President Joe Biden plans to raise billions through wealth tax to support his social and economic agenda, which is contrary to his campaign promises.
Biden’s repeated promises to raise taxes on big companies and wealthy citizens have worried US Citizens.
Biden says it would support environmental projects, childcare, child tax credits, and maternity leave.
According to Biden, a tax on the wealthiest 0.005% of Americans would help to reduce the deficit.
He will have to persuade Congress and voters to agree with this his wealth tax proposal.
What Is Wealth Tax?
A wealth tax is a charge on the difference between one’s assets and debts(net worth). One-time or ongoing wealth taxes are possible depending on legislation and policy.
Pros and Cons of the Wealth Tax Proposal:
The wealth tax has some other benefits and drawbacks:
- Billionaires will benefit from stock market investments.
- People with assets or income over $1 billion for three years will pay taxes
- According to the AP, the new tax standard would hurt 700 households worse.
- Billionaires’ will pay for taxes on stocks and bonds.
- Inheritance tax will include taxes. Then there’s the tax upon selling the asset.
- Sellable assets like property and company stock will be taxed
- Billionaires will be taxed on pre-tax gains in the first year.
How Much Will Wealth Tax Generate?
According to CNN, House Speaker Nancy Pelosi expects the tax to raise $200-250 billion.
This is a big figure, but nothing compared to the $2 trillion expected over the next decade.
Enforcing existing laws and creating new ones, such as a global minimum tax, would help reduce the deficit.
Additionally, there is a wide dispute over a wealth tax’s income projection.
“It’s absolutely impossible, I’ve never heard an explanation for how this might work,” said Allison Schrager of the Manhattan Institute.
Biden’s wealth tax proposal brings worry upon some officials. Should this worry the US Citizens?
Do Billionaires Own That Much?
It appears to be the case. The issue of taxation is a concern.
What if wealthy individuals invested in startups? What if the government, sponsored child care, universal preschool, and renewable energy transitions?
Affluent people have to pay taxes too. Yet, nothing has been done about it.
According to the Americans for Tax Fairness and IFS Inequality Program, billionaires’ wealth has surged 70% since the epidemic began.
The gain since March 18, 2020, equaled what Biden planned to spend over a decade. ATF’s Frank Clemente said millionaires aren’t paying taxes on their massive stock gains during the pandemic.
In the same way as employees’ wages, this tax would tax asset appreciation. There were 614 US billionaires at the start of the epidemic. Now there are 745.
Others, especially the poor, have become wealthy slowly over the period of the pandemic.
The Federal Reserve states that during 2007 and 2008, the net worth of the lowest 90% of Americans grew by 22%.
US Citizens believe growing stock market values helped house values and those government-aided small businesses.
Do the Wealthy Avoid Taxes?
There may have been ways for billionaires to dodge taxes in the past. They may have employed legions of tax attorneys, accountants, and others.
The Pandora Papers expose a global corporation that protects wealthy individuals and politicians from taxation.
According to the ProPublica analysis, Warren Buffett paid an average of 19% in taxes, Jeff Bezos 23%, and Elon Musk 30%.
Since the top marginal tax rate on work income is 37%, but just 20% on capital gains, it benefits the rich. Increasing new business investment can also boost the economy by cutting capital gains taxes.
Between 2010 and 2018, 400 of the wealthiest households paid an average federal income tax rate of 8.2%.
The government objects to the low rate since middle-class people pay more taxes.
Democratic MPs aim to stop the rich from escaping from tax.
Why Did Biden Choose Wealth Tax?
Biden’s original proposal was to raise taxes on corporations and the wealthy. Despite his solid plan, he is yet to appease West Virginia Senator Joe Manchin and Arizona Senator Kyrsten Sinema.
Only two votes in the Senate will determine the Democratic Party’s fate. Sinema objected to raising rates, therefore the wealth tax was proposed.
Billionaires such as Elon Musk have stepped out against Biden’s idea of imposing a wealth tax.
French economist Thomas Piketty’s book “Capital in the Twenty-First Century.” accelerates this.
Moving forward, Massachusetts Sen. Elizabeth Warren and Vermont Sen. Bernie Sanders both suggested a 2% wealth tax.
Unlike most of his rivals, Biden never jumped on board. While promising higher taxes on the wealthy, he left out individuals earning under $400,000.
Most Americans may also handle minor concerns like the “deferral recapture amount.”
Whatever the wording and execution, the effectiveness of a wealth tax depends on Biden’s larger goal.
Considering that what happens in the US may affect other parts of the world, it’s important to stay tuned to the Press Updates.
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