President Joe Biden said he supports a proposal to tax billionaires for the appreciation in their investments on an annual basis, a change that would prohibit some of the richest Americans from deferring their tax bills.
The idea of a levy on unrealized appreciation is being promoted by Senate Finance Committee Chairman Ron Wyden, the Democrat in charge of compiling his chamber’s tax proposals to offset Biden’s social-spending agenda of up to $3.5 trillion. Wyden, who has been working on versions of this proposal for years, will release updated details soon, according to Ashley Schapitl, a spokeswoman for the senator.
“I support a lot of these proposals. We don’t need all of the things I support to pay for this—but I do support that,” Biden told reporters at the White House Friday when asked about the billionaire tax. “I just think it’s about just paying your fair share, for Lord’s sake.”
Requiring investors to pay taxes annually on their unrealized gains would end a longstanding rule that says levies aren’t due to the IRS unless an asset is sold. The change would require ultra-wealthy taxpayers to report on the gains and losses on their stock, bond and other asset holdings annually, rather than being able to defer any taxes until they sell. It’s not immediately clear the rate that would be applied to a new billionaires’ tax.
The idea is essentially a scaled-back version of Senator Elizabeth Warren’s wealth tax, which would put an annual levy on the entire fortunes of the richest households.
The idea is just one of dozens—including corporate rate hikes, estate-tax changes and capital gains tax increases—that Democrats are considering to fund the multi-trillion dollar package to invest in climate programs, education and health care. The legislation could get a vote in the House as soon as next week, but the Senate is likely to take much more time to negotiate and write their version of the bill.
Wyden’s annual billionaire tax, known in accounting circles as mark-to-market, has faced criticism from financial groups saying that it would be incredibly complex to track the annual gain of some assets, including closely held property or other non-tradeable investments. Other detractors have said it is not fair to require tax payments until the income has also been received.
The 100 wealthiest Americans have become $469 billion richer since the start of the year, bringing their combined wealth to $3 trillion as of Thursday, according to the Bloomberg Billionaires Index. Tesla Inc. Chief Executive Officer Elon Musk, world’s richest person, is among those who’ve gained the most. Musk’s fortune, which is largely tied to Tesla’s stock, has soared by $34 billion since January. America’s wealthiest family, the Waltons, have added $23 billion to their fortune over the past 13 months. The third-generation clan owns almost half of Walmart Inc.
The inclusion of Wyden’s proposal would strengthen the tax rules on the wealthiest households. The House version of the tax bill scaled back some of Biden’s original ideas, and omitted a proposal to address a tax benefit that allows some assets to be passed to heirs tax-free, known as step-up in basis. The House plan does include some changes to make the estate tax more expansive.
—With assistance by Devon Pendleton, and Tom Maloney
This article was provided by Bloomberg News.