As congressional negotiations over President Biden’s ‘Build Back Better’ reconciliation bill reached a critical stage, it’s clear that the original $3.5 trillion domestic spending agenda over 10 years will be reduced to between $1.5 trillion and $2 trillion. The initial proposal sought to fund a long list of social policy objectives, including universal preschool, paid family leave, expanded Medicare services, making increased child tax credits permanent and new policies to address climate change. But opposition by a few corporate Democrats have succeeded in scaling back the plan. Proposed programs that have been withdrawn include providing two years of free community college and instituting a clean electricity program to rein in carbon emissions.
One major element of the original bill was to pay for the new programs by raising taxes on the wealthiest Americans and profitable corporations. But when Arizona Democratic Sen. Krysten Sinema opposed reversing the 2017 Trump tax cuts, alternative methods of raising funds needed to be found. Sen. Ron Wyden of Oregon, chairman of the Senate Finance Committee, is now proposing a billionaires tax that would affect fewer than 1,000 people. The tax would require those with assets of more than $1 billion, or income of $100 million for three consecutive years, to pay taxes on gains on stocks and other tradable assets, rather than waiting until holdings are sold.
Between The Lines’ Scott Harris spoke with Frank Clemente, executive director of Americans for Tax Fairness, who discusses the proposed billionaires tax, and other measures to fund the Build Back Better human infrastructure plan and ensure that the wealthiest Americans pay their fair share in taxes.
FRANK CLEMENTE: It’s called the Billionaires Income Tax, being proposed by Sen. Wyden, who’s the chairman of the Finance Committee. That’s the tax writing committee. So that’s a big help to have the guy who’s in charge of shepherding the tax bill through. His idea here is that it’s a form of a wealth tax, but it’s not called a wealth tax because it’s really a tax on income. The way to think about it, it’s in two parts. One is to think of Jeff Bezos. Jeff Bezos is worth close to $200 billion. I think $190 billion at our last estimate. He started out under a billion dollars when he first got his Amazon stock and his Amazon stock has grown in value and he’s accumulated more Amazon stock, whatever. Virtually all of his wealth, though, is from stock. And he has had reports from his financial institutions that say what it was worth when he first bought it and how much it gained and what it’s worth today.
Wyden’s tax would say, “Okay, we’re going to tax those gains in income, capital gains income on your stock, which is the increased value of your stock. We’re going to tax it as if you sold it. You don’t have to sell it, but as if you sold it, we’re going to tax it as if it’s income – as if it’s income, just like the rest of us, you know, get a salary every year. You’re getting a big wealth gain every year. You’re not selling it. You don’t have to sell it because you don’t need to sell it. You don’t need that much money to live. Even though he’s just bought a $500 million yacht, that’s about to start floating. But we’re going to treat it like income. And so Wyden’s bill would tax those gains, the capital gains tax rate. So the 20 percent rate, not the income tax rate, that much higher rate, 37 percent, but at least at that capital gains tax rate.
And, it would tax it, not just this year, but over the entire course of the life of those assets. He’s going to have to pay taxes on it. Now he doesn’t have to pay it all in one year. There’s going to be a 5-, 6-, 7-, 10-year period during what you can pay it out. So that’s how it would work for non-tradable assets, if you’re a David Koch and you own Koch Industries, and most of your wealth is tied up in your business, you’re not going to have to pay taxes on it until you sell your business. Then the capital gains tax will be due, which is already due when he sells his business, but there’s going to be an interest charge for every year he didn’t have to pay taxes on it. We’re going to send (him) an interest charge.
And so you’ll have to pay more than just what the capital gains tax is. So that’s how it works. It gets at this wealth in a very substantial way. And we think it’s probably more defensible from a Supreme Court point of view as well. So anyway, that’s totally in play. We could raise about $250 billion of the $800 billion we’re going to lose from Sinema saying, “I don’t want this, this and this tax.” It’s going to drop the amount that is coming in by about $700 billion to $800 billion. So we’ll get about a third of that back with this billionaire’s income tax.
SCOTT HARRIS: If Sen. Wyden’s proposal here, goes through, the wealth tax, what is the deficit that remains that has to be made up in a shrunken down Biden Build Back Better package of about $2 trillion? Is there a lot that has to be made up or is it pretty close?
FRANK CLEMENTE: Well, I’m not sure because I don’t know what the spending amount is and it really has a lot to do that, but there’s a few other places. Sen. Wyden’s proposing that a stock buybacks be taxed. Most people probably don’t know what stock buybacks are, but after Trump’s tax cuts passed, remember everybody was promised a big raise by their employer and they’re going to take the tax cut and dole it out to everybody.
Well, what most corporations did was they bought back their own stock. They had a lot of cash and they bought back their own stock. And by buying back their own stock it increases the price of their stock, which inflates the value of it, which makes people who were holding that stock wealthier. Ninety percent of the stock is owned by the 10 percent of the richest people. Half of it’s owned by the top 1 percent. So inflating that value by doing stock buybacks, it was benefiting the rich. If corporations are going to do stock buybacks, (the Finance Committee) wants to discourage it, or they want to tax it as a way to discourage it. And that is a chunk of change.
There’s also the corporate minimum tax that was not in the House bill. Fifty-five major national corporations didn’t pay a dime of taxes last year in federal income taxes. Putting in place a corporate minimum tax would ensure that a lot of these corporations can’t get away with paying nothing. And it would try and establish a 15 percent minimum tax that they pay — 15 percent of the profits get paid in taxes. So that could raise a couple hundred billion dollars.
And then there’s a whole bunch of changes that would fund the IRS better so the IRS could go after tax cheats, focused on wealthy tax cheats and the corporate tax cheats — that could bring in to anywhere from $200 billion to $400 billion. So there’s some real good ways to pick up some additional revenue and it really just depends on what they set the investment spending level at.
For more information, visit Americans for Tax Fairness at americansfortaxfairness.org and Billionaires Income Tax at americansfortaxfairness.org/
