Senate Finance Committee Chairman Ron Wyden (D-Ore.) on Wednesday unveiled his proposal to tax billionaires’ investment gains annually, which could become a key provision in Democrats’ social spending package.
The proposal comes as Democrats are working to determine how to raise revenue to finance spending in the package. It’s the second major tax proposal Wyden has released in recent days, following a proposal he released Tuesday to create a minimum tax on corporate profits.
“We have a historic opportunity with the Billionaires Income Tax to restore fairness to our tax code, and fund critical investments in American families,” Wyden said in a statement.
Wyden’s proposal is aimed at preventing billionaires from avoiding taxes. Currently, people don’t have to pay taxes on investment gains until they sell the assets.
Wyden’s office said it expects that the proposal would raise hundreds of billions of dollars in revenue.
The proposal would affect taxpayers with assets of more than $1 billion or income of more than $100 million for three years in a row. About 700 taxpayers are expected to be subject to the tax.
In cases of tradeable investments, such as stocks, applicable taxpayers would pay taxes on gains and claim deductions for losses annually. Billionaires would be able to carry forward losses and would also be able to carry back losses for three years in some circumstances.
In cases of nontradable assets, such as real estate, billionaires would not pay taxes annually on the gains but would pay a charge, on top of regular capital gains taxes, when they sell the assets.
In the first year that taxpayers are subject to the tax, they would have the option to pay their liability in installments over five years. They would also be able to designate up to $1 billion of stock in a single corporation as a nontradable asset so that they could keep their controlling interest in the company, according to a summary released by Wyden’s office.
The proposal also includes rules designed to prevent billionaires from avoiding paying the tax.
Wyden has been championing the idea of taxing wealthy people’s investment gains annually for several years. But the idea has received increased attention in recent days because Sen. Kyrsten Sinema (D-Ariz.) has been resistant to raising tax rates on corporations and high-income individuals.
It’s unclear whether the proposal can get widespread support among congressional Democrats. A number of House Democrats have been hesitant to back it and have indicated that they would prefer to raise tax rates.
Wyden told reporters Tuesday that his proposal gets at tax avoidance issues that aren’t addressed by rate increases.
“The House says, ‘Why don’t we raise the taxes on the adjusted gross income?’” Wyden said. “And I said, ‘Do you all know that if you do that the billionaires still get to skate to tax avoidance because they don’t take an income.’”