The Joe Biden legislature is currently dead in the water. Congress people are looking for ways to pay for the package, but even if they could there may not be a package to pay for.
Every Senator wields considerable power and a couple in particular have been vocal opponents of the proposed bill. Joe Manchin and Krysten Sinema have voiced concerns about the package and the price tag.
Other members of the Democrat party have lambasted Joe Manchin on social media and on the floor, and he has not taken the criticism lightly. He’s gone from proposing a $1.5 trillion dollar limit to $0, and Krysten Sinema has made it clear that she’s not interested in any sort of tax increases at all.
Congress has now turned its attention to a different sort of tax. They’ve proposed a wealth tax, also described as taxing the unrealized capital gains on the liquid assets of anybody who has $1 billion or more in assets or anyone reporting more than $100 million in income for three consecutive years.
This would affect only the 700 richest people in the country, and will generate $200 billion in revenue over the next decade.
The reasoning is that raising the tax rate isn’t going to directly affect the highest earners because so much of their net worth is tied up in the value of their stock ownership.
Democrats are not calling this a wealth tax because it’s not being levied against the entire net wealth of a wealthy person. Elizabeth Warren proposed a wealth tax in her presidential run and it is considered to have sunk her campaign.
Jeff Bezos doesn’t liquidate his stock to fund his lifestyle. He borrows money and uses his stock holdings as collateral. This allows him to fund his lifestyle while still maintaining a controlling interest in Amazon.
Democrats have asked Krysten Sinema to weigh in on the proposal, but she’s not likely to vote for it since she’s opposed to similar measures already being proposed. This would leave the Democrats below the threshold of a simple majority.
Critics of the plan say that it will force billionaires out of the stock market and into more opaque markets like art and real estate.
The real issue is that, even if passed, this tax only raises $200 billion in revenue. Even if the Democrats managed to pass the bill, there is still no clear plan to pay for it.
The real question with this package hanging from a thread is what will happen to individual tax rates? Joe Biden’s proposed tax increases are tied to the bill so right now we have a choice.
We can either assume the tax rates will expire in 2026 and this bill will not pass. The trouble with this is compressing the amount of shifting you need to do over five years and possibly bumping into a higher tax bracket along the way, only to realize after the fact that you had nine years all along.
The reverse is also troublesome. You don’t want to plan for nine years when you only have five and end up in the scenario where you didn’t shift as much as you need to.
Joe Biden wants to increase tax rates on the rich, but the only way for him to really accomplish that is by allowing the Trump tax cuts to expire in 2026.
The more time that passes that Joe Biden fails to push through this legislation, the less likely that anything is going to be adopted. Few Congress people want to have their name tied to a controversial piece of legislation leading up to midterms because that’s the kind of thing that will get you voted out of office.
Mentioned in this Episode:
With corporate tax off table, U.S. Democrats turn to billionaires to fund spending bill – reuters.com/world/us/with-corporate-tax-off-table-us-democrats-turn-billionaires-fund-spending-bill-2021-10-25/
Secretary Yellen: How new billionaire tax would work – edition.cnn.com/videos/politics/2021/10/24/yellen-on-billionaire-tax.cnn
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