- House Ways and Means Chairman Richard Neal said the proposal to tax billionaires was unlikely to be taken up.
- Senate Democrats had announced the plan to target the wealthiest of the wealthy on Wednesday.
- But the architect of the proposal, Senate Finance Chair Ron Wyden, insisted it will stick around.
A Senate proposal that would target American billionaires was “very unlikely” to be taken up in the House if it can’t pass the upper chamber, House Ways and Means Chairman Richard Neal told reporters on Tuesday.
At the same time, Neal’s counterpart, Senate Finance Committee chair Ron Wyden, was far from throwing in the towel on the proposal he authored, underscoring major divides among within the party on how to pay for their social spending package.
Sen. Joe Manchin of West Virginia imperiled the measure after criticizing it as both punitive to successful people and unworkable. “I don’t like the connotation that we’re targeting different people,” he told reporters, floating a 15% “patriotic tax” without elaborating further.
Senate Democrats can’t spare a single vote in their endeavor to approve President Joe Biden’s economic agenda over unanimous GOP opposition. Manchin’s opposition threw the tax into doubt and further complicated Democratic efforts to close a revenue gap that only seems to be growing wider in recent days.
The plan from Senate Democrats on Wednesday would tax roughly 700 of the nation’s billionaires. Under the “billionaires’ income tax,” the wealthiest slice of Americans would see the skyrocketing value of their stocks and assets taxed. They estimate that it could generate up to $US400 ($AU531) billion in revenue, though projections vary.
House Democrats were ready to move on as anxiety and frustration mounted among rank-and-file lawmakers at the crawling pace of Senate negotiations with Manchin and another holdout, Sen. Kyrsten Sinema of Arizona.
Neal said that a new surtax on millionaires may still be included as a back-up. The proposal would slap a 3% surtax on individual incomes above $US5 ($AU7) million. The nonpartisan Joint Committee on Taxation projected it would raise $US127 ($AU169) billion
But Wyden pushed back against the idea that this is the end of the road. “I’m not saying that it’s dead!” Wyden told Insider, noting that the White House still backs the proposal.
“I’m talking to senators, and nobody has said that the status quo is okay,” Wyden added. “Everybody gets that this is flagrantly unfair.”
The Oregon Democrat also criticized the millionaire surtax. He argued the measure “allows the billionaires to literally skate to tax avoidance” since it targets people’s income and not their assets.
Normally, assets are just taxed when they’re sold – what’s called a capital gain. However, the new proposal, spearheaded by Wyden, would tax “unrealized gains,” or when unsold stocks and assets grow in value. It tends to be the main source of wealth for billionaires with a hoard of stocks.
“The basic problem is that for very wealthy people who get most of their income from capital gains, they can choose when to pay tax on that income, if at all,” Samantha Jacoby, a senior tax legal analyst at the nonpartisan Center on Budget and Policy Priorities, told Insider.
The tax on billionaires came after Sinema, another key moderate, pushed back on raising taxes for high earners and corporations to offset infrastructure spending. Instead of rolling back Trump-era tax cuts and hiking rates for Americans who earn over $US400 ($AU531),000, Democrats instead turned towards taxing the 700 or so billionaires in the country.
An analysis from economist Gabriel Zucman found that the tax could bring in $US500 ($AU664) billion, $US275 ($AU365) billion of which would come from just the top 10 richest billionaires. If the proposal came to fruition, it would be a “a major structural reform to the tax system” to tax income from wealth like income from wages, according to Frank Clemente, executive director at the left-leaning advocacy group Americans for Tax Fairness.