Biden Urges Congress To Pass New Billionaire Tax In State Of The Union—But It’s Destined To Fail

Topline

President Joe Biden called for a new minimum tax targeting billionaires in his State of the Union address Tuesday night, as part of a White House plan to ensure wealthy Americans and large businesses pay their “fair share” of taxes, but the proposal is likely dead on arrival in the Republican-controlled House.

Key Facts

Biden pointed to the low tax rate many American billionaires have paid in recent years, saying “no billionaire should pay a lower tax rate than a school teacher or a firefighter.”

He didn’t specify any details about the plan, like what the tax rate or exact income threshold would be, but a proposal he unveiled last year included a 20% minimum tax rate on Americans making more than $100 million a year.

The president also used his speech to call for quadrupling the tax on corporate stock buybacks from 1% to 4%, arguing the existing rate encourages publicly traded companies to use profits to pump up stock values, rather than paying out dividends to shareholders—which can be taxed as regular income.

House Speaker Kevin McCarthy ruled out raising taxes in a speech about the debt ceiling Monday, saying, “Defaulting on our debt is not an option but neither is a future of higher taxes.”

Crucial Quote

“I’m a capitalist. But just pay your fair share,” Biden said.

What To Watch For

The proposal suggests that Biden will continue pushing some of the more ambitious goals of his economic agenda even though they are no longer politically feasible with Republicans in control of the House. It comes as both Biden and congressional Republicans trade jabs over raising the debt ceiling, which has become the principal economic issue since the GOP won back the House. The sides have until roughly June 5 to reach an agreement to raise the federal government’s cap on borrowing, or else the U.S. could face an economically disastrous default, according to Treasury Secretary Janet Yellen. Republicans’ insistence on spending cuts and the White House’s reluctance to negotiate cuts in exchange for a deal have left it unclear how or when an agreement might be made.

Key Background

Biden throughout his presidency has pushed for raising taxes on the wealthiest Americans, but this renewed effort is the longest shot yet since Democrats no longer control the House. Senate Democrats in 2021 proposed a “billionaires income tax” on Americans making more than $100 million for at least three consecutive years as part of a multi-trillion dollar social spending package Biden supported, but the measure was removed from the heavily pared down $430 billion spending bill the Democratic-controlled Congress passed last year. Biden also proposed a “minimum tax on billionaires” in last year’s White House budget draft targeting Americans making more than $100 million a year, but the measure didn’t get off the ground following pushback from centrist Democrats like Sen. Joe Manchin (W.Va.). One of the biggest objections to both proposals was that they would have taxed unrealized—or “paper”—gains, like rising stock values, which are only subject to capital gains taxes when they are sold for profit.

Big Number

735. That’s how many Americans Forbes estimates had a net worth of at least $1 billion last year, the most of any country in the world.

Contra

Many of the wealthiest Americans have had years where they paid $0 in federal income taxes, including Elon Musk, Jeff Bezos and Michael Bloomberg, according to a 2021 ProPublica report, based off leaked Internal Revenue Service records. Former President Donald Trump also paid $0 to the IRS in 2020 after claiming an adjusted gross income of negative $4.8 million that year, according to records released by the House Ways and Means Committee.

Tangent

McCarthy has repeatedly said the top goal for House Republicans is to rein in the federal budget through spending cuts, not raising taxes, but he has thus far not publicly stated what programs the GOP might want to slash, other than vowing that Medicare and Social Security will not be touched.

Further Reading

Senate Democrats Reportedly Near Agreement On Plan To Raise Taxes On Billionaires (Forbes)

Inflation Reduction Act Passes: Senate Approves $430 Billion Climate And Healthcare Bill (Forbes)

House Releases Trump’s Tax Returns—Here’s What We Know (Forbes)

McCarthy Promised No Social Security Cut In Debt Ceiling Deal, Manchin Says (Forbes)

The Debt Ceiling, Explained—What Happens If The U.S. Doesn’t Raise It (Forbes)