I recall a time in the mid-2000s when a news show asked people on the street in New York what annual salary made a person qualify as “rich.” Surprisingly, I remember quite a few people offering up $100,000 as a baseline.
I would venture that many of you live in a household that makes $100,000 or more. Would you consider yourself rich? I doubt it. Don’t get me wrong: $100,000 per year is nothing to sneeze at, even in the Washington, D.C., area. But even in 2003, such a salary was not “rich.”
Envying the wealthy goes as far back as recorded history. That’s nothing new. However, these days, it is fashionable in many left-wing circles, including Congress, to heap scorn on wealthy people merely because they are rich. Ironically, that disdain doesn’t extend to entertainers and businesspeople who give prominently to the Democratic Party. Warren Buffett is a prime example.
For the past several years, politicians such as Alexandria Ocasio-Cortez (who said a system that allows billionaires to exist is immoral), Elizabeth Warren, Bernie Sanders, and others have floated cockamamie “wealth tax” proposals that are nothing more than schemes to fund their fantasyland spending proposals. It works in some quarters because it sounds fair: Why shouldn’t that jerk Elon Musk be paying enough in taxes so that Joe Schlabotnick in Yonkers can get Medicare?
Thankfully, none of those proposals gained any traction and President Joe Biden, being pragmatic, decided against the idea.
Until now.
In his latest budget proposal, Biden is resurrecting the wealth tax and including
it as a policy proposal
. According to the New York Times, “The tax would require that American households worth more than $100 million pay a rate of at least 20 percent on their income as well as unrealized gains in the value of their liquid assets, such as stocks and bonds, which can accumulate value for years but are taxed only when they are sold.”
Naturally, the press will do its best to help Biden and the Democrats sell the idea to the public. The Washington Post, owned by noted pauper Jeff Bezos,
wrote in its coverage
, “Billionaires are able to borrow against their accumulated gains without triggering taxes on capital gains, enabling huge accumulations of wealth to go virtually untaxed by the federal government.”
Last time I checked, having a household worth $100 million does not make one a billionaire, so the framing of the legislation is rather odd.
But the larger point is the implication that those Richie Rich people are getting tax-free money to swim around in while the serfs get nothing. Nonsense. That paragraph has two critical words: “wealth” and “borrow.”
One of the ways intelligent investors continue to make more money is by utilizing debt to their advantage. Yes, people can and do borrow against their stock portfolios. The money is not considered “income” by the government because they must pay it back, making the Washington Post’s complaint about such accusations of wealth going “virtually untaxed by the federal government” all the more ridiculous. If invested wisely, people can add to their portfolios and create more wealth. Still, since they borrowed the money, they have to pay it back. A poor investment or making purchases on depreciable assets such as cars or boats could cost them more in the long run. However, the individual assesses the risk and makes that decision.
With the housing market soaring right now, it is likely that many people either took out a home equity loan or a home equity line of credit to utilize for investing, consolidating other debt, or making home repairs. Of course, the money does have to get repaid, but the best part is the interest is tax-deductible.
But beyond those absurdities is the foolhardiness in thinking the bill can be made into law. Aside from West Virginia Sen. Joe Manchin, a centrist Democrat, already saying he’s a no, the legislation is not policy. It’s complex in that whatever taxes someone pays against the appreciation of their stocks would have to be deducted from whatever capital gains taxes they owe when they sell. Also, it doesn’t address what happens if the value of the stock goes down the following year. Is there a refund process in order? Finally, the 16th Amendment to the Constitution gives Congress the authority to tax income, not the value of assets.
With the Democratic Party floundering and a midterm wipeout on the horizon, the Biden tax proposal reeks of nothing more than a messaging ploy designed to get base voters out to the polls. It’s yet another unserious legislative proposal from what is increasingly looking like an unserious administration.
