Congressional Democrats are weighing a new tax on the income and assets of the nation’s leading billionaires — a provision many believe can help get President Biden’s multi-trillion-dollar expansion of the federal safety net across the finish line.
Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat, is drafting the proposal with input from the White House and congressional leadership. Democrats hope the plan will raise sufficient revenue to fund the more than $2 trillion in dollars in taxpayer spending they are proposing.
While the plan has yet to be finalized, it would tax billionaires annually on any increase in the value of their assets, like stocks and real estate. The tax would apply to individuals with assets in the billion-dollar range and those with annual incomes greater than $100 million over a three-year period.
“The Billionaires Income Tax is about fairness and showing the American people taxes aren’t mandatory for them and optional for the wealthiest people in the country,” said Mr. Wyden.
Unlike capital gains, which taxes the profit made from an asset post-sale, the new surcharge would be assessed annually regardless. Individuals would be able to receive tax deductions, however, if their assets lose value over the span of a year.
Democrats say the new tax will help ensure that everyone is paying their “fair share.” They say that billionaires have “gamed” the tax code by sitting on assets, while using them as collateral for loans needed to finance their jet-setting lifestyles.
Not everyone is on board with the proposal. Some argue that it would be complicated to implement and could result in more asset offshoring. Instead, they argue Mr. Biden should stick by his initial proposal to hike the income tax on top earners and corporations.
“When you do rates, they’re efficient and they’re easily implemented. Unlike the more esoteric ideas of taxing this or taxing that, rates are simple by nature,” said House Ways and Means Committee Chairman Richard Neal, Massachusetts Democrat. “People understand them.”
Apart from the new billionaire’s tax, Democrats are also eyeing a series of other tax hikes and budgetary measures to raise enough revenue for Mr. Biden’s domestic ambitions.
Up for consideration is a 15% global minimum tax on corporations, which would apply to overseas profits. Mr. Biden is also eager to expand enforcement measures by the Internal Revenue Service to help crack down on tax scofflaws. Part of the expansion entails giving the IRS bank information on accounts with more than $10,000 in annual deposits or withdrawals.
Democrats believe a deal on the tax increases will go a long way towards finalizing the package, something Senate Majority Leader Charles E. Schumer hoped to have done by Friday.
Mr. Biden initially wanted the bill to run upward of $3.5 trillion and include long-sought liberal priorities such as free community college, amnesty for immigrants who are in the country illegally, and new climate change regulations.
After significant opposition from two moderate Democrats, Sens. Joe Manchin III of West Virginia and Kyrsten Sinema of Arizona, the White House was forced to retreat.
Mr. Biden has scaled back the price tag of the bill from $3.5 trillion to $2.2 trillion. Some Democrats even estimate the actual figure for the bill is likely to be as low as $1.75 trillion.
“I’m very optimistic,” said House Speaker Nancy Pelosi, California Democrat. “This is exciting because whatever it is, it’s going to be bigger than anything we’ve ever done for the American people.”
Dropped by the wayside has been Mr. Biden’s proposal to grant two free years of community college, regardless of citizenship. Also out is a tax credit scheme that many hoped would force electric utility companies to abandon coal and natural gas in favor of wind and solar.
Remaining within the deal is $450 billion for a universal pre-kindergarten program. Money is also earmarked for transitioning the federal fleet of vehicles to electricity. A further $3.5 billion would be spent on creating a “civilian climate corps” program to employ youth to plant trees.
While there is broad consensus on certain programs, a large portion of the package has yet to be hashed out.
Deep divisions exist among Democrats over whether to means test and make the child tax credit permanent. There is also disagreement over how many weeks of paid family leave will be offered for employees and the extent of the package’s healthcare provisions, including Medicare and Medicaid expansion.
The fate of such programs, according to lawmakers, will be clearer once a top-line number on the package is determined. For that to happen, Democrats need to ensure there is sufficient federal funding.
“We agree on the policy outcomes. Now we just have to find a path on the revenues side,” said Mr. Neal. “This is the ninth inning.”
House Democrats initially proposed at least 40 new tax increases, stemming from increasing taxes on corporations to doubling the federal tobacco tax, to pay for all of the new spending.
Ms. Sinema, a key swing vote, upset that plan by opposing tax hikes for corporations and top-earners. Given that Democrats plan to push the spending bill through the 50-50 split Senate along party lines, the opposition effectively killed the hikes.
Democrats say that Ms. Sinema is increasingly been open to the billionaire’s income tax in private conversations. Ms. Sinema’s office did not return comments for this story.
The state of the negotiations has Democratic leaders optimistic that a deal is in hand after months of back and forth.
“There are many decisions that have to be made, but more than 90 percent of everything is agreed to and written,” said Mrs. Pelosi.
House Majority Leader Steny Hoyer, a Maryland Democrat, has even expressed hope that some version of the spending bill can be brought up for debate next week.