President Biden on Monday proposed raising taxes on the wealthiest Americans and businesses, outlining several initiatives in his 2023 budget aimed at reducing the federal budget deficit and closing loopholes that allow the wealthy to lower their tax bills.
The proposals revive elements of Mr. Biden’s economic agenda that have struggled to gain traction in Congress over the past year, including the reversal of key elements of the 2017 tax bill passed by Republicans and the promoting what Mr. Biden has called economic fairness.
The budget introduces a new tax on U.S. households worth more than $100 million, which would require them to pay a rate of at least 20% on their income as well as unrealized gains on the value of their liquid assets, such as stocks, which can accumulate in value for years but are not taxed until they are sold.
The “billionaire minimum income tax” would only apply to the one-hundredth of 1% of the wealthiest American households, and more than half of the income would come from those worth more than a billion dollars. The proposal emphasizes the taxation of unrealized capital gains that accumulate over years, but are taxed only when sold for profit. The White House estimates the new tax would generate about $360 billion in revenue over a decade.
White House officials said the proposal would eliminate tax planning loopholes and strategies that the wealthy have used for years to keep their federal tax bills lower than those of many middle-income Americans. It would only apply to those who are not already paying a tax rate of at least 20% on their unrealized income and gains. Those paying below this level would have to pay the difference between their current tax rate and the new rate of 20%.
Democrats in Congress have considered a variety of different tax proposals that would target the wealthiest Americans, including surtaxes and wealth taxes that trigger gains from a wide assortment of assets.
The Biden administration has pointed out that the proposal is different from wealth taxes that Democrats such as Sen. Elizabeth Warren of Massachusetts have proposed in the past, which would impose annual levies on an individual’s accumulated assets. However, Mr. Biden’s proposed billionaire tax could still face legal challenges, as taxes on unrealized capital gains are different from income taxes permitted by the 16th Amendment.
The idea of the tax has drawn criticism from some conservative groups who have argued that it would discourage investment.
“Under Biden’s tax proposal, wealthy people would be rewarded for their consumption and penalized for reinvesting to grow their businesses,” said Chris Edwards, director of tax policy studies at the Cato Institute. “Patience and caution would be punished. The Biden plan would particularly hurt high-tech industries that rely on wealthy investors to take the big risks that drive American innovation.
The White House budget also includes other tax increases for the wealthy. This would bring the top personal income tax rate to 39.6% from 37%, reversing the 2017 tax cut introduced by President Donald J. Trump. A White House official noted that this was the same maximum rate that was in place under the Obama administration. The rate would apply to unmarried individual taxpayers with incomes of $400,000 or more and married individuals with incomes of $450,000 or more, a Treasury official said.
Mr Biden also proposed raising the corporate tax rate to 28% from 21%, a partial reversal of the corporate tax cut in the 2017 law.
The call for a corporate tax rate hike drew criticism from the retail industry on Monday.
“Major retailers are extremely disappointed to see a tax plan from the president that revives previous failed plans to raise the corporate tax rate to 28%,” said Hana Greenberg, vice president of tax at the Association of Retail Industry Leaders. “In concrete terms, this tax increase would disproportionately penalize merchants who already pay their full freight in corporate taxes.”
In total, the tax proposals represent a tax increase of $2.5 trillion over a decade.
It is unclear whether any of the proposals will be able to garner enough support in Congress to become law. Previous efforts to raise taxes on the wealthy and corporations have met with resistance from moderate Democrats, including Senators Joe Manchin III of West Virginia and Kyrsten Sinema of Arizona.
With an evenly divided Senate and Republicans unlikely to support any kind of tax increase, Mr Biden would need the full support of the Democratic caucus to push new levies through the chamber.