A plan by Senate Democrats to impose a tax targeting 700 billionaires to partly pay for president Joe Biden’s $2tn spending plan has hit resistance among moderate members of the party, raising doubts about its political viability.
Ron Wyden, the chair of the Senate finance committee, announced details of the proposal on Wednesday, saying it would apply to taxpayers who earn more than $100m in annual income or hold more than $1bn in assets for three consecutive years.
But within hours, key Democratic senators voiced concerns about the plan. Given the 50-50 split of party representation in the Senate, any one of them could single-handedly sink its chances of being passed.
“I don’t like the connotation that we’re targeting different people,” Joe Manchin, the Democrat from West Virginia, told reporters.
Mark Warner, the Democratic senator from Virginia, said that it made sense to ensure that the “absolute wealthiest Americans pay a fair share”, but added that the “devil is in the details” and it was important not to favour “one asset class over another”.
Despite the possible setback, Jen Psaki, White House press secretary, said it was still realistic that an agreement could be reached on the broader package before Biden heads to Europe for the G20 summit in Italy on Thursday.
“Of course he would love to head on his trip with a deal,” she said.
Wyden had announced the billionaires’ tax plan earlier in the day, as the chief tax-writer in the upper chamber of Congress scrambled to find ways to raise revenue to fund the president’s economic plans. The move represented an alternative plan after Democratic proposals to raise corporate and individual income tax rates were dashed by opposition from Kyrsten Sinema, the senator from Arizona.
“The Billionaires Income Tax would ensure billionaires pay tax every year, just like working Americans. No working person in America thinks it’s right that they pay their taxes and billionaires don’t,” Wyden said. “We have a historic opportunity with the Billionaires Income Tax to restore fairness to our tax code, and fund critical investments in American families.”
The plan would involve treating US billionaires’ tradable assets, such as shares, on mark-to-market basis each year — a big departure from their traditional treatment under US tax policy, whereby they are taxed only when sold.
But while Wyden said the billionaires tax would bring in billions of dollars of revenue, it would leave the tax treatment of many of the richest US households untouched.
Wyden’s move targeting billionaires came a day after he announced a plan along with Elizabeth Warren, a Democrat from Massachusetts, and Angus King from Maine, for a minimum tax on corporate profits for 200 of America’s biggest companies, in an attempt to make up for the likelihood that Democrats will not succeed in raising the corporate income tax.
That measure would require companies that report more than $1bn in profits to shareholders to pay at least 15 per cent of those back in taxes. King later told reporters the plan would raise between $300bn and $400bn in revenue over a 10-year period.
The changes, which would limit companies’ ability to use tax loopholes and claim deductions to reduce their tax base, are designed to offset the cost of Biden’s legislative plans to pour federal funds into early childhood education, public healthcare and clean energy.
That plan was designed to prevent America’s largest corporations from avoiding paying federal taxes. The senators cited the example of Amazon, which despite reporting $45bn in profits over the past three years paid in effect a tax rate on its profits of 4.3 per cent — compared with the current corporate tax rate of 21 per cent.
In an important endorsement of the proposal, Sinema issued a statement calling the planned tax changes a “common sense step toward ensuring that highly profitable corporations — which sometimes can avoid the current corporate tax rate — pay a reasonable minimum corporate tax on their profits”.
Sinema had previously proved a thorn in the side of the Biden administration when she made it clear that she opposed the White House’s proposals to increase the US corporate tax rate from 21 per cent to 25 per cent, along with increases in individual income and capital gains taxes for the country’s richest households.
The White House had initially suggested increasing the corporate tax rate to 28 per cent, in a partial reversal of former president Donald Trump’s 2017 tax cuts, but subsequent negotiations on Capitol Hill initially made a 25 per cent benchmark seem more feasible.