US billionaires would pay tax on unrealised gains from their assets to help finance President Joe Biden's social policy and climate change legislation, a proposal unveiled on Wednesday by the top Senate Democrat for tax policy said.
The so-called billionaires tax, announced by Senate Finance Committee Chairman Ron Wyden, is part of a two-pronged legislative strategy that also includes a proposed 15 per cent minimum corporate tax on the most profitable US corporations.
Mr Wyden and other lawmakers, including Democratic Senator Elizabeth Warren, say the legislation is intended to curtail tax avoidance by corporations and the wealthy and could generate hundreds of billions of dollars to pay for Mr Biden's “Build Back Better” legislation, which is expected to cost between $1.5 trillion and $2tn.
The levy would apply to taxpayers who, for three consecutive years, have had assets worth at least $1 billion or have earned at least $100 million three years in a row.
The thresholds mean about 700 people would be affected, a summary of the plan showed.
But even if the proposal does pass, collecting the several hundred billion dollars that Mr Wyden’s office says it will raise depends on the rules withstanding probable court challenges and loophole-seeking by those in the Internal Revenue Service’s sights.
“There are two tax codes in America. The first is mandatory for workers who pay taxes out of every paycheck. The second is voluntary for billionaires who defer paying taxes for years, if not indefinitely,” Mr Wyden said in a statement.
“Two tax codes allow billionaires to use largely untaxed income from wealth to build more wealth.”
The White House backs the corporate minimum tax, which would dovetail with a global corporate minimum tax recently agreed to by 136 countries and aimed at corporations that pay little or no tax by gaming the international tax system.
But the billionaires tax faces potential opposition from Democrats in the House of Representatives, who favour straightforward increases in tax rates for companies and the wealthy as a way to fund the Biden agenda.
Tesla chief executive Elon Musk blasted the plan on Twitter.
“Eventually they run out of other people's money and then they come for you,” said Mr Musk, who early this week was worth about $230bn, Refinitiv reported.
Not all billionaires are opposed to the plan. George Soros, the investor and liberal activist, is “supportive”, his representative told Reuters on Monday.
Aides said the 23.8 per cent tax rate for long-term capital gains on tradable assets, such as stocks that increase in value over the year whether or not they have been sold. It would also allow taxpayers to take deductions for losses on assets.
Agencies contributed to this report