This “Billionaire Minimum Income Tax” would target the 700 richest Americans, with a minimum tax rate of 20% on income over $100 million annually.
President Biden is proposing as part of his fiscal year 2023 budget proposal an innovative form of taxing the unrealized capital gains of the wealthiest Americans. Less than 20,000 households of multimillionaires would have to prepay taxes on their assets, particularly in stock market values. The Treasury wants to oblige households with assets of more than 100 million dollars to pay at least 20% of their income in taxes. The American tax authorities would thus generate 360 billion dollars in additional revenue over 10 years, according to the estimate of the White House.
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The objective of the reform is to circumvent the enormous obstacle of the taxation of many American billionaires: the latter often receive relatively little taxable income. On the other hand, they have enormous potential capital gains, thanks to the appreciation of their stock portfolio. By pledging this heritage with banks, they can borrow huge sums and live richly while escaping the bulk of income tax. For the moment, capital gains are only taxed when they are realized, for example when the co-founders of technology empires like Amazon, Apple or Meta Platforms (formerly Facebook) sell a share of their securities on the market. They are also when they die and their heirs decide to sell.
Question of constitutionality
The idea of a federal estate tax is constitutionally dubious. If the proposal were accepted, it would certainly be submitted to the Supreme Court, in order to determine whether the 16th amendment to the Constitution, relating to income tax, authorizes this new approach. Can we tax income that only exists virtually?
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Republicans, who control half of the Senate, will certainly seek to block reform. Estimating the value of the estates of millionaires also promises to be complex and subject to lengthy legal challenges.
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