Wyden Unveils Billionaire Income Tax | Brownstein Hyatt Farber Schreck

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This morning, Senate Finance Committee Chairman Ron Wyden (D-OR) released the Billionaire Income Tax legislation, his proposal to impose a valuation regime on the government. market value to certain high income and high net worth individuals who target unrealized gains. In addition to the text, Wyden published an article by article of the bill.

PREVIEW

The billionaire income tax is designed to tax marketable and non-marketable assets held by ultra-rich people by targeting unrealized gains. Beginning in 2022, people with total assets of at least $ 1 billion or who earn $ 100 million in annual income for three consecutive years would be subject to tax. Initially, covered taxpayers would be subject to a single tax on all earnings accrued before the new regime was imposed. Thereafter, a mark-to-market system would apply annually to marketable assets at the end of the tax year. The amount subject to tax would be based on the difference in market value from the previous year. Taxpayers would be allowed to spread any tax payment over five years.

For assets that are more difficult to value, such as real estate, the proposal would effectively charge interest charges when the asset is finally sold, eliminating the need to value the assets each year. These non-marketable assets would be subject to both capital gains tax and a “deferred recovery amount,” which together would total a maximum of 49%, according to the bill’s summary.

The proposal would impose reporting obligations on intermediary companies in which the covered taxpayers hold at least 5% of the capital. Likewise, special rules would apply to trusts, which would be subject to lower thresholds of $ 100 million in assets or $ 10 million in annual income.

Finally, the legislation deals with capital losses by offering covered taxpayers two options:

  • carry losses forward to offset potential future gains, or
  • carry back losses for up to three years (the carry-back option would be limited to taxes paid as income tax billionaires, but not income tax or other types taxes).

While the Joint Committee on Taxation has yet to release an official cost estimate for the proposal, Wyden says the tax would affect around 700 people.

OUTLOOK

The bill is based on Wyden’s 2019 white paper, “Treat Wealth Like Wages”. The release of the legislation comes as Democrats scramble to find other sources of revenue to pay an estimated $ 2 trillion in Build Back Better Act spending. While the House Ways and Means Committee has already marked out legislation that increases this amount, lawmakers have been forced to review revenue sources after Senator Kyrsten Sinema (D-AZ) signaled her opposition to increases in rate for individuals and businesses, which constitute an important part of the revenue provisions of the Ways and Means Act for better reconstruction.

Sinema has indicated his support for the billionaire income tax, but another key centrist Democrat, Senator Joe Manchin (D-WV), has reportedly expressed deep concerns about the proposal ahead of its release. Manchin has since called the proposal “convoluted,” and as of this writing, Democratic leaders of the House and Senate tax drafting committees have sent mixed signals as to whether the proposal will be included in the package. .

House Ways and Means Committee chairman Richard Neal (D-MA), for example, argued that the billionaire income tax proposal is too complicated to bring in reconciliation discussions at this stage. budget, especially since it was not fully considered by the committee process. Rather, Neal prefers the revenue provisions included in the Ways and Means Reconciliation Bill, which he says are much simpler and have already been approved by the committee. While Neal has publicly stated that the proposal will not be included in the package, Wyden said she “is not dead,” according to reports.

The plan may also face constitutional challenges, which could depend on whether the plan qualifies as a permitted income tax under the Sixteenth Amendment.


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