After a summer of speculation, the contours of the deal needed to pass President Joe Biden’s popular “Build Back Better” agenda are becoming clear. To win key votes, Congress will have to find fresh sources of revenue to match new spending. Fortunately, there is an economically sound, overwhelmingly popular path that the President is endorsing: requiring ultra-wealthy families like ours to pay more in taxes.
Doing so would mean reforming a tax code that allows the wealthiest to build and maintain fortunes without paying their share in taxes. Ultra-wealthy families further reduce their tax burdens to a pittance by deferring sale of their appreciated assets, borrowing against those assets and structuring their charitable giving. From 2014 to 2018, America’s 25 wealthiest people amassed a combined $401 billion, but in some years paid zero federal income tax, according to ProPublica. The Biden Administration calculates that America’s richest 400 families pay an average annual income tax rate of just 8.2%.
Billionaires generate headlines, but a larger number of American families worth hundreds of millions—including ours—enjoy similar benefits. In 2018, a family in the most common income bracket (adjusted gross income of $50,000 to $75,000) paid average federal income taxes of $4,866. If their tax burden (relative to wealth) had been the same as our own, they would have paid less than $400.
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Unless Congress acts, those who can afford to pay the most will continue to pay nothing, or relatively little, shortchanging urgent priorities. Unlike some, we do not view the existence of billionaires as a policy failure. But as investors, we see the tiny effective tax rates paid by the ultra-wealthy undermining innovation, competitive capitalism and ultimately U.S. democracy. A status quo in which people who work for paychecks pay more in taxes, proportionately, than the wealthiest Americans is driving cynicism and kneecapping our national ambition.
Recent developments suggest this status quo could soon change. Last week, Biden lent his support to a billionaire’s income tax—a new tax on currently untaxed investment income for anyone whose wealth tops $1 billion. He did so as Senate and House leadership announced a framework to fully pay for the $3.5 trillion reconciliation package, which contains much of the Build Back Better agenda.
While income from wages is taxed immediately, many kinds of investment income are not taxed until assets are sold—if ever. Unlike most Americans, billionaires do not need wages or salaries. Instead, many use investment income to help fund their lifestyles by borrowing against appreciated assets at extremely low rates without paying much in income taxes. Taxing billionaires’ untaxed investment income would raise hundreds of billions for public investments such as high-speed internet, quality child care and clean drinking water. Sen. Ron Wyden (D-Ore.), who chairs the Senate Finance Committee, has championed this proposal. Various House members have supported a one-time version of the tax.
In addition to a billionaire’s income tax, Congress should include a small annual tax of 2% on fortunes above $50 million to ensure that families like ours also pull their weight. That measure, which Senators including Elizabeth Warren (D-Mass.) have advocated for, would raise hundreds of billions annually to sustain economic growth. Wealthy countries including Switzerland and Norway have implemented versions of a wealth tax successfully, and it would be relatively cheap to administer across the roughly 100,000 U.S. households who would pay it.
Lawmakers should include both of these revenue provisions in the final reconciliation bill. They are smart policy and smart politics. Among Democrats, Republicans, and independents, few issues attract more support than raising taxes on the ultra-wealthy. An overwhelming majority (71%) of Americans supports an annual wealth tax on fortunes above $50 million, including 57% of Republicans. More than 60% of people with more than $1 million in investable assets support a wealth tax. Many billionaires even support it. In 1999, a certain former president currently residing in Florida proposed to tax himself with a wealth tax.
Including taxes on billionaires and ultra-millionaires dramatically increases support for infrastructure and other Build Back Better investments. Biden tweeted, amid the ongoing negotiations, that he was “sick and tired of the super-wealthy and giant corporations not paying their fair share in taxes.” It appears that voters, including those in crucial states, agree.
In West Virginia, funding the $3.5 trillion reconciliation bill with a billionaire’s income tax increases support from even (48% in favor, 47% oppose) to 2-1 in favor (65% in favor, 29% opposed)—a bipartisan supermajority. In Arizona, likely voters support the reconciliation bill when funded by a billionaire income tax by a 39-point margin (67% in favor, 28% opposed). These states are home to Sens. Joe Manchin and Kyrsten Sinema, respectively, whose votes will be needed to pass any final agreement.
It’s popular, powerful politics for a simple reason: higher taxes on the ultra-wealthy can pay for urgent, shared needs without overburdening anyone. Less than 1,000 Americans would pay a billionaire’s income tax. Only one-twentieth of the richest 1% would pay the annual tax on fortunes over $50 million. Taxes like these on billionaires and ultra-millionaires wouldn’t damage their quality of life—it certainly wouldn’t hurt ours—and no one who wasn’t already an ultra-millionaire would pay a cent under either policy.
Taxing America’s wealthiest citizens is productive and patriotic, not punitive. Improved roads and railways, safer neighborhoods and high-quality schools in every zip code boost economic freedom and allow working people to build wealth of their own. Foundations bearing the names of billionaire families frequently advocate for government action on productive investments like health care, education and climate change. Taxing a fraction of the fortunes of billionaire families would pay for scaling the most effective solutions in a way that philanthropy cannot.
For those worried about a backlash, trust us: There may be some whining and bluffing, but a wealth tax won’t hinder the drive of the wealthiest to invest in entrepreneurs. Ultra-wealthy people won’t renounce their citizenship en masse. Our family’s relative tax burden will still be light; billionaires’ will be manageable, to say the least.
Not everyone agrees. In response to ProPublica’s report, billionaire Carl Icahn asked incredulously, “Do you think a rich person should pay taxes no matter what?” For Americans who prefer economic freedom to free-riding, the answer should be a resounding “Yes!”
All of our wealth, in one way or another, is built on investments our country has already made. Additional investments will empower more Americans to compete in the global economy, strengthen America’s ability to compete with China, and give the wealthiest investors more reason to create jobs at home. We can pay for solutions to short- and long-term challenges without asking wage earners, small-business owners or future generations to pick up the tab.
Voters across the political spectrum view a system that asks Americans with massive fortunes to contribute so little to America’s future as fundamentally broken. They are right. Our estate attorneys might not thank us for pointing that out—but our grandchildren will.
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