- Bloomberg reported that Biden was getting more serious about some taxes targeting the rich.
- Economic disparity has grown throughout the pandemic.
- Capital gains, larger corporations, and high earners could feel the hikes that are under talks.
- See more stories on Insider’s business page.
President Joe Biden is getting even more serious about raising taxes on the wealthy, according to a new Bloomberg report. But it likely won’t look like a “wealth tax.”
Biden hasn’t said he’ll enact a wealth tax like the one proposed by Sen. Elizabeth Warren. Instead he’s considering alterations to the tax code that would increase taxes on high earners without creating a tax that targets wealth, the report said.
Biden has already said that Americans making over $US400,000 ($516,519) will see a “small to significant” tax increase. High-earning Americans could see their top income-tax rate increase to 39%.
Now, the deputy director of the National Economic Council, David Kamin, has told Bloomberg what other tax changes are under discussion. One is eliminating the stepped-up basis, something that Treasury Secretary Janet Yellen has already been eyeing.
That measure has to do with inheritance and how inherited assets are valued for tax purposes. Current law lets assets that have gained value since they were originally acquired be valued at their market price and taxed only on the increase from the value at the time of inheritance – not any of the prior gains.
Also under consideration, according to Bloomberg, is increasing the tax rate on capital gains by taxing them at the same rate as the income tax.
Capital gains – profits made from selling assets like stocks – are taxed differently from income once the owner has had the asset for over a year. The rates for those gains are generally lower than the income tax. Throughout his presidency, Donald Trump weighed even more cuts to capital-gains-tax rates. Biden’s proposal could bring the top tax rate up to 39% for those making the most money. And wealthier Americans are likelier to own assets that can be sold for a capital gain.
Finally, Biden wants to raise taxes on businesses.
Yellen is working toward creating a global minimum corporate-tax rate under the idea that if the US can convince most other countries to set the corporate tax rate at a certain level, Biden can raise corporate taxes without fear of multinationals leaving the country.
Growing disparity has underscored the push for a tax increase
According to Bloomberg, the “administration’s intentions” have been reinforced by the “K-shaped” recovery taking place throughout the pandemic in which high-income Americans have seen their jobs and wages grow, while low-income Americans experience the opposite. Biden used the term during a 2020 presidential debate.
Throughout the pandemic, low-wage and minority workers have been hit the hardest. Those low-wage jobs may also not return after the pandemic ends, which would require workers to learn new skills and move into different fields. On the whole, workers globally have lost $US3.7 ($5) trillion in wages during the pandemic, while the world’s billionaires have added $US3.9 ($5) trillion to their cumulative net worths, an Oxfam report found. In the US alone, billionaires added $US1.3 ($2) trillion to their net worths during the pandemic, according to the Institute of Policy Studies and Americans for Tax Fairness.
Biden’s $US1.9 ($2) trillion stimulus package did offer some relief – and increased consumer confidence – for low-income Americans. That package was passed via reconciliation, which seems to be the most likely route forward for any Democratic tax hikes.
Tax increases – and what the wealthy are (or aren’t) paying – have been a hot topic
A new report by the National Bureau of Economic Research found that the top 1% of Americans were avoiding taxes more than anticipated. They’ve been failing to report about 21% of their income, the report said.
There has also been a more targeted push by progressives to introduce a new tax on wealth. Warren introduced a new bill that would increase taxes on the top 0.05% of households. If the measure had been in place in 2020, it would have raised $US114 ($147) billion from billionaires alone, according to an analysis from Americans for Tax Fairness.
White House press secretary Jen Psaki has said Warren and Biden share similar objectives for addressing that “those at the top are not doing their part” but the two ultimately have different plans.
In an interview with Bloomberg, Warren praised the American Rescue Plan and Biden’s continual advocacy for it. “There is momentum now for real change, and tax policy is a critical part of that change,” she told Bloomberg.
Warren also recently joined Sen. Bernie Sanders and other progressive Democrats in introducing a bill that would target corporations where CEOs make at least 50 times more than the median worker. That bill could raise up to $US150 ($194) billion in 10 years.