Biden’s Billionaire Tax Would Punish Long-Term Investors
The president’s proposal is not only plagued by practical problems, but also undermines one of the core goals of a progressive tax system.
Everything old is new again.
Photographer: Win McNamee/Getty Images North AmericaIn his upcoming budget, President Joe Biden proposes reviving the wealth tax, a concept popularized by his rivals in the Democratic presidential primary two years ago. The proposal — now dubbed the “Billionaire Minimum Income Tax” — includes a few improvements over the 2020 version. Nonetheless, it remains a convoluted mess whose primary benefit could be achieved by simply eliminating a loophole in the current tax code.
A core difficulty faced by early wealth tax proposals is uncertainty over whether they are constitutional. The Constitution stipulates that any direct tax on citizens be levied such that each state pays the same amount per capita, an onerous requirement that makes it almost impossible to impose a wealth tax. The 16th Amendment, however, made income taxes legal. So, rather than levy a 2% tax on wealth each year, as Senator Elizabeth Warren envisioned, Biden’s plan would levy a onetime charge of 20% whenever an asset increases in value.