After months of negotiation over Build Back Better, Democrats are going to have to go back to the drawing board with a new bill after Senator Joe Manchin said that in order to earn his vote, party leaders were going to have to start with “a clean sheet of paper.”
Manchin’s stonewalling of the Biden agenda has endlessly frustrated Democrats, but without any real leverage, it’s time for them to focus on what they can get out of him. Despite his opposition to many popular progressive proposals, Manchin has actually indicated support for one of the most exciting new ideas to come out of the BBB negotiations — a billionaires income tax.
This is a position that Manchin has held throughout negotiations. Back in September, when the reconciliation deal was in the midst of arguments Manchin publicly stated that Democrats need to start with removing the 2017 Trump Tax cuts and go from there, “I want to do tax overhaul.” Now that negotiations are back to square one, let’s start at a tax change proposal we know Manchin can get behind: the Billionaire’s Income Tax.
The Billionaire’s Income Tax (also known as mark-to-market) is one of the most significant tax proposals in decades, as it would directly target the assets of the ultra-wealthy and attack the out-of-control wealth inequality at its source. The tax would require every American with over $1 billion in net worth or over $100 million in income for at least three years, to pay taxes on the accumulated value of their capital gains at the close of each year, regardless of whether or not they sold them. This ensures that billionaires pay taxes at the end of the year like every working American, rather than the current system where they pay no taxes at all while getting billions of dollars richer.
Unlike working people, wealthy individuals like myself make their living off their investments rather than income. However, since assets are only taxed at the point of sale (unlike ordinary income which is taxed annually) by not selling assets that are actively growing in value, billionaires are able to avoid paying their taxes indefinitely. This means that at the close of each year billionaires are able to accumulate billions of dollars in wealth without paying a cent in taxes. A ProPublica report found that the richest 25 billionaires in America paid an effective tax rate of just 3.4% on over $400 billion in gains between 2014-18, precisely because of this ability to defer payments on their assets.
Thanks in part to this incredible tax benefit, the top 1% of Americans now own over 30% of the country’s wealth, and that number has been steadily increasing over the past decade with no signs of slowing. Oxfam’s recent report on billionaire wealth found that the world’s 10 richest men saw their fortunes double from $700 billion to $1.5 trillion, at a staggering rate of nearly $1.2 billion per day since the pandemic started. Of course, this has left individuals like Jeff Bezos with so much wealth that he’s bought a support yacht for his mega yacht.
Because this tax would only target roughly 700 billionaires, we can ensure that no middle-class or working family will ever see their tax bill go up. This isn’t just taxing the 1%, this is the top 0.0002% — a special bracket for the Jeff Bezos’ and Elon Musks of the world.
But don’t just take my word for it, recent polling shows that the billionaire income tax is widely popular among key swing state districts and states. In fact, when swing district voters were told that a billionaire income tax would pay for the swath of social programs in the Build Back Better act their support of the bill rose from 53 to 69%.
With overwhelming support among voters and Sen. Manchin already on board, this important piece of legislation should be the centerpiece of any new plans coming out of the Democratic House and Senate. This no-brainer tax provision provides a clear path forward for the President’s agenda, and would score the party a much-needed boost before the 2022 midterms.
If Democrats do not deliver on their promise to invest in America, then November will be a complete and total disaster for the Democratic Party. At a time when our society is buckling under the pressure of unprecedented inequality, it is unacceptable for the government to continue to allow ultra-wealthy elites to avoid paying their fair share. This is an incredibly popular and politically feasible tax that could clear the ongoing bottleneck in the Senate — there is no excuse for it to fail.
Drew Pomerance resides in Los Angeles, and is the Co-Managing Partner of a boutique business litigation firm. He has practiced as a trial and appellate lawyer for more than three decades. He is a proud member of the Patriotic Millionaires.