Watch out, bloated plutocrats: Senate Democrats are coming for you. To help pay for the Build Back Better Act, Democrats rolled out two plans that would go after vast wealth that corporations and billionaires try to hide away from ever being taxed; each of the new plans is expected to bring in hundreds of billions of dollars over 10 years.
The first plan, to impose a 15 percent minimum tax on corporate profits over a billion dollars, was introduced by Sens. Elizabeth Warren of Massachusetts, Ron Wyden of Oregon, and Angus King of Maine; it has the support of Sen. Kyrsten Sinema, who has blocked other tax increases that were originally proposed as part of Build Back Better. So that's going to be helpful in moving it along should no other "centrist" Dem decide "nah."
The second plan, from Warren and Wyden, would go after the very richest Americans' "unrealized gains" on assets every year, instead of only collecting capital gains taxes when those assets are sold; it's one of the ways the very wealthy get richer without paying income taxes. (They never sell. They borrow their fuck-you money against their stocks as collateral.)
Both plans, in addition to helping to fund Build Back Better, have some real class war appeal, since they address the tax loopholes that widen the gap between the filthy rich and ordinary American taxpayers. As Wyden said in a statement on the proposed billionaire tax,
There are two tax codes in America. [...] The first is mandatory for workers who pay taxes out of every pay check. The second is voluntary for billionaires who defer paying taxes for years, if not indefinitely.
The minimum corporate tax plan would make sure that hugely profitable corporations can't get away with avoiding taxes. It would apply only to companies that report more than a billion dollars in profits each year, over a three-year period, and would impose an across-the-board 15 percent minimum tax on those profits. That's a big heckin' deal, as Wyden explained in a statement (the man has a very busy staff):
The most profitable corporations in the country are often the worst offenders when it comes to paying their fair share. Year after year they report record profits to shareholders and pay little to no taxes. Our proposal would tackle the most egregious corporate tax dodging by ensuring the biggest companies pay a minimum tax.
The statement specifically pointed out that freaking Amazon has reported over $45 billion in profits over the last three years, but has gotten away with an "effective tax rate of just 4.3% – well below the 21% corporate tax rate."
CNBC notes that the proposal is similar to an idea Joe Biden originally proposed as part of his economic agenda, but which hadn't previously been included in the reconciliation bill. That proposal had been aimed at corporations reporting over $2 billion in profits in a given year, and didn't include the three-year reporting timeline in the senators' bill. The Senate proposal will apply to more companies, but with the three-consecutive-year reporting framework, it'll also be aimed more clearly at corporations that are consistently reporting huge profits.
The senators said the tax would apply to about 200 of the biggest and most profitable US corporations, and that it would still allow companies to claim a variety of business tax credits, such as
R&D, clean energy, and housing tax credits – and include some flexibilities for companies to carry forward losses, utilize foreign tax credits, and claim a minimum tax credit against regular tax in future years.
They just wouldn't be able to completely avoid taxation through such credits this way, a bit like the current alternative minimum tax prevents very wealthy households from paying zero in income tax.
The Treasury Department would be given the job of deciding some of the details of how and when the tax on profits would apply. You want a draft of the legislation? Here's a draft of the legislation, nerds.
Warren and Wyden's "billionaire tax" would similarly seek to tax wealth that's normally not subject to taxation, even though it's a very real source of riches for the One Percent. NPR explains how it would work:
The tax proposal would apply to just about 700 taxpayers, Democrats say — people who earn more than $100 million per year or who have more than $1 billion in assets for three straight years. It would require them to give the IRS a detailed account of how much the assets they own gained or lost each year, a process called mark to market.
Most of the gains on tradeable assets like stocks would be taxed at the existing capital gains rate, which is currently 20% for individuals earning over $445,850.
But unlike current capital gains taxes, which only apply when liquid assets like investments or real estate are sold, or "realized," the new tax would be applied annually. As the New York Times points out, even though the very wealthy do in theory have to pay taxes on capital gains eventually (except when they die, and then their heirs avoid cap gains taxes too), those assets generate big money all the same, "as vast capital stores that can be borrowed off to live virtually income tax-free." And since there are so currently so many ways for the super wealthy to avoid taxation altogether, then it's damn well time to make sure they pay their fair share.
Yes, even if that scares them into putting all their money into paintings, ranches, or Pokemon cards, as Mitt Romney warned us.
We should also point out that the new proposal is different from the wealth tax that Warren proposed when she was running for president. Under that plan, people with more than $50 million in assets would have that wealth taxed at two percent annually, with a three-percent tax on fortunes worth over a billion dollars. In case you had a scorecard.
Now, there are some potential complications for the billionaire tax proposal, as the Times explains, like whether it would be legal at all:
The courts would have to determine whether unrealized gains in wealth can be considered income, which the 16th Amendment allows the federal government to tax.
And even if the two new proposals make it past legal challenges, it's dead certain that creative tax lawyers would find all new creative ways for corporations and the wealthy to avoid paying at least some of the tax, because America is all about helping our long-suffering super rich avoid taxes. That's not a reason not to whack those moles anyway, until they run out of loopholes to hide in.
The thing we like about both of these proposals is that they are at least a start at addressing the basic unfairness that Wyden pointed out: The rich have finagled advantages in the tax code that simply aren't available to most of us, and those advantages have only served to widen the gaps between the investor class and ordinary Americans. Hell, that sense of being cheated was one of the things that fueled Trumpism, along with all the racism, of course. Emphasizing that these taxes will begin to whittle down some of the unearned advantages of America's corporate overlords sounds like a winning strategy to us — and when wingnuts ask why we're so mean to Job Creators, we can ask them when the last time was that they were able to hide most of their wealth from the IRS because they hired a top-notch law firm.
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