A top senator wants to tax the cash piles the wealthy are sitting on

senator ron wyden

Sen. Ron Wyden (D-OR). Sarah Silbiger/Getty Images

  • Senate Finance Chair Ron Wyden wants to tax billionaires’ unrealized wealth gains annually.

  • Biden said he supports the proposal as a potential method to fund Democrats’ social-spending bill.

  • “I come from the corporate state of America,” Biden said. “I just think it’s about just paying your fair share, for Lord’s sake.”

  • See more stories on Insider’s business page.

House Democrats have proposed a whole host of options to pay for their $3.5 trillion social-spending bill which includes measures like universal pre-K, tuition-free community college, and paid leave for workers.

One of those options, proposed by Senate Finance Chair Ron Wyden, is a change to the way the government taxes earnings on assets like stocks and bonds. It would mainly affect the wealthy, because their wealth usually derives from investments more than salaries. The gains on those assets – which are called capital gains – are taxed at a far lower rate than income brought in through wages. The top marginal tax rate on income is 37%; capital gains for the wealthiest Americans are taxed just up to 20%.

“A priority for me in these negotiations is making it clear that billionaires are not exempt from the general proposition [that] nurses and firefighters see every year: that they have to pay taxes regularly,” Wyden told The Wall Street Journal.

President Joe Biden is on board. On Friday, he leant his support for the measure in a press conference. It’s similar to his earlier proposal to double the capital gains rate to 43%. House Democrats’ proposal to fund their infrastructure plans would increase the capital gains rate from about 20% to 25%, and they estimated it would bring in $2.9 trillion. Wyden’s preferred rate hasn’t been reported yet.

“I come from the corporate state of America,” Biden said. “I just think it’s about just paying your fair share, for Lord’s sake.”

A 2019 analysis from the left-leaning Center on Budget and Policy Priorities said that capital gains taxes are “effectively voluntary to a substantial extent,” because the wealthy can either just not sell off those assets, or strategically sell them in periods where they will be also see capital losses to avoid paying or lessen their tax burden. Under Wyden’s proposal, unrealized gains would be taxed.

Given Wyden’s role as the top lawmaker in the Senate finance committee, he could be a key voice in pushing a stronger tax overhaul than House Democrats’ tax framework.

Biden has said that he wants tax hikes to level the “playing field,” while assuring that “the superwealthy are still going to be able to have their three homes.” In a unique move, White House economists released their own analysis this week of just how much America’s 400 wealthiest families pay in taxes. On average, they pay about 8.2% in income taxes annually, far lower than the average rate of 14.3% that the Tax Policy Center found in 2015. The White House’s methodology notably factored in assets – not just wages – into the billionaires’ incomes, similar to the net worths taxed under Senator Elizabeth Warren’s proposed wealth tax.

Senate Majority Leader Chuck Schumer announced on Thursday that Democrats have a “framework” for paying for reconciliation, but he declined to provide details and said there are a “menu of options” available to fund the plans.

Read the original article on Business Insider