President Biden is proposing a Billionaire Tax that will target big corporations and wealthy Americans. Optima Tax Relief reviews the plan.
The billionaire tax would impose a minimum 20% tax on households with a net worth of over $100 million. Currently, those households pay an average of 8%. American taxpayers who earn $400,000 or less will be protected from the tax.
This proposition comes after the president signed the Inflation Reduction Act into law, which imposed a 15% minimum tax on corporations that earned more than $1 billion in profits. In addition, there is also now a 1% excise tax on stock buybacks, which disables large corporations from avoiding paying tax on dividends.
President Biden is also seeking to adjust the capital gains tax rate. The proposed 48.6% rate with a 3.8% net investment income on long-term capital gains and dividends would be applied to earnings over 41 million.
The billionaire tax is essentially an effort to balance income earned and unrealized gains when determining how much to tax. Unrealized gains are increases in the values of assets, like stock or real estate, that have not been sold. Taxes are currently only owed on capital gains when they are realized, or sold. The rate of tax that is owed will depend on how long the asset was held. In other words, the tax would aim to get the wealthiest Americans to pay taxes without being able to shelter their income made off investments for decades. In order to do this, a lot of administrative work would need to be done each year, including figuring out the market value of taxable assets.
Since Republicans control the House, the tax will likely not pass. For now, tax advocates are focusing on trying to make an impact at the state level.