President Biden on Monday outlined a $5.79 billion budget plan for the fiscal year beginning Oct. 1, including a minimum tax rate of 20% on US households worth more than $100 million, or the wealthiest 0.01% of Americans. Company executives would also be required to keep the shares they receive for several years after a share buyback, while the corporate tax rate would rise from the current 21% to 28%. In 2020, there were fifty Fortune 500 companies making over $50 billion in profits, but paying nothing in federal taxes.
Quote: “For most Americans, the past few years have been very difficult, stretching them to breaking point, while billionaires and big corporations have gotten richer than ever,” Biden said in a statement. “Right now, billionaires pay an average of 8% on their total income, while a firefighter and a teacher pay double that tax rate. That’s not right, that’s not fair.”
Billionaires make most of their money from capital gains, which are taxed at a lower rate than the paychecks that the majority of working Americans take home. The ultra-rich are also accumulating huge fortunes without ever selling their assets – or so-called unrealized capital gains – which are currently not subject to income tax. The new proposal would expand the tax code’s definition of “income” by taxing unrealized capital gains, which could mean hefty tax bills for some of America’s most prominent billionaires.
Examples: The ten richest people in the United States, including Tesla’s Elon Musk and Amazon’s Jeff Bezos, are reportedly paying up to $215 billion in taxes on unrealized stock gains, having currently paid next to nothing. Last year, Musk slammed a similar proposal by Senate Finance Committee Chairman Ron Wyden, tweeting, “Eventually they run out of other people’s money and then they come and get you.” The Biden administration also hopes Congress will pass a global minimum tax, which was agreed to by 130 countries last year to “prevent multinational corporations from shipping jobs and recording profits overseas in order to avoid paying taxes at home”.