âȘ A wealth tax on billionaires is included in the latest version of Joe Bidenâs âBuild Back Betterâ agenda, but itâs a sure thing the real target is your retirement savings...
The Democrats’ so-called âBillionaire Income Taxâ now being written by Senate Finance Committee Chairman Ron Wyden (D-Ore.) with âinput from the U.S. Treasury Department and the White House,â according to SWFI.
âItâs not a wealth tax, but a tax on unrealized capital gains of exceptionally wealthy individuals,â U.S. Treasury Secretary Janet Yellen told CNN on Sunday. Thatâs like saying you have a four-legged pet that eats kibble, barks, fetches, and looks exactly like a Golden Retriever â but it isnât a dog.
Yellen told Jake Tapper, âI think whatâs under consideration is a proposal that Senator Wyden and the Senate Finance Committee have been looking at that would impose a tax on unrealized capital gains, on liquid assets held by extremely wealthy individuals, billionaires. I wouldnât call that a wealth tax.â
Itâs a wealth tax. Worse, itâs a tax on the investments and productivity gains that make the entire country richer.
Letâs pretend for a moment that Iâm a young entrepreneur whose company just went public. Iâve been personally scraping by to get my business going, working long hours and not taking much pay. Overnight, though, the shares I hold are worth a billion dollars. Letâs also pretend that you, dear reader, are a smart investor who bought a few shares in my IPO and tucked them away in your IRA account.
I donât actually have a billion dollars. I just have these shares that the stock market values at a billion dollars. But according to Yellen, wealth tax-proponent Elizabeth Warren (D-Mass.) and Presidentish Joe Biden, I âmadeâ a billion dollars yesterday. And being a naughty rich person, I must pay taxes on that money I donât actually have.
So what do I do? Iâm forced to sell off enough shares in my own company to pay the tax bill. What does that do to you, Mr. or Mrs. Smart Investor? My big sell-off reduces the value of your shares and your retirement account. In essence, youâre paying the âBillionaire Income Taxâ even though you arenât a billionaire and havenât made any income. Every year aroundApril 15th there would be a big sell-off.
So not only is Yellen lying when she says it isnât a wealth tax, sheâs lying when she says it will fall only on the âextremely wealthy.â
Iâm going to need at least one more cup of coffee before I can figure how, exactly, a wealth tax would stifle investment and innovation, so letâs just say for now that it would create several disincentives to smart investing, along with a few more perverse incentives toward making bad investments.
Weâd be looking at a replay of the 1970s, when people were looking more for tax shelters than they were for smart investments. There are reasons the â70s was the Malaise Decade, and thatâs a big one.
But thank goodness that you only have to pay for the unintended (?) consequences of this wealth tax⊠for now. You wonât pay today, but someday you certainly will.
When the income tax first went into effect in 1915, the top rate was a mere 7% and fell only on those making $500,000 a year or more â thatâs $13.5 million in todayâs dollars. The vast majority of Americans paid the lowest 1% rate.
Today, the federal income tax ranges from 10%-37% and thatâs on top of all the FICA withholding. Todayâs top rate â more than five times higher than it was in 1915 â falls on those making about $500,000.
Which means top rate-payers are paying 5.5 more income tax on about one-thirtieth of the income. The lowest rate-payers are paying 10 times more on about the same fraction â and that still doesnât count FICA deductions, which hit the poorest the hardest.
The income tax was sold by early 20th Century progressives as a way to sock it to the rich, but progressives made sure it become a way to sock it to everybody.You can bet your bottom dollar â if Congress doesnât confiscate that, too â that todayâs âBillionaire Income Taxâ is tomorrowâs âTax Your Middle Class Retirement Accounts Before You Even Retire Tax.â âȘ
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