Biden Proposes Billionaire Minimum Income Tax in 2023 Budget, But It's a Gimmick

In his 2023 federal budget, President Joe Biden proposed a "billionaire minimum income tax" -- a 20% levy on households worth at least $100 million (which make up around 0.01% of Americans):^[1]

Proposes a New Minimum Tax on Billionaires. The tax code currently offers special treatment for the types of income that wealthy people enjoy. This special treatment, combined with sophisticated tax planning and giant loopholes, allows many of the very wealthiest people in the world to end up paying a lower tax rate on their full income than many middle-class households. To finally address this glaring problem, the Budget includes a 20 percent minimum tax on multi-millionaires and billionaires who so often pay indefensibly low tax rates. This minimum tax would apply only to the wealthiest 0.01 percent of households—those with more than $100  million—and over half the revenue would come from billionaires alone.

How the Billionaire Minimum Income Tax Would Work

The minimum 20% tax would be on all of the income, including unrealized appreciation on investments.

The President's Fact Sheet: President’s Budget Rewards Work, Not Wealth with new Billionaire Minimum Income Tax explains how this tax would work:

If a wealthy household is already paying 20 percent on their full income – standard taxable income plus unrealized income – they will pay no additional tax under this proposal. If tax-free unrealized income allows a wealthy household to pay less than 20 percent on their full income, they will owe a top-up payment to meet the 20 percent minimum. As a result, this new minimum tax will eliminate the ability for the unrealized income of ultra-high-net-worth households to go untaxed for decades or generations.

The proposal allows wealthy households to spread initial top-up payments on unrealized income over nine years, and then five years for top-up payments on new income going forward. Stretching payment over multiple years will smooth year-to-year variation in investment income, while still ensuring that the wealthiest end up paying a minimum tax rate of 20 percent. Illiquid taxpayers may opt to pay later with interest.

In effect, the Billionaire Minimum Income Tax payments are a prepayment of tax obligations these households will owe when they later realize their gains. This approach means that the very wealthiest Americans pay taxes as they go, just like everyone else, and eliminates the inefficient sheltering of income for decades or generations.

Billionaire Minimum Income Tax Would Reduce Deficit

According to a summary table, the new billionaire tax would decrease the deficit by $361 billion from 2023 to 2032:

Criticism of the Billionaire Minimum Income Tax

Although some millionaires are "patriotic" and want to pay more taxes,^[2] the Billionaire Minimum Income Tax is unlikely to pass.^[3] Even if it passes, billionaires are likely to dodge the tax because they can afford a cadre of the best advisors who can assist them in exploiting loopholes in the law.^[4]

The Billionaire Minimum Income Tax sounds like a gimmick:

• It is written to appeal to the average American who is likely to believe that billionaires own assets just as they do -- directly. In reality, billionaires are more likely to own assets through an array of complex legal structures. But most people support a tax on billionaires.^[5]
• Further, even if it is enacted, the Billionaire Minimum Income Tax would likely be repealed by a future Republican administration that adheres to supply-side economics.^[6]