Manchin needs to get behind the Billionaire Minimum Income Tax

Shutterstock | Tinnaporn Sathapornnanont

 
 
  

Yesterday, President Biden and the White House unveiled their $5.8 trillion budget request for the 2023 fiscal year. There are many parts of the budget that are garnering headlines, but the most exciting is clearly Biden’s “Billionaire Minimum Income Tax” proposal.

The Billionaire Minimum Income Tax would institute a 20% minimum tax rate on incomes for households worth $100 million or more. It would only affect the top 1% of the 1% – roughly 30,000 of the wealthiest households in America – and would apply to all income sources, including unrealized capital gains. It is estimated that the tax would raise $360 billion in revenue over a decade and $215 billion from just the top ten richest Americans alone.

This fantastic proposal has been a long time coming and we celebrate the Biden administration throwing its support behind it. Just two weeks ago, we discussed why Democrats must institute a “mark-to-market” tax like the one Biden is proposing. As we mentioned, most rich people make most of their money from capital gain and, unlike ordinary income, this type of capital income is only taxed when investors decide to sell assets.

This is how, as ProPublica reported last June, the ultra-rich can get away with paying extremely low effective tax rates, or no taxes at all, year after year. In short, Biden’s proposal to start taxing capital gains on a regular, annual basis would go a long way in ensuring the wealthy pay their fair share by targeting one of their favorite tax dodges.

Unfortunately, Biden’s proposal has already been stymied by West Virginia Senator Joe Manchin. Ironically, the White House crafted this and other tax initiatives in the budget specifically with Manchin in mind, hoping to appease the notoriously recalcitrant moderate with proposals that fit his deficit reduction and tax reform priorities. But this seems to not have worked, as Manchin has now publicly voiced his opposition to the Billionaire Minimum Income Tax and effectively doomed its passage.

According to Bloomberg, Manchin reasoned his opposition by saying, “…the idea is a ‘tough one.’ You can’t be taxed ‘on things you don’t have…you might have it on paper. There are other ways for people to pay their fair share, and I think everyone should pay.’”

Manchin has got it all wrong. For one thing, billionaires most definitely “have” all of their wealth. Yes, Elon Musk doesn’t receive cash or checks in the mail whenever his stocks or bonds increase in value. But to say that he doesn’t “have” the $121 billion that he added to his fortune in 2021 is extremely disingenuous. Rich people like Musk can “have” their wealth and use it to fund their exorbitantly lavish lifestyles by selling assets or, more commonly, taking out low-interest loans against their holdings.

Further, the Billionaire Minimum Income Tax is the furthest thing from a “tough idea.” Instead, it is probably the easiest idea on offer that would help Democrats score political bonus points with voters ahead of the 2022 midterm elections. Raising taxes on the wealthy and corporations is extremely popular with the public, and with the leading tax proposal from Republican Senator Rick Scott demanding that poor people pay more income tax, instituting a tax like Biden’s would go a long way in showing voters that Democrats are committed to making the wealthy pay for our country’s bills. After all, they could certainly use the boost as their polling ahead of the 2022 midterms continues to trail behind Republicans.

To his credit, Manchin is correct in claiming that there are other ways for the wealthy to pay their fair share in taxes. We can equalize tax rates on capital gains and ordinary income. We can reform estate and gift taxes. We can close loopholes and exemptions. We can and should do all of these things, but in order to begin taxing billionaire income in any meaningful way in this country, we need to institute a mark-to-market tax like Biden’s.

Manchin has been nothing but an obstacle in virtually all of Biden’s legislative initiatives. If he wants to redeem his reputation and finally prove himself to be a team player, throwing his support behind Biden’s Billionaire Minimum Income Tax proposal is the easiest way to do it. If he doesn’t, he might end up paying for it in 2024.

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