During a press conference underlining the budget Monday, Biden said one percent of Americans will be taxed. “The minimum tax for billionaires is fair and raises $ 360 billion that can be used to cut costs for families and reduce the deficit,” he said. Whether Congress approves it is an important question, as the government outlines its hope of taxing the country’s highest-income people. See how it would work: HOW WILL THE TAX APPLY? The budget proposes that households worth more than $ 100 million pay at least 20% tax on both income and “unrealized gains” – increasing the value of an unsold investment. For many wealthy people, the administration says, “true income” is never taxed, as it can be maintained for decades and sometimes generations. Biden’s proposal would allow wealthy households to split certain payments into unrealized gains over a nine-year period and then for five years into new incomes in the future. The multi-year extension of payments is intended to smooth out annual fluctuations in investment income, while ensuring that the wealthy end up paying a minimum tax rate of 20%. In fact, the Millionaire Minimum Income Tax payments are an advance payment of the tax liabilities that these households will owe when they later realize their profits. This is a very differentiated policy. The tax targets the extremely rich. It taxes the profits made from their wealth, but it is real and unrealized income and not just the underlying assets. That’s why David Gamage, a professor of tax law at Indiana University, says “it’s not a property tax, it’s an income tax reform.” He says, “This is a minimum income tax that includes the real economic value” of income that can be withheld for a very long time, he said. WHO WOULD SEE THE IMPACT? About 700 billionaires will be affected by the tax proposal, the White House says, estimating that these individuals increased their wealth by $ 1 trillion in 2021, paying about 8 percent of their income and unearned tax profits. “A firefighter and a teacher pay more than double the tax” a billionaire pays, Biden said at a news conference on Monday. Elon Musk, Bill Gates, Jeff Bezos, Warren Buffett and Michael Bloomberg are just a few of the celebrities who could see their share of the profits taxed under this proposal, if it became law. HOW MUCH MONEY WOULD HE COLLECT? According to the White House, $ 361 billion in 10 years. The budget proposal includes additional revenue of $ 1.4 trillion, which will include a higher tax rate of 39.6% for individuals and an increase in corporate tax to 28%. HOW DO VOTERS FEEL? The issue of tax evasion has increased in recent years. A report by ProPublica last June described how richer Americans can legally pay income taxes, which is a fraction of what middle-income Americans pay for their income. And a Pew Research Center study last April found that most Americans – about 59 percent – said they were “very” upset that some companies and wealthy people were not paying their fair share of taxes. A 2017 Gallup poll found that just over six in 10 Americans say people with higher incomes pay very little in taxes. IS IT POSSIBLE FOR THE CONGRESS TO APPROVE THIS MEASURE? “A few years ago, I would have laughed out loud,” said Donald Williamson, a professor of accounting and taxation at the American University in Washington. “Today it is understandable.” Most likely it is through “reconciliation” – a budget process for passing fiscal legislation by a simple majority of the Senate. This will require a takeover of West Virginia Sen. Joe Machin and Arizona Sen. Kyrsten Sinema, who have opposed tax proposals for the super-rich in the past. Steve Wamhoff, director of tax policy at the Institute for Taxation and Economic Policy, says Democrats “have this reconciliation vehicle that they can use to pass legislation.” “This is a step towards a much fairer tax code.”
Associated Press author Josh Boak contributed to this report.
