Business leaders support the President Joe Biden in the 2020 election conveys profound skepticism that the so-called billionaire tax Biden proposed in his State of the Union speech Tuesday night that would become law.
The plan would require households with a net worth over $100 million to pay a Minimum annual tax is 20% on both their standard taxable income and the return on the total value of their “tradable assets,” including stocks, bonds, mutual funds, and other securities.
Under current tax law, stock gains are not taxed until the owner sells them. Under Biden’s proposal, the ultra-wealthy would owe a 20% annual tax on unrealized gains or losses on the value of those assets, even if they actually pocketed that gain. by selling them or not.
The plan is “DOA and stupid to boot,” billionaire investor Leon Cooperman told CNBC in an interview. cooper speak he voted for Biden in 2020, but he accused Democrats of deliberately misleading people about how the billionaire tax proposal works.
They “lie about the taxes that billionaires pay because they include unrealized gains as part of the income,” he said.
White House economist Jared Bernstein disputed this, telling CNBC on Wednesday that “unrealized gains” are not something that is taxable.
“What it really is, or at least the way we see it, is a prepayment or a tax deduction on future capital gains,” he said Wednesday on “”ink pot.” The White House did not respond to follow-up questions from CNBC about the plan.
Charles Myers, a contributor to Biden’s presidential campaign and president of Signum Global, an investment consulting firm, said the proposal to tax billionaires was “completely dead on arrival”.
However, Myers said the purpose of Biden’s billionaire tax announcement was never to launch a negotiation in Congress.
“Last night was Biden’s unofficial 2024 reelection launch,” Myers told CNBC in an interview. The billionaire tax plan is part of his “messaging point” campaign, he said.
Myers added: “Those tax increases will never pass the House of Representatives. “Probably not even through a Democratic Senate.”
Closing the tax loopholes that the very wealthy use to lower their actual tax rates has long been a goal of Democrats in Congress. But for some in the party, Biden’s billionaire tax has a fatal flaw.
Jake Dilemani, a prominent Democratic political strategist, said in an interview on Wednesday: “Within the Democrats, there is disagreement about how to advance this, especially with unrealized gains are part of the equation.”
Three lobbyists with ties to the Democratic congressional leader told CNBC they had heard signs on Wednesday from key lawmakers that the House or Senate was not interested in passing it on. through the billionaire tax.
When asked about the prospect of taxing billionaires in Congress, a lobbyist close to a top Democrat in the House of Representatives simply replied via text message with a skeleton emoji. cross and the word “Death”. The lobbyist spoke on condition of anonymity to share private conversations.
In the nation’s capital, everyone remembers what happened the last time Biden tried to pass a billionaire tax.
White House reveals final billionaire tax for the first time Steps are as a way to increase revenue for Biden’s ambitious domestic construction program.
Initially, most Democrats in the House and Senate accepted the idea. But a crucial vote in the equally divided Senate didn’t happen: Just a day after the proposal was announced by the White House, West Virginia moderate Democratic Senator Joe Manchin rejected it.
“You can’t tax something that isn’t earned. Earned income is what we rely on,” he told The Hill at the time. “There are other ways to do it. Everyone has to pay their fair share.” A spokesman for Manchin did not respond to a request for comment.
By early August, most of the tax increases proposed by Biden for wealthy individuals had been removed from legislation that was signed into law as the Inflation Reduction Act, a shortened version of the bill. Biden’s Build Back Better.
If the odds for the bill looked bleak a year ago, when Democrats controlled both the chamber and the White House. Now, with Republicans in control of the House, the odds look downright bleak.
“I don’t think anyone really expects a billionaire’s tax, in the form of the current proposal, to go into effect this year or next,” Dilemani said.
But there is one senator who could dramatically improve the prospect of taxing billionaires, at least in the Senate, if she publicly endorses the plan: Senator Kyrsten Sinema, I-Ariz.
In 2021, as the Build Back Better bill was taking shape, Sinema signal that she’s willing to accept the billionaire income tax proposed by Senator Ron Wyden’s, D-Ore.
More than a year later, Sinema is still open to the idea, her spokesperson told CNBC on Wednesday.
“As always, Kyrsten welcomes the opportunity to review and discuss changes to the tax code, including this proposal from the President,” Sinema spokeswoman Hannah Hurley told CNBC.
The same is true for the “Child tax credit, research & development expenses, affordable housing credit, and other provisions from the 2017 tax reform law that expire in 2025,” Hurley wrote in an email.
However, the reality of the GOP’s control in the House means that for now, long-term proposals like a billionaire tax have given way to debates over the federal budget and debt ceiling.
With plans to tax billionaires stalled in Washington, wealth tax advocates and activists are turning to the states.
In January, a coalition of state legislators from eight states launched Funding our future“a national effort to move wealth tax measures across the country,” according to the group.
Coalition members come from California, New York, Washington, Connecticut, Illinois, Maryland, Minnesota and Hawaii, all traditionally blue states where a new property tax could have a chance to be passed. passed in the legislature.
“The ultra-wealthy benefit from our communities, from our public infrastructure and the labor of families,” said Democratic Senator Gustavo Rivera of New York state. working family”. in a statement published by the group. “And because of our outdated tax system, they can avoid paying the taxes they owe.”
“We have to restructure our tax system to be fair,” he said.
