Throughout Joe Biden’s presidential campaign, he warned that he planned to largely undo one of former President Donald Trump’s biggest accomplishments while in office: the Tax Cuts and Jobs Act. Biden’s tax plan wasn’t always clear, but he was adamant that those who earned less than $400,000 per year would not see any sort of increase. While Biden has yet to introduce any sort of income tax reform, that hasn’t stopped a couple of noted Senate Democrats from introducing an Act of their own.
Last week, Senators Elizabeth Warren and Bernie Sanders unveiled an “Ultra Millionaire Tax Act,” which the two far-left Democrats say will aim to hold millionaires accountable for the taxes that they should be paying. The Act calls for a 3 percent annual tax on any wealth that exceeds $1 billion and a 2 percent annual wealth tax on households and trusts that range anywhere from $50 million to $1 billion.
Senators Warren and Sanders, along with other Democratic supporters, see this Act as a way to create a more level playing field and help solve the issue of the ever-widening wealth gap in the United States — a gap that they believe was made more significant by the Tax Cuts and Jobs Act. They say this wealth gap has also widened as a result of the COVID-19 pandemic, as those who earn less have been much more adversely impacted compared to higher earning Americans.
If passed, the Ultra Millionaires Tax Act would apply to about one of every 1,000 families and allegedly raise nearly $3 trillion in additional tax revenue over the course of 10 years. It’s estimated that about 100,000 total American families would be subject to such a tax. Senator Warren advocated for the funds raised to go toward public schools, child care and infrastructure.
Does the Ultra Millionaire Tax Act have legs? Even assuming all 100 Senators vote on party lines and Vice President Kamala Harris casts a tie-breaking vote, there’s no guarantee that it will even come close to getting to a vote. Some sort of wealth tax has been a pipe dream of far-left Democrats for a while now, and even a slim majority in the Senate is unlikely to get this particular bill across the finish line.
For starters, deep dives into similar bills proposed in the past have found that they’re likely to decrease economic output — and that’s certainly not something that can be afforded, especially now as the country is still reeling economically from the pandemic.
Perhaps even more significantly, it could lead to the ultra-wealthy seeking more creative means of avoiding taxes and perhaps even renouncing U.S. citizenship and moving elsewhere to avoid such a tax. Beyond all this, however, there are arguments over whether such a tax is even permitted under the United States Constitution.
Bottom line: Any type of wealth tax pitch is more pipe dream than reality. If higher taxes are going to be assessed on the ultra-wealthy, it will likely come through some type of larger income tax reform.