Way back in 2018, in the earliest days of the Democrats’ so-called invisible primary, Joe Biden candidly pitched himself as the type of pro-success Democrat who wouldn’t demonize the wealthy. “I don’t think 500 billionaires are the reason we’re in trouble,” Biden said in a speech that year, drawing a distinction between himself and Bernie Sanders. And yet a presidential campaign later, 18 months after wealth tax proponents like Bernie and Elizabeth Warren petered out of the Democratic primary, those billionaires are firmly ensconced in the Biden barrel. A proposal to tax the hell out of them in the most controversial manner has abruptly become a credible proposal in an exhausted Washington, borne less out of an ideological commitment from Biden than from a frenzied, deadline-fueled panic to find $2 trillion in revenue that a single senator won’t deep-six.
The “billionaire income tax” may have emerged overnight, but it’s all too easy to see how we arrived at this consensus: Billionaires are growing increasingly unpopular with both the populist left and the populist right, fueled by the sense that the economic system is rigged, and became even more rigged during the pandemic. If you’ve got to pick the pocket of someone, there are few easier targets than a group comprising about 700 people, as powerful as they may be.
The complex proposal, which would levy an annual tax on their unsold publicly-traded assets, would be a radical transformation of the American tax regime. Under the current system, billionaires can effectively defer taxation until after their deaths, and even beyond it, borrowing against their holdings rather than selling assets. The billionaire tax would eliminate that strategy by imposing a one-time tax at the capital gains rate, 23.8 percent, on the lifetime growth of their assets. For company founders like Elon Musk, who typically acquire shares at a near-zero cost basis, the tax bill would be astronomical. In subsequent years, affected taxpayers would pay more when their wealth goes up, or claim a deduction going forward if it goes down.