Biden’s wealth tax makes billionaires pay their fair share. It’s good policy, and it’s good politics

Billionaires’ money gives them lots of power

A recent in-depth article from The New York Times centers on research by three political scientists at Northwestern University: Matthew Lacombe, Benjamin Page, and Jason Seawright. Page laid out their purpose to the Times: “I wanted to find out how much influence the truly wealthy have and what they want from government.” There hadn’t been much concrete evidence produced on that specific question, so the researchers decided to look at the 100 wealthiest billionaires in the U.S.

The scholars started by looking for public statements from the people on their list, name by name, to see what policy stances they took, but found almost nothing. Page explained: “If they’re being very influential, but it’s in a stealthy way without talking about public policy, that’s a special problem for American politics.” And that’s exactly what the researchers found: Billionaires rarely take public stances on major policy and legislative issues like Social Security and taxes because their opinions are wildly out of sync with the positions held by most Americans.

Don’t be fooled by billionaires like George Soros, who aren’t completely right-wing. Overall, according to Page, the research showed that “when you look at all the wealthiest billionaires, the picture is very different, much more economically conservative.” For example, on the estate tax, an issue with profound, direct consequences for the ultra-wealthy and for our society’s ability to counter the creation of a hereditary oligarchy, he found that “among the billionaires that we studied, the 100 wealthiest, none of them are actually working to make taxes more progressive.”

Although the billionaires examined in this study have said little publicly, the researchers learned a great deal by looking at the recipients of their political donations. Lacombe summarized the findings:

What we see basically is a class of people who have more money than God, who are very politically active in relatively unknown ways, and who we have reasons to believe have been politically influential and have used their political influence in ways that don’t really serve the interests or preferences of what most Americans want.

They’re mobilizing them on the basis of cultural grievances. And I think those two things in conjunction are fairly large contributors to the dysfunction that we’ve observed in American politics.

That final point echoes the work of Berkeley Law School professor Ian Haney López, whom I’ve written about a number of times. As he told me in a 2019 interview: “Racism is the primary weapon wielded by the power elite in a class war they are winning. This describes what’s been happening in society since colonialism, but over the last half-century in particular.”

Billionaires’ political donations go a long way

On the whole “God and money” thing, here are a few specifics. Whereas multimillionaires give $4,500 each year to political causes—not an insignificant sum—the figure is a gobsmacking half a million per person, per year, for billionaires. Overall, 40% of our country’s politics-related contributions come from the fattest of fat cats—the richest 1% within the richest 1%. Mind-bottling, isn’t it? Now that we know for sure what these super-elites are spending their money on, it’s no wonder conservatives do the bidding of the real elites.

In conclusion, Lacombe added: “My expectations going into this would have been that billionaires were powerful, and that billionaires mostly work on behalf of causes that many Americans don’t support. But I was surprised by the extent of their stealthiness.”

On the less stealthy billionaire front, there’s Elon Musk—the guy who makes you wonder what it would feel like to decide that, since you don’t exactly love the way your favorite social media company works, you’ll just go ahead and buy the damn thing. Anand Giridharadas offered the following on how Musk’s purchase of Twitter fits into the whole billionaire influence issue more broadly:

The plutocrats have already rigged the economy. That’s just the first step. Then you take some of the spoils and reinvest it in buying even more political influence, so that political inequality can help keep economic inequality yawning. You buy up media or social media platforms and thus can help rig the discourse in your favor, taking control of the tools used by regular people to fight back.

So what the hell are we going to do about these (mostly) stealthy bastards? Since very little of what they earn is taxed as ordinary income—only the little people collect paychecks, I guess—a number of Democrats have proposed taxing their wealth, including Sens. Elizabeth Warren, Ron Wyden, and Bernie Sanders. And while capital gains profits are taxed when assets are sold, they are taxed at a far lower rate than the income people earn on the job—a grave problem that we also need to fix.

Billionaires don’t pay that much in taxes. Here’s why

The larger problem is that the richest of the rich don’t even have to sell their assets, which would require them to pay taxes on the profits, in order to live. Instead, they just take out loans (typically at very low interest rates, which cost much less than the tax bill would) against the assets. This tax avoidance strategy even has a cute little name: SBLOC, or “securities-backed line of credit.”

That’s one way to live off an asset’s profits without paying taxes on them. But surely the tax bill comes due for the billionaires’ heirs, right? After all, only the first $12 million of an estate ($24 million for a married couple) can be passed on tax-free. How ever will these poor heirs of billionaires survive in the face of reasonable taxation?

Fret not, ye of great compassion!

If an asset is not sold before the billionaire dies, the person who inherits it gets to claim the value upon inheritance as their new, stepped-up “cost basis” in terms of profits. In other words, if Mr. X bought 1 million shares of stock at $10 a share, and the value went up to $200 a share, that would mean his wealth increased by $190 million. Then Mr. X passes away, and his son inherits the stock; subsequently its value goes down from $200 to $190 a share. At that point, the son could sell it and claim a loss. The stock dropped $10 a share after he inherited it, so that’s a big time sad for him—that he could use to reduce his tax bill. 

This is how the uber-wealthy keep their Benjamins in-house. President Joe Biden actually proposed to do away with the step-up at inheritance time for single tax filers with an income above $1 million, and married couples above $2.5 million—again, targeting the wealthiest households. But the proposal didn’t make it into the tax bill that passed the House last year. Nevertheless, Democrats should certainly be on board, and be campaigning on this proposal in the fall.

Biden’s Billionaire Minimum Income Tax

The most politically relevant proposal to tax the wealth of the mega-elite right now is the one recently proposed by President Biden. His “Billionaire Minimum Income Tax” plan would “ensure that the very wealthiest Americans pay a tax rate of at least 20% on their full income, including unrealized appreciation.” Unrealized appreciation refers to “appreciation”—aka profits—that are “unrealized” because the owner doesn’t actually need to sell them to benefit from the gains in wealth.

Since this tax will only apply to the top 1% of the top 1%—as noted above, a group that makes 40% of all political contributions—Biden is standing up to the elites whose money speaks incredibly loudly. If a household is already paying at least 20% of their income—including any unrealized wealth gains— in taxes, then this new proposed tax won’t affect them. If they aren’t, then this tax acts like a “top-up” to bring their overall income tax rate to 20%. The Biden-Harris administration estimates that the plan will bring in $360 billion in additional revenue over the next 10 years. Billionaires would be paying over half of that money.

Biden isn’t looking to punish anyone, of course. In fact, the payments required by his Billionaire Minimum Income Tax plan can be spread out over a number of years, to avoid making them too disruptive. Per a White House statement, the president is “a capitalist and believes that anyone should be able to become a millionaire or a billionaire.” However, he also wants to “make sure that the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters.”

This is exactly the right way to pitch progressive tax reform.

Check out the data supporting Biden’s claim. Incredibly, when those unrealized profits are counted as income, the federal tax rate paid by the tippity-top of the elite recently fell below the rate paid by the average American family.

As the economists who produced this data commented: “This looks like the tax system of a plutocracy.”


Also notice how far the rate paid by the wealthiest 400 households has fallen over the decades, with huge drops just after Ronald Reagan, George W. Bush, and Donald Trump passed massive tax cuts for the rich—along with a drop after a Republican Congress passed and Bill Clinton (ugh) signed the capital gains tax rate cut in 1997. As you can see, the rate paid by the richiest rich increased after Barack Obama undid Dubya’s giveaway to them. But then Trump came in and did his thing, with an impact that unfortunately qualifies as “great”—in the same way Mr. Ollivander used that word to describe Voldemort.

Unsurprisingly, a recent Wall Street Journal editorial attacked Biden’s plan on the grounds that billionaires don’t really have that much money to begin with. You see, their estimated combined $4.7 trillion (with a T) in assets is so paltry that it’s “barely enough” to cover not just the Build Back Better plan as originally proposed—with some of the programs running the full 10 years, and others sunsetting before that—but the 10-year cost without any programs sunsetting.

The WSJ piece also points out that carving up this $4.7 trillion and giving an equal share to every American would only net $14,000 per person, intoning, with an almost caricature-like level of condescension: “if that sounds lower than you hoped, it’s because very large numbers are hard for humans to grasp intuitively.” Here’s what this human can grasp: $14,000 is more than the total net wealth currently held by one-quarter of American households. I’d say those folks can intuitively understand the impact that would have on their lives. Oh, and Wall Street Journal editorial board: You can go grasp yourself.

The point here is that just 735 people have that much wealth. I’m not sure the WSJ is making a very good argument here. You want another way of looking at this? Over the two years since the start of the pandemic that has thus far killed over one million Americans, our country’s billionaires have seen their wealth increase by a whopping 57%, or $1.7 trillion (again, with a T). That’s just about enough to pay off the nation’s entire student loan debt. And look, no one’s proposing taking every penny from these billionaires, but the point remains that there’s a shit ton of wealth concentrated in very few hands.

Because of the filibuster and the fact that Republicans—even the not super-extreme ones—won’t go along with restoring this kind of justice to our tax code, Democrats will have to convince Sens. Joe Manchin and Kyrsten Sinema to support Biden’s Billionaire Minimum Income Tax plan. Hopefully it becomes law, but either way, Democrats running this fall must highlight their push to make the wealthiest pay their fair share.

They also should contrast Biden’s plans with the official blueprint released by the head of the National Republican Senatorial Committee, Sen. Rick Scott of Florida, which was also endorsed by the head of the Republican National Committee, along with other top national Republicans. This incredibly and rightfully unpopular plan would hike federal income taxes by a trillion bucks over a decade—with virtually every penny coming from Americans earning under $100K a year (additionally, each of the plan’s individual policy elements were opposed by majorities in a recent poll). Biden himself slammed the Republican plan on May 10. Taxing billionaires, on the other hand, is wildly popular—even with Republicans.

The campaign ads should write themselves.

Poll showing voters think billionaires should pay more in taxes

Biden’s proposal would help fight inflation

Additionally, given how important inflation is right now, Democrats should talk about how raising the taxes of the ridiculously wealthy can also reduce overall demand in the economy—which is running too high, thus causing inflation—in a way that specifically does not harm those outside the very top. Cooling the economy by raising interest rates, as the Federal Reserve has already begun to do—is a blunt measure that affects everyone. But plans like Biden’s Billionaire Minimum Income Tax acts in a more targeted fashion.

We do have to raise interest rates some, but this kind of tax hike on billionaires might mean we’d have to do less interest rate hiking—and thus cause less harm to average Americans—to bring inflation under control. Raising taxes on the rich has helped reduce inflation in the past, and at least one pundit has argued it would work today as well.

Democrats need to make the contrast on taxes crystal clear so that voters can see what each party really prioritizes. The Party of Fuck a l’Orange makes a lot of noise giving their target audience of mostly white, working- and middle-class people a bullshit enemy, a scapegoat for some overhyped or just plain made up problems. Right-wing candidates, office-holders, and media figures bleat on about the cultural elite who supposedly want to destroy traditional, Christian values on LGBTQ matters, and the liberal elite who supposedly want to oppress white Christian Americans in every way possible. Democrats need to push back hard against those culture war attacks, and also get voters to see the underlying bait-and-switch Republicans are pulling by making them in the first place.

The Trumpists fearmonger on race and, increasingly, on gender and LGBTQ issues, because they don’t want voters to know about their economic policies, which favor the real elites, the people using their money and power in an attempt to completely control America’s economic and political system. This is why the GQP rarely if ever mentions the lone major legislative accomplishment of the Trump presidency: the Rich Man’s Tax Cut.

As for Trump’s economic policies on the whole, the aforementioned Prof. Lacombe stated: “When millions of Americans voted for Donald Trump, many believed his claims of personal wealth would free him from wealthy donors and allow him to drain the swamp. But then Trump appointed several billionaires to high-level positions and pursued billionaire-friendly policies, such as cutting corporate income tax.”

HOUSTON, TEXAS - MAY 17: An activist with MoveOn calls on Senator Ted Cruz to increase federal taxes on the wealthy and big corporations outside Cruz’s Houston office on May 17, 2021 in Houston, Texas. (Photo by Bob Levey/Getty Images for MoveOn)

Taxing the rich, and running on doing so, gives Democrats another concrete policy they can emphasize when pointing out what Republicans are doing with their culture war malarkey. Team Blue needs to hammer home for voters that the billionaire elites—and their Republican lackeys—are the real enemies of all middle and working class people: white, Black, brown, Asian, Indigenous, and more.

Getting the uber-wealthy to pay their fair share is the right thing to do for our country—not least because doing so will help fight inflation, the issue at the front of so many voters’ minds right now. It’s about fairness, the common good, and having the resources necessary to make sure every American has what they need to reach their full potential.

In other words, it’s about progressive values—and those are values that can win elections.

Ian Reifowitz is the author of  The Tribalization of Politics: How Rush Limbaugh’s Race-Baiting Rhetoric on the Obama Presidency Paved the Way for Trump (Foreword by Markos Moulitsas)

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