additional levies such as the global minimum tax and increased enforcement dollars for the IRS would still be needed to help close the gap.

Global minimum tax, IRS…scary. I am guessing the definition of “wealthy” will change dramatically in the not too distant future.

https://erietimes-pa-app.newsmemory.com/?publink=2fe8dc74b_1345f77

Josh Boak ASSOCIATED PRESS To help pay for his big economic and social agenda, President Joe Biden is looking to go where the big money is: billionaires.

Biden never endorsed an outright ‘wealth tax’ when campaigning last year. But his more conventional proposed rate hikes on the income of large corporations and the wealthiest Americans have hit a roadblock.

That leaves a special tax on the assets, not the income, of billionaires being proposed by a Senate Democrat as a possible vehicle to help pay for child care, universal pre-kindergarten, child tax credits, family leave and environmental initiatives.

Biden has vowed his programs will not add a penny to the deficit, which means selling to Congress and voters a tax on the wealthiest .0005% of Americans. Some details on the proposed billionaires tax:

How would it work? Essentially, billionaires earn the bulk of their money off their wealth. This might be from the stock market. It could include, once sold, beachfront mansions or the ownership of rare art and antiquities. A triceratops skeleton.

This new tax would apply solely to people with at least $1billion in assets or $100million in income for three straight years. These standards mean that just 700 taxpayers would face the additional tax on increases to their wealth, according to a description obtained by The Associated Press of the proposal of Senate Finance Committee Chairman Ron Wyden of Oregon.

On tradeable items such as stocks, billionaires would still pay a tax even if they held on to the asset. They would be taxed on any increases in value and take deductions on losses. Under current law, those assets get taxed only when they’re sold.

Billionaires would also face an additional tax on non-tradeable assets such as real estate and business interests once those assets are sold. During the first year of the proposed tax, the billionaires would also owe taxes on any built-in gains that predate the tax.

How much money would it raise? House Speaker Nancy Pelosi estimated Sunday on CNN the tax would raise $200billion to $250billion. This is a meaningful sum, but it’s well shy of the nearly $2trillion in proposed additional spending over 10 years being negotiated right now. This means additional levies such as the global minimum tax and increased enforcement dollars for the IRS would still be needed to help close the gap.

And the forecasts for revenue from the wealth tax are highly debatable.

‘It’s just impossible to implement,’ said Allison Schrager, a senior fellow at the conservative Manhattan Institute. ‘There’s a lot of evidence that these things don’t work, and I’ve never heard an explanation of how this could be workable.’

Why would Biden go this route? The president would rather raise corporate tax rates and rates on wealthy individuals. That was his initial proposal, but he’s got to appease West Virginia Sen. Joe Manchin and Arizona Sen. Kyrsten Sinema. Those are the two make-or-break Democratic votes in the evenly split Senate. Sinema objected to higher rates, which brought the wealth tax into play as an alternative.

The idea gained steam after the publication of French economist Thomas Piketty’s book ‘Capital in the Twenty-First Century.’ Massachusetts Sen. Elizabeth Warren made a 2% wealth tax a trademark policy in the 2020 Democratic presidential primaries, and fellow candidate Bernie Sanders, the senator from Vermont, proposed his own wealth tax.

Biden never jumped on that bandwagon. But he did make higher taxes on the wealthy a key promise, saying no one earning less than $400,000 would pay more.

Are billionaires really that rich? Seems that way.

There is a legitimate debate about the optimal forms of taxation. Is it better for the economy for the wealthy to keep their assets invested in new businesses? Or, is it better for some of their money to go to the government to help fund programs like child care, universal pre-K and shifts to renewable energy?

What is clear is the wealthy do have money to tax, should the government wish to do it.

America’s billionaires have seen their collected wealth surge 70% since the start of the pandemic to over $5trillion, according to an analysis by the pro-wealth-tax Americans for Tax Fairness and the Institute for Policy Studies Program on Inequality. That gain from March18, 2020, to this past month is equal in size to Biden’s spending plans over 10 years.

‘Right now, billionaires are not paying a dime in taxes on their fabulous income gains from their stock holdings during the pandemic,’ said Frank Clemente, executive director of Americans for Tax Fairness. ‘The billionaires income tax would tax the increase in the value of those assets each year just like workers’ wages are taxed.’

Be seeing you

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