White House proposes new minimum tax on billionaires
United States President Joe Biden’s administration will include more taxes on the wealthiest Americans in its 2023 budget proposal, due to be released today, U.S. media reported on March 26.
The “Billionaire Minimum Income Tax” would require the American households worth more than $100 million to pay at least 20 percent on their full income, the Washington Post and other U.S. media reported, citing a White House document.
“This minimum tax would make sure that the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters,” said the document, cited by the Post.
A study by the Biden administration this autumn found that 400 billionaire households paid an average of only 8.2 percent in taxes on their income between 2010 and 2018, a rate often well below that of many American households.
The tax would also target unrealized gains in the value of liquid assets, such as stocks, which are not taxed until they are sold.
The new measure, which requires congressional approval to be enacted, could raise up to $360 billion in new revenue over ten years, the document cited by the Post said.
A longstanding goal of the political left, the plan could dramatically change the tax paid by U.S. billionaires.
Tech titan Elon Musk would, for example, have to pay an additional $50 billion in taxes, and Amazon founder Jeff Bezos some $35 billion more, according to calculations by University of California Berkeley economist Gabriel Zucman, cited by the Post.
The Biden administration is planning to cut projected budget deficits by more than $1 trillion over the next decade. The lower deficits also reflect the economy’s resurgence as the United States emerges from the pandemic. It is a sign that the government’s balance sheet will improve after a historic burst of spending to combat the COVID-19 pandemic.
The fading of the pandemic and the growth has enabled the deficit to fall from $3.1 trillion in fiscal 2020 to $2.8 trillion last year and a projected $1.4 trillion this year. That deficit spending paid off in the form of the economy expanding at a 5.7 percent pace last year, the strongest growth since 1984. But inflation at a 40-year high also accompanied those robust gains as high prices have weighed on Biden’s popularity.
Republican lawmakers have said that the Biden administration’s spending over the past year has led to greater economic pain in the form of higher prices. The inflation that came with reopening the U.S. economy as the closures from the pandemic began to end has been amplified by supply chain issues, low interest rates and, now, disruptions in the oil and natural gas markets because of Russia’s invasion of Ukraine.
Biden inherited from the Donald Trump administration a budget deficit that was equal in size to 14.9 percent of the entire U.S. economy. But the deficit starting in the upcoming budget year will be below 5 percent of the economy, putting the country on a more sustainable path, according to people familiar with the budget proposal who insisted on anonymity to discuss forthcoming details.
The lower deficit totals will also be easier to manage even if interest rates rise.
The expected deficit decrease for fiscal 2022 reflects the solid recovery in hiring that occurred in large part because of Biden’s $1.9 trillion coronavirus relief package. The added jobs mean additional tax revenue, with the government likely collecting $300 billion more in revenues compared to fiscal 2021, a 10 percent increase.
Still, the country will face several uncertainties that could reshape Biden’s proposed budget, which will have figures that don’t include the spending omnibus recently signed into law. Biden and U.S. allies are also providing aid to Ukrainians who are fighting against Russian forces, a war that could possibly reshape spending priorities and the broader economic outlook.