Massachusetts Senator Elizabeth Warren proposed during the 2020 presidential race to implement an “Ultra-Millionaire Tax,” which would pull in $3.75 trillion over 10 years. “Think about how that money could be used,” her campaign said. Vermont Senator Bernie Sanders upped the ante with his proposed “Tax on Extreme Wealth,” which aimed to establish a graduated wealth tax for billionaires.
Those campaign trail pledges embraced the data and the vision of groups such as Americans for Tax Fairness, Citizens for Tax Justice, the Institute for Policy Studies, and Patriotic Millionaires that have long advocated increasing taxes on the rich to address economic inequality. They were sound, economically and politically. They were also popular, as evidenced by the cheers the plans elicited at rallies for Warren and Sanders and multiple polls showing that the idea of taxing American oligarchs is well-liked. Yet the Warren and Sanders plans were quickly dismissed by Republican and Democratic insiders, as well as the media elites that police the discourse to assure that the most privileged among us are not offended by what they read in the morning papers. To the extent that these insiders and media elites entertained any notion of a tax increase on the wealthy, they preferred a more “moderate” plan advanced by former vice president Joe Biden, which focused on capital gains and estate tax hikes.
Biden won the party’s nomination and the 2020 election. But as we’ve witnessed in recent months, so too did the “tax the rich” politics that Warren and Sanders advanced. Slowly but surely, Biden and the Democrats have come around to the idea that taxing billionaires is smart economics and very smart politics. Now, taxation of extreme wealth is not just “on the table”—it’s in the budget.
President Biden has proposed a “Billionaire Minimum Income Tax,” which the White House argues will eliminate “the inefficient sheltering of income for decades or generations.” A White House fact sheet explains, “In 2021 alone, America’s more than 700 billionaires saw their wealth increase by $1 trillion, yet in a typical year, billionaires like these would pay just 8% of their total realized and unrealized income in taxes. A firefighter or teacher can pay double that tax rate.”
The proposal seeks to address that reality by requiring households with assets valued in excess of $100 million to provide the Internal Revenue Service with annual accountings of how those fortunes increased. Billionaires and über-millionaires who paid less than 20 percent on their gains would have to write a check to the IRS to get their rate of payment up to 20 percent.
That’s not a “wealth tax” in the sense that Warren, Sanders, and others have proposed. But arguing about semantics misses the point. The tax targets the very rich with a necessary income-tax adjustment.
Right now, über-billionaire Elon Musk enjoys a tax rate of 3.27 percent, while Amazon’s Jeff Bezos pays 0.98 percent, according to a 2021 ProPublica report. Getting them to pay 20 percent would be an epic accomplishment, which is what makes the president’s initiative a big deal. Indeed, as Amy Hanauer of the Institute on Taxation and Economic Policy has said:
Creating a Billionaire Minimum Income Tax would ensure for the first time that the very wealthiest people in this country, those who have gained the most from our economic system, would finally begin to pay tax on their full income, just as regular working people do on their earnings. It would affect only the richest .01 percent of households and it would raise hundreds of billions of dollars for the essential priorities that face all of us as a nation. It will help us address the soaring inequality we see in this country and make the tax code fairer, more adequate, and more sustainable. This plan offers a transformational and long-overdue change.
Facing a difficult midterm election cycle, Democrats should bet on the appeal of a billionaire tax to excite Americans.
If they can lock in a minimum tax for billionaires, the administration estimates that it would raise roughly $361 billion over the coming decade. Of course, the tax should be even higher—in a recent Nation piece, I proposed a top marginal rate of 92 percent, based on standards set during the administrations of Presidents Franklin Roosevelt and Dwight Eisenhower. But as US Representative Ro Khanna (D-Calif.) has said, “It’s high time that people who have made billions of dollars pay the same tax as preachers and as people who are in service jobs. And this is a first step towards that.” Khanna, a champion of higher taxes on wealthy individuals and of a windfall profits tax on fossil fuel companies, has also said, “I don’t see why any Democrat wouldn’t get behind it.”
Cue Senator Joe Manchin, the West Virginia Democrat who is griping that Biden’s plan would get that $361 billion by taxing the value of assets that are held by billionaires, rather than from taxes on gains made when the assets are sold. “You can’t tax something that’s not earned. Earned income is what we’re based on,” the senator said Tuesday.
Manchin’s wrong, of course. But he did leave some wiggle room for negotiations, adding, “There’s other ways to do it. Everybody has to pay their fair share.”
To build support for the proposal, Biden and the Democrats who want to increase their party’s majority in November should not be intimidated by Manchin. They should go directly to the American people and make the Billionaire Minimum Income Tax a central theme of their messaging about what they want to do, in this Congress if possible, or in the next Congress if voters give the party enough seats in the Senate to marginalize Manchin.
Democratic strategists need to recognize that while billionaires and their apologists are already grumbling about Biden’s proposal, the American people love the idea of taxing the rich. “The polling is good for any tax that can be labeled a ‘Billionaire Tax’—people think, ‘That’s somebody else, and they ought to contribute more’,” said Steve Rosenthal, a senior fellow at the Tax Policy Center. “And ‘hundred-millionaires’ probably aren’t too sympathetic as a class, either.”
Even before the latest round of pandemic profiteering, a 2019 Hill-HarrisX poll found that 67 percent of registered voters agreed that a tax of billionaires should be implemented to cut down on inequality, while only 33 percent opposed such an effort. At that point, 85 percent of Democrats favored the tax, as did 66 percent of independents and 53 percent of Republicans. That’s consistent with a June 2021 survey by ALG Research and Hart Research for Americans for Tax Fairness, which found that two-thirds of voters (69 percent) of Americans believed Biden should raise taxes on the wealthy and corporations. “Indeed,” noted ATF, “every proposal to raise taxes on the wealthy and corporations tested in the survey is supported by at least 55% of voters, with most generating over two-thirds support.”
For Biden and the Democrats, that’s the polling data—and the message—that they should run with in 2022.