Democrats are frantically seeking to convince skeptical legislators, voters, and taxpayers that they can pay for profligate new programs just by taxing “the rich.”
Democratic Senate Finance Committee Chairman Ron Wyden proposes to tax people who have $1 billion in assets or earn $100 million in income in three consecutive years. The tax would only affect about 700 taxpayers.
Anyone tempted to believe these fables should recall the 1969 Alternative Minimum Tax. Intended to ensure that “super-rich” families “pay their fair share,” the AMT originally targeted only 155 taxpayers who had paid no federal income tax in 1967 despite incomes over $200,000. The AMT wasn’t indexed for inflation until 2015. That deliberate oversight, rising incomes, and other factors helped the AMT ensnare 5 million households by 2017. That year’s Tax Cuts and Jobs Act reduced the impact to 200,000 households — until 2025, when TCJA reforms expire and the number skyrockets to some 7 million taxpayers.
Wyden’s “Billionaires Income Tax” bill is infinitely more deceptive, destructive, and confiscatory. The ultra-rich hold most of their wealth in stocks, bonds, businesses, multiple homes and cars, jewelry, art, land, and retirement plans. These assets usually increase in value but presently get taxed only when they are sold.
Wyden would tax all unrealized gains every Dec. 31, as if the underlying assets had been sold. Imagine trying to evaluate all these assets with no actual sales. Who would do so? Our trusted IRS? Outside experts trusted by the IRS? What rights would uber-rich taxpayers have to appeal? Could they go to the Supreme Court, every year, for every asset?
Further complicating matters, Wyden would make his tax retroactive! Super-rich taxpayers would have to calculate the value and paper gains of all assets in their global portfolios — from the date of their original purchase to Dec. 31 of the year his law becomes effective. They would then have five years to pay the initial confiscation, probably by selling off billions in assets, probably triggering new appraisals and appeals, as assumed values are replaced by actual sale prices.
Accountants, appraisers, auditors, and lawyers would get rich. Billionaires would deduct those costs. But what if assets depreciate in value? Would taxpayers get credits or refunds for multibillion-dollar unrealized losses? Over the years, Treasury Department income and outflow under the Wyden scheme would likely balance out. Democrats have an energy/climate term for that: net-zero.
Wyden’s tax also appears unconstitutional. The 16th Amendment authorizes government taxation of income. Unrealized gains on assets are not income. If the Supreme Court ultimately agrees, what happens to all the taxes the IRS collected during the prolonged litigation process?
As Margaret Thatcher so wisely warned: Eventually, governments spend economies into oblivion and run out of other people’s money to pay for it. Then, they come after you. Once these infinitely hungry social and climate subsidy programs get rolling, they will cause a red-ink explosion.
No wonder Wyden wants quick action on his complex, convoluted, already controversial 107-page bill. He wants it to become law before legislators have time to figure out what’s actually in it.
There is hope, however. Democratic House Ways and Means Committee Chairman Richard Neal says the bill will be dropped from consideration. It hasn’t been vetted by his committee — or any committee. Sen. Joe Manchin is also “wary.” Senate Minority Leader Mitch McConnell calls it “harebrained.”
Its most appropriate destination is history’s dustbin.
Paul Driessen is a senior policy analyst for the Committee For A Constructive Tomorrow (www.CFACT.org). He writes on energy, environmental, economic, and human rights issues.
