Democrats at odds over 'billionaires tax' to fund sweeping Biden agenda

Senator Ron Wyden talks to reporters in the basement of the US Capitol building on Oct 27, 2021, in Washington, DC. PHOTO: AFP

WASHINGTON (REUTERS) - Senior Democrats in the United States Congress were at odds on Wednesday (Oct 27) over a proposal to tax billionaires' assets to help pay for President Joe Biden's social and climate-change agenda, leaving it unclear if the idea had enough support to become law.

The Senate's top tax writer, Finance Committee chairman Ron Wyden, unveiled the idea early on Wednesday, but by afternoon his House of Representatives counterpart, Ways and Means Committee chairman Richard Neal, said the idea appeared to be too complex to succeed.

Mr Biden's Democrats are struggling to reach consensus on the scope of a pair of Bills worth about US$3 trillion (S$4 trillion) to rebuild the nation's infrastructure, boost social spending and fight climate change.

With the narrowest of margins in Congress and unified Republican opposition, they need almost 100 per cent agreement within the caucus to pass anything.

Mr Biden and Democratic congressional leaders have been scaling back their ambitions in order to keep sceptical centrists on board.

Several media outlets reported that they dropped a provision on Wednesday that would have provided up to 12 weeks of paid family leave.

Aides in Congress said the billionaires tax, affecting roughly 700 taxpayers with more than US$1 billion in assets or US$100 million in annual income for three consecutive years, would impose a 23.8 per cent tax rate for long-term capital gains on tradable assets, whether or not they have been sold.

It would also allow taxpayers to take deductions for losses on assets.

Mr Neal, along with other Democrats, had backed Mr Biden's original proposal, which would raise tax rates on companies and the wealthy, but that idea faces an uphill fight in the Senate.

Referring to the billionaires tax, Mr Neal said: "It will be very difficult because of its complexity."

He added that Democrats are discussing imposing a 3 per cent surtax on taxpayers earning more than US$10 million.

Senator Bernie Sanders, a leading progressive, said the billionaires tax was a "step in the right direction" but not nearly enough.

"Every sensible revenue option seems to be destroyed," he told reporters.

Mr Sanders met Mr Biden on Wednesday, a White House aide said.

The plan for the billionaires tax was put forth after Senate moderates voiced opposition to the idea of raising corporate tax rates.

"The president supports the billionaire tax," said White House spokesman Jen Psaki. "He looks forward to working with Congress and chairman Wyden to make sure the highest-income Americans pay their fair share."

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Two other revenue proposals - a 15 per cent corporate minimum tax and tougher enforcement of existing tax laws - also enjoy backing from the White House and congressional Democrats.

Manchin sceptical

Democratic Senator Joe Manchin, a centrist who has forced Mr Biden to scale back the spending package, reacted with scepticism to the proposed billionaires tax as well.

"I don't like the connotation that we are targeting different people," he told reporters.

Mr Manchin said he would support a minimum 15 per cent tax on wealthy individuals, similar to the 15 per cent corporate minimum tax that Democrats have proposed.

He and Democratic Senator Kyrsten Sinema, another centrist who has opposed various Democratic proposals, met White House staff behind closed doors for roughly two hours on Wednesday.

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The minimum corporate tax would dovetail with a global corporate minimum tax recently agreed to by 136 countries which is aimed at corporations that pay little or no tax by gaming the international tax system.

It would apply to many large American companies, such as Apple,, JPMorgan Chase & Co and Johnson & Johnson.

Some experts say the billionaires tax could be difficult to enforce.

"Government staffers tend to be outmatched by the most sophisticated, best-resourced taxpayers out there," said Dr Steve Rosenthal, a senior fellow at the Tax Policy Centre, a Washington think-tank.

Top White House tax expert David Kamin wrote favourably about a similar proposal in 2019 while serving as a law professor. But he also noted that it could create "distortions" by encouraging a shift in investments to privately held firms.

Tesla chief executive Elon Musk, who early this week was worth about US$230 billion, criticised the plan on Twitter.

"Who is best at capital allocation - government or entrepreneurs - is indeed what it comes down to," he said.

Tesla, an electric car maker, has reaped at least US$3 billion in US and local government support, according to Good Jobs First, a subsidy tracker.

Not all billionaires are opposed to the plan. Investor and liberal activist George Soros is supportive, his spokesman told Reuters on Monday.

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