Vampires are – this is what the stories say – extremely difficult to kill, and so it’s sort of fitting that the same are, but in reality, predatory tax proposals.
The Wall Street Journal
President Biden has expressed support for a proposal under consideration in the Senate to impose an annual income tax on unrealized capital gains of billionaires.
The potential tax hike, pursued by Senate Finance Chairman Ron Wyden (D., Oregon), is believed to be among a number of tax arrangements that Biden is seeking to pay for a draft spending plan. $ 3.5 trillion that sums up much of its first long-term agenda. It is an alternative to some of the administration’s tax ideas that failed in Congress, and it would generate money from the wealthiest segment of Americans, whose income can be a fraction of their wealth.
It is not uncommon for a tax to begin to be levied on “the richest slice of Americans,” but over time it attracts more and more people to its web. As I wrote in March in response to a wealth tax proposed by (surprise!) Elizabeth Warren:
When a âpermanentâ income tax was introduced after the passage of the 16th Amendment, there were not many victims, and they did not suffer much. Less than 1 percent of the population paid income taxes at the rate of only 1 percent of net income. I understand that has changed.
Back to WSJ:
The idea is that for billionaires only, annual gains in wealth would be treated as income. So, under the current law, a person whose net worth has increased from $ 20 billion to $ 22 billion and has not sold anything would have no income. According to Mr. Wyden’s proposal, that person would have taxable income of $ 2 billion.
One of the challenges of the proposal is that it would face losses, and the prospect of the government sending big checks to billionaires is politically unappealing. Lawmakers could allow deductions for annual losses while placing limits on those deductions or allowing them to defer to offset gains in future years.
Mr Wyden has been working on the idea of ââan annual unrealized earnings tax for several years, and its passage would mark a significant change in US tax law that would redefine the taxable income of a few hundred people. It would affect billionaires like Jeff Bezos and Warren Buffett.
There is no official income estimate yet, but a similar proposal targeting a larger group – the richest 0.1% of households – would raise around $ 750 billion over a decade, according to one estimate. of 2019 from tax professors Lily Batchelder and David Kamin, who are now two senior officials in the Biden administration.
Thus, the first clue of the future extension of such a tax is already there. The Wyden proposal affects “a few hundred” people, but the Biden administration has two academics (it should always be remembered that class warfare is mainly managed from in elite) who had already offered something similar for the richest 0.1% of households, still a small number, but the ratchet has to start somewhere.
The authors of the WSJ report (Ken Thomas and Richard Rubin) highlight other practical difficulties with such a tax:
The proposal would be very difficult for the Internal Revenue Service to implement and enforce, in part because of the challenge of valuing illiquid assets, said Andrew Moylan, executive vice president of the National Taxpayers Union Foundation. The resulting revenue stream could be volatile and the proposal could make it harder for founders of large companies to stay in controlâ¦.
The system doesn’t have to be perfect to deal with all the complexities, and policymakers should focus on making it easy to administer and difficult to avoid, said Ari Glogower, professor of tax law at Ohio State University. .
âYou want to design a system that will increase revenue and avoid the most substantial gambling opportunities,â he said.
Translation: We have to stick it to the taxpayer.
There are many other objections to the taxation of unrealized capital gains and, writing in 2019, David Bahnsen responded to an earlier, broader Wyden proposal (âmillionaires and billionairesâ were to be targeted) with demolition work explored here.
I would add this to what David had to say. A tax on an increase on unrealized gains (and, of course, perhaps ephemeral) is only on the most strained interpretation of an income tax. In reality, it is a wealth tax, and one of the things that wealth taxes do is redefine the relationship between the individual and the state. Granted, this is “only” a tax on a portion of a wicked billionaire’s fortune, but (to repeat myself) the ratchet has to start somewhere.
As i tweeted here:
A wealth tax is a sophisticated and lighter derivative of feudalism, but the heart of it is the same: the state (“the king”) has, theoretically, a call on anything you own.
This is not where we should want to be heading.