Market insights and outlook
25 October 2021
Why are we suspicious of the billionaire tax?
Here are seven reasons
25 October 2021
WE HAVE NO SPECIAL AFFINITY for billionaires; the ultra-rich probably have to pay higher tax rates. A clear majority of Americans want higher taxes on billionaires, who are a juicy political target for members of Congress, who need the income to pay for a spending boom.
THE CONGRESS RACES TOWARDS APPROVAL of a tax on billionaires, plus a tax on share buybacks and a minimum corporate tax of 15%, in a radical new package that was not approved by the committee ways and means of the House. Its exasperated president, Richard Neal, has only a few days to write a new tax bill.
NEW SWEEPING TAXES, in response to Senator Kyrsten Sinema’s apparent refusal to accept higher rates on corporate, personal and capital gains taxes, raises all kinds of issues – starting with the law of unintended consequences . Here are seven reasons why we are wary of a mad rush to tax a billionaire:
1. It is truly a wealth tax, which has not been approved (or successfully implemented) anywhere.
2. He is enthusiastically supported by Senator Elizabeth Warren, which makes us nervous.
3. If passed, it would almost certainly face a constitutional challenge.
4. Billionaires fund a wide range of investments such as tech start-ups, which create jobs. And a majority of billionaires are heavily involved in philanthropy.
5. Tax avoidance could actually increase as assets in ultra-rich housing move abroad.
6. The application of a wealth tax would be a nightmare; What if a billionaire had a Monet painting? Or a huge collection of coins? How to value rising assets like this would be a legal quagmire. Or, what if the assets decline in value?
7. A tax on billionaires is not a fiscal panacea. It would raise between $ 200 billion and $ 250 billion over ten years, which is not insignificant, but barely enough to pay $ 2 trillion in new social spending.
WE RECOGNIZE THAT WEALTH DISPARITY is a serious issue, but it cannot be resolved in a week of frenzied negotiations designed to give Joe Biden something to bring to the Glasgow summit next week.
BIDEN SURELY NEEDS POLITICAL COVER in Scotland, as the United States and other great powers face a huge irony: They all need more coal, natural gas and oil while a winter short of supply is looming.
DEADLINES ARE NEARING: Highway financing is to be re-authorized by the end of this month, the government is only expected to stay open until December 3, and the debt ceiling is to be reauthorized in early December.
A MAD RACE TOWARDS AN UNAPPROVED TAX PLAN is now joining these deadlines to make Washington appear to be restless, seemingly poised to adopt a tax plan Elizabeth Warren loves.
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