Joe Biden has been busy crunching numbers. In addition to a new spending plan that would increase the national security budget by $813.3 billion, four percent higher than last year, he’s also pushing a billionaire tax plan that would require a 20-percent minimum tax for households earning at least $100 million annually.
In theory, Biden’s new tax plan would generate hundreds of billions of dollars over the next few years. However, it’s unclear whether it will be passed. Here’s the billionaire’s tax proposal, explained.
Biden first proposed the billionaire tax in his infrastructure plan
In Oct. 2021, Biden proposed the billionaire tax as a way to pay for his infrastructure bill, which came out to be worth $1 trillion and was signed into law on Nov. 15, 2021. The billionaire tax wasn't officially part of the plan, and Biden is just now coming forward with revised details about what the tax would involve.
What Biden’s tax plan for billionaires proposes
Biden’s billionaire tax is officially called the “Billionaire Minimum Income Tax,” according to a document. With the plan, American households making at least $100 million annually would have to pay a 20-percent minimum tax.
Despite the highest tax rate for single filers making at least $523,601 being 37 percent of their income, many wealthy Americans are able to reduce their true tax bill due to charitable donations, equity exposure, business assets and expenses, estate and gift tax exemptions, and more. That’s why the 25 richest Americans had an average tax rate of 15.8 percent from 2014 to 2018, according to ProPublica.
Biden’s billionaire tax plan would change this. Any households purported to pay less than 20 percent of their income in taxes would be required to make a top-up payment that would bring their total taxes paid to the 20-percent threshold. In a statement, the Biden administration wrote, “This new minimum tax will eliminate the ability for the unrealized income of ultra-high-net-worth households to go untaxed for decades or generations.”
The earnings from this tax would be tremendous, wiping away as much as $360 billion from the U.S. federal deficit in the next ten years. Reportedly, half of the taxes would come from people with a net worth of at least $1 billion. Any household that fits in the specified income bracket that’s already paying at least 20 percent for their taxes would be unaffected.
Will U.S. lawmakers let the billionaire tax increase pass?
The new tax proposal is a part of Biden’s budget for 2023 spending. The budget is poised to reduce the federal deficit by $1.3 trillion over the next decade, nearly halving it from 2021. Of course, it can only happen if Congress approves all the budget's measures in the budget, and there are likely to be negotiations in the package before anything passes. Sen. Joe Manchin (D-W.V.), who has historically sided against left-leaning agendas, may hold things up.