Washington may tax the passive income of the super-rich to finance social spending

AFP, Released Tuesday, October 26, 2021 at 1:15 p.m.

The United States is preparing a tax on the super-rich to fund Joe Biden’s investment plans, which is the result of difficult negotiations between various democratic factions, and the cult of individual victory stands alone in the country.

Faced with opposition from a section of Democrats to raising taxes on multinational corporations to finance infrastructure projects and social activities, an idea re-emerged: taxing so-called “hidden” capital gains and taxing passive gains in dense portfolios. Shares of big American fortune.

Today, a wealthy partner like Elon Musk, the boss of Tesla, or Jeff Bezos, the founder of Amazon, does not pay taxes on these unrealistic capital gains on the pretext that these gains do not exist and are not actually monetized.

On Sunday, Democrat Nancy Pelosi, the leader of the House of Representatives, pointed out that the proposal was on the table. “We will tax the rich,” he told CNN.

U.S. Treasury Secretary Janet Yellen acknowledged on the same channel that “this will facilitate returns on capital, which will represent the most important part of the rich’s income and are not currently taxed.”

According to the Wall Street Journal, the plan targets assets of more than $ 1 billion or more than $ 100 million in three years, or less than 1,000 U.S. taxpayers. Other media refer to about 700 billionaires.

– “A Breakthrough” –

Gabriel Jugman, a professor at the University of Berkeley, said in an interview with AFP that the tax would be a turning point if it was adopted.

“This is the first time millionaires have been taxed. This is the most progressive tax imaginable,” he said. Moreover, it could “spread oil” in Europe, where “it is much easier to have a large fortune by paying a small dividend or by levying small taxes on realizing small capital gains,” he added.

Mrs. According to Pelosi, the tax could generate at least $ 200 billion in revenue in a decade, far from the $ 3,000 to $ 3,200 billion that Joe Biden spent over 8 to 10 years reforming the United States.

However, the idea remains attractive as wealth is increasingly accumulated over the social level.

Steve Wamhoff, director of the Institute for Economic and Monetary Policy, responded that the tax would “deal with the biggest breach in our tax code, which would benefit the very rich.”

He points out that the current code “makes sense” for the middle class, for example renters, whose value increases over the years. “No one expects you to pay tax on the value of this property before you sell the property,” he says. “But this picture is so different for millionaires that they can leave most of their income in real capital gains without paying taxes.”

Pelosi said Senator Ron Wyden, chairman of the Senate Finance Committee, who has been working on different versions of the plan for the past two years, will explain the final proposal earlier this week.

– Far from account –

Senator Elizabeth Warren, when he was a presidential candidate last year, proposed a drastic version of the tax on these unrealistic capital gains, surprisingly supporting the idea.

In particular Ron Wheaton’s plan will target not only stocks but also other assets such as real estate.

Republicans will not raise their voice because they have long opposed such a tax, which they say is difficult to create and implement additional bureaucracy. Unrecognized capital gains vary with the price of the stock. So, do I have to repay the tax paid by the tax administration if the price goes down?

On the Democrats’ side, the proposal could be considered acceptable after President Joe Biden drastically reduced the size of his investment plans.

However, Biden management needs to find other sources of funding for its forensic projects.

The “Build Back Better”, “Reconstruire en better” project in support of social and climate action is worth $ 2,000 billion over 10 years and $ 1,200 billion to modernize infrastructure.