Democratic Senate negotiators are homing in on a final proposal to tax the nation’s wealthiest individuals and families as a principal source of revenue for a major human infrastructure spending bill.
The proposal would apply only to taxpayers who have more than $1 billion in assets or who earn $100 million in income for three consecutive years, according to a person familiar with the negotiations.
It would apply to around 700 taxpayers and is projected to raise hundreds of billions of dollars.
“In a package that’s supposed to be about giving everybody a shot to get ahead, it would be a big mistake, from both a policy and a political perspective, not to ask billionaires to pay a fair share,” said Senate Finance Committee Chairman Ron Wyden (D-Ore.) in a statement Monday.
“The Billionaires Income Tax is about fairness and showing the American people taxes aren’t mandatory for them and optional for the wealthiest people in the country,” Wyden said. “No working person in this country thinks it’s right that billionaires can pay no taxes for years on end, and sometimes never at all.”
Senate Democrats initially wanted to raise revenue to pay for their budget reconciliation package by raising the corporate tax rate and marginal income tax rates on wealthy Americans in the top income tax bracket.
But plans to raise the corporate tax rate and marginal income tax rates were shelved because of opposition from Sen. Kyrsten Sinema (D-Ariz.).
Under the emerging alternative Senate Democratic proposal, tradable assets, such as stocks, would be marked to market every year. That means billionaires would have to pay taxes on gains and take deductions on losses for tradable assets on an annual basis, regardless of whether they sell those assets.
Nontraded assets, such as real estate holdings, trophy artwork or ownership stakes in closely held business ventures, would be subject to capital gains taxes when they are sold as well as a “deferral recapture amount.” That means billionaires would have to pay interest on the taxes deferred during the time the asset is held before being sold.
Senate negotiators are also working on special rules to prevent billionaires from gaming the system and shielding their assets from taxation through the use of pass-through entities, gifts, estates and trusts.
Centrist Sen. Joe Manchin (D-W.Va.), a key player in the talks, on Monday said he’s open to the tax proposal.
“I’m open to any type of thing that makes people pay that’s not paying now. So people that don’t report income like you and I do, earned income, there has to be a way for them to pay their fair share,” he told reporters outside his office.