Biden’s Wealth Tax – Class Envy Hiding Economic Malpractice
President Joe Biden is likely staring these days at the rising budget deficit along with his desire to spend far more money than the US Treasury has in its coffers. He must also notice his sinking poll numbers and dim prospects for his party in the November midterm elections. In response he has proposed a wealth tax on the uber rich.
The White House calls it the “billionaire minimum income tax” which is neither limited to billionaires nor is a tax on income. Anyone with a basic understanding of economics may call it instead an “economic malpractice tax”.
As the Wall Street Journal notes, “It’s a new tax on Americans with $100 million or more in assets whose effective tax rate in any year is less than 20% of their income.” Biden is off by an order of magnitude on the billionaire description, like calling someone with $100,000 in net worth a millionaire.
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The other fraudulent part is calling it an income tax when it is instead a wealth tax. Per the WSJ, “The 20% minimum tax rate would apply both to ordinary income and the increase in the value of assets in a given year.” An appreciated asset is not considered income until it is sold.
If business owners or entrepreneurs grow their assets through hard work, reinvestment, or just good luck, all they have are unrealized gains, taxable when those gains are realized by selling the asset. And if the asset value rose quickly, it could just as easily fall quickly, perhaps after the IRS collects its tax. Would the IRS then refund the tax if the asset suddenly loses value? No way.
In addition, how would such a taxpayer pay the tax bill? Just because someone has a $100 million asset, that doesn’t mean they have cash on hand to pay the tax man. What if the asset increased in value by $25 million? The Biden tax of 20% would require a $5 million check to the IRS, cash entrepreneurs or business owners may not have on hand if they are reinvesting profits into growing their business.
Simply having an appreciating asset is not the same as having income. The business owners may be taking little in the way of salary, deferring such until their business has matured or is sold. Should an aspiring athlete, say a first-round draft pick, be taxed at signing day on their potential $100 million contract, even if they haven’t yet played a single game or earned any of that contracted salary? Yet that is how wealthy business owners or investors are being treated under the guise of “pay your fair share.”
As MSN summarizes this distinction between an appreciated asset and income,
In the normal way of talking about things, income includes money that comes in, which one could spend on things. When a person owns an asset and it increases in value, we don’t normally call that “income,” unless he or she sells the asset and pockets that gain.
Taxing the rich is always a popular issue, especially when 99.9% of the population is not affected by this tax, at least not yet. If such a tax passes into law, you can be certain the $100 million threshold will drop and over time the not so rich will be subject to a wealth tax. Buy a hot stock or some crypto currency that pops in value, purchase a home in an inflating real estate market, or start a business that quickly grows, and you may find yourself with a fat tax bill that requires selling some of your new asset just to mollify the tax collector.
If Biden and the Democrats want a wealth tax, make the case, have a debate, and pass it into law as a “wealth tax” rather than an income tax.
It’s always “pay your fair share”, especially ahead of an election, in this case the Congressional midterms. Is that a winning issue? Are Americans taxed enough already, those first three letters, T-E-A, one of the meanings of the Tea Party, popularized in 2009.
Rasmussen Reports asked that question in a recent survey of American adults. They found that, “62% of American Adults believe they pay more than their fair share of taxes. That’s up from 51% last year, and exceeds the previous high of 59% in 2020.”
Only 21% of those surveyed believe they are not paying their fair share. What exactly is a “fair share”? 30%? 50%? 80%? Ask proponents of a wealth tax what’s “fair” and they will hem and haw, without providing an answer, preferring the campaign slogan over actually making an economic case for higher tax rates directed at the successful.
Those who feel undertaxed are all free to voluntarily pay more taxes or claim fewer deductions. How many do that?
As NBC News reported, “Massachusetts Sen. John Kerry is docking his family's new $7 million yacht in neighboring Rhode Island, saving roughly $500,000 in Bay State taxes.” Multimillionaire Kerry is not alone. Other politicians, many of whom promote “pay your fair share”, take measures to minimize their personal tax bills. This includes liberal race hustler and MSNBC mouthpiece Al Sharpton who a few years ago had $4.5 million in tax liens against him and his businesses.
Biden’s proposed $5.8 trillion budget, with a $1.3 trillion deficit, printing and spending money we don’t have, is economic malpractice. America now has a debt to GDP ratio of 130%, up from 105% during the last administration. For perspective, above 80% is the tipping point before economic calamity according to the Washington Post.
If individuals live above their means for year after year, bankruptcy is the inevitable outcome, leaving creditors high and dry. America is on a similar path, not harming those octogenarians currently running the country, but the following generations hoping to enjoy the same American dream that their parents and grandparents experienced.
Cutting spending is not an option for the federal government, regardless of which party is in charge, as we have learned when the GOP controlled Congress and the White House in past years. We could inflate away the debt, but with current inflation, further money devaluation will push America closer to economic collapse, which these days seems to be a fait accompli.
So, Biden and Democrats call for an income tax, in reality a stealth wealth tax, punishing those who are powering the economy, killing the golden goose. That is exactly what the Biden administration is proposing and hopefully there is enough common sense in the halls of Congress to stop this poison pill dead in its tracks.
If not, the wealthy, armed with lawyers and accountants, will figure out a way to protect their wealth from this onerous tax, even if it means moving their assets to another country. So much for making America great, instead boosting the economies of more tax friendly countries.
Class envy won’t right the sinking US economic ship, but some basic economic common sense may. If there is any left in Washington, DC.
Brian C Joondeph, MD, is a physician and writer. On Twitter as @retinaldoctor. And on Truth Social as @BrianJoondeph.
billionaire minimum income tax