Biden moves to campaign mode with billionaire tax plan
President Biden’s proposal to impose a 20 percent minimum tax on billionaires is a sign that Democrats are looking ahead to the midterm elections and scrambling for a good message in a tough political environment.
The proposal itself has an uphill path to becoming law, as Sen. Joe Manchin (D-W.Va.) has previously expressed concern about targeting the super-rich, but it gives Democrats a great talking point to capitalize on the unpopularity of billionaires such as Jeff Bezos and Elon Musk.
Whether moderate Sen. Kyrsten Sinema (D-Ariz.) will support the idea is another uncertainty. She opposed raising the top marginal income tax rate or the corporate tax rate during negotiations with the White House in the fall.
Republicans are leery about attacking the proposal because they don’t want to be seen as siding with billionaires, which makes it a good talking point for Democrats when inflation is a major problem and much of their legislative agenda remains stalled on Capitol Hill.
Policy experts predict that even if Biden can’t get his billionaires tax enacted this year, it will be a topic of conversation heading into his 2024 reelection campaign.
“It’s important that you have the president propose it and if it doesn’t get done this year, I think it remains on the table. I think it’s something that will remain unfinished until it’s done. It’s such a glaring flaw that at some point it needs to be addressed,” said Chuck Marr, the vice president for federal tax policy at the Center on Budget and Policy Priorities, a liberal-leaning nonpartisan policy institute.
“It’s a major policy issue for this year and every year until” it gets enacted, he added of the billionaires’ tax. “Once the Pro Publica story came out, I don’t think policymakers can ignore that.”
Pro Publica published a bombshell story in June based on a trove of secret IRS files reporting that several of the nation’s richest multibillionaires, Bezos, Musk, Mark Zuckerberg and Rupert Murdoch, paid little and sometimes nothing in income taxes compared to their huge personal wealth.
Musk, for example, the world’s richest man, didn’t pay any federal income taxes in 2018, according to the report. Bezos, who is worth an estimated $190 billion, didn’t pay federal income taxes in 2007 or 2011.
Less than a year later, Biden is seeking to capitalize on the issue by proposing a new tax on billionaires in the budget plan he released Monday.
The White House budget office on Monday said in a fact sheet explaining the proposal that “the tax code currently offers special treatment for the types of income that wealthy people enjoy.”
Democratic strategists say the budget signals that Biden is pivoting to the center and closer to who he was when he ran for the White House and won two years ago.
“I think it’s return to Biden 2020,” said Jim Kessler, executive vice president for policy at Third Way, a moderate Democratic think tank. “There’s deficit reduction, more money for police, a strong defense budget.
“He ran as a centrist with big ideas in 2020 and that won the Democratic primary and it beat Donald Trump, and then early on he did what had to be done with the [American] Rescue Plan and getting through the pandemic and the infrastructure bill.”
Kessler noted that Biden’s fall in the polls coincided with the Democrats’ push for what was initially envisioned as the $3.5 trillion Build Back Better climate and social spending bill.
“I think Build Back Better started to get away from him,” he said. “Congress deserves some of the, definitely, blame on this, too. That $3.5 trillion price tag — no one thought that was real and that just hung around for too long.”
Some progressives say Biden’s proposal doesn’t go far enough to raise to tax the rich.
“I think it’s a good start. I think you got to go a little further,” Senate Budget Committee Chairman Bernie Sanders (I-Vt.) told The Hill.
Biden’s proposal comes at a time when Democratic lawmakers have largely moved on from last year’s effort to muster 50 Democratic votes to implement Biden’s tax reform and social spending agenda.
Many Democratic senators were left highly frustrated after months of negotiations with Manchin and Sinema that failed to yield a bill that could be brought to the floor for a vote.
“I’ve taken the word reconciliation, I’ve put it over here on the shelf,” said Senate Majority Whip Dick Durbin (D-Ill.), pantomiming the act of setting something aside. “I’m focusing on everything else that’s going on around here, and most of it needs 60 votes, which means it’s very limited in scope.”
“I don’t want to go through this exercise again of getting my hopes up that reconciliation is going to solve our problems and then losing it to one or two senators at the last minute,” he said.
Biden’s billionaire tax proposal would need to pass under special budget reconciliation rules to circumvent a Republican filibuster, as it has no chance of getting 10 GOP votes in the 50-50 divided Senate.
Durbin said he doesn’t know whether it would have the support of Manchin and Sinema.
“I don’t know, it would be close,” he said when asked whether it would muster all 50 votes in the Democratic caucus.
Manchin last year expressed some concern about targeting billionaires to raise revenue for Biden’s agenda but didn’t altogether shoot down the idea.
“I don’t like it. I don’t like the connotation that we’re targeting different people,” Manchin told reporters when asked in October about a proposal sponsored by Senate Finance Committee Chairman Ron Wyden (D-Ore.) to tax the unrealized capital gains of billionaires and people who earned $100 million or more in three consecutive years.
Manchin argued that ultra-wealthy individuals “bring a lot of jobs, invest a lot of money and give a lot to philanthropic pursuits.”
Sinema was a major obstacle to the Democrats’ tax reform agenda last year. She stood firmly against proposals to raise the marginal income tax rate on the top income bracket and to increase the 21 percent corporate tax rate.
Faced with Sinema’s opposition to raising the marginal and corporate rates, the White House instead proposed a 5 percent surtax on income above $10 million and an additional 3 percent surtax on income above $25 million.
A major problem with that proposal was that it did little to tax multibillionaires such as Bezos and Musk, who in past years have avoided paying federal income tax or paid very little by declaring little to no income. Many billionaires can live lavish lifestyles by taking out big loans secured by their assets instead of accepting regular income or selling stock to cover expenses.
Biden’s new plan would impose a minimum 20 percent tax on income and the unrealized gains of stocks and other liquid assets for households worth more than $100 million.
But the idea of taxing unrealized gains is controversial among Republicans, independents and Democrats.
A poll and study by professor Zachary Liscow of the Yale University Law School and Edward Fox of the University of Michigan Law School found that Americans are opposed to taxing unrealized gain by a margin of 3 to 1.
So while the talking point of taxing the ultra-rich is a good political message for Democrats, getting the proposal outlined by Biden on Monday through Congress will be a heavy lift.