The White House is set to unveil a new minimum income tax for billionaires Monday as part of President Joe Biden’s budget proposal for FY2023, according to a White House document released Saturday.
The “Billionaire Minimum Income Tax” would require households worth more than $100 million to pay at least 20% on their full income, including unrealized investment income, the White House said in a fact sheet, with over half of the revenue coming from billionaire households.
“The Billionaire Minimum Income Tax will ensure that the very wealthiest Americans pay a tax rate of at least 20 percent on their full income, including unrealized appreciation,” the White House said. “This minimum tax would make sure that the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters.”
The proposed tax is consistent with the desire among the Democratic Party’s progressive base to impose heavier levies on the wealthiest Americans. But the reality of it becoming law is unclear on Capitol Hill, where some more moderate members of the party have previously balked at such efforts.
The Washington Post first reported the proposed tax.
The announcement on the billionaire tax comes ahead of a release of Biden’s FY2023 budget on Monday. The White House projects the billionaire tax alone would reduce the deficit by $360 billion over the next decade, while the FY2023 budget overall would reduce the federal deficit by more than $1 trillion over 10 years.
According to the White House, the wealthiest households already paying 20% on standard taxable income and unrealized income will not owe additional taxes, but those currently paying below that rate will pay a “top-up payment to meet the 20 percent minimum” on their full income spread out over multiple years.
“The proposal allows wealthy households to spread initial top-up payments on unrealized income over nine years, and then five years for top-up payments on new income going forward,” the White House said. “Stretching payment over multiple years will smooth year-to-year variation in investment income, while still ensuring that the wealthiest end up paying a minimum tax rate of 20 percent. Illiquid taxpayers may opt to pay later with interest.”
“In effect, the Billionaire Minimum Income Tax payments are a prepayment of tax obligations these households will owe when they later realize their gains,” the White House said. “This approach means that the very wealthiest Americans pay taxes as they go, just like everyone else, and eliminates the inefficient sheltering of income for decades or generations.”
The new plan from the White House to tax the ultra-rich comes as Sen. Joe Manchin, a West Virginia Democrat who nixed negotiations in December on the President’s Build Back Better plan, has begun to have informal discussions about passing legislation on specific issues like energy and prescription drugs that he might support in a package ahead of the midterms.
It’s unclear if the White House’s new tax plan is part of those discussions and whether it is something that enough Democrats in Congress would ultimately support. Sens. Manchin and Mark Warner in October last year resisted moving forward with Finance Committee chairman Sen. Ron Wyden’s complicated and controversial plan to tax America’s wealthiest individuals.
Unlike Wyden’s plan, which would have taxed billionaires on the gain in value of certain assets every year instead of only at the time of sale, the White House’s proposal would give households five years to be in proper compliance with the minimum tax as well as an initial nine-year period to pay any previously unrealized income.
Taxing America’s wealthiest to address economic inequality featured heavily during the 2020 election, especially among progressive Democrats like Sens. Bernie Sanders and Elizabeth Warren, who both proposed a tax on the net worth of the richest Americans during their campaigns.