President Joe Biden has decided to not pursue Senator Elizabeth Warren’s proposed wealth tax for individuals with a net worth of $50 million or more, Politico reports.
The so-called “ultra-millionaire’s tax” would have been an annual 2% tax on household net worth above $50 million and 3% for households with net worth above $1 billion. This means that in addition to any taxes already paid, the uber-rich would also pay 2% or 3% according to their total net worth.
Senator Warren has been a long time supporter of implementing a wealth tax and was an adamant leader on the campaign trail for progressive Democrats to put one in place with a new President.
Warren stated in March, “A wealth tax is popular among voters on both sides for good reason: because they understand the system is rigged to benefit the wealthy and large corporations,” The New York Times reported. She added that she was confident that “lawmakers will catch up to the overwhelming majority of Americans who are demanding more fairness, more change, and who believe it’s time for a wealth tax.”
President Biden has decided to scrap the idea despite its popularity with a public that is still largely dealing with unemployment during a pandemic in which the richest Americans have increased their net worth.
The collective net worth of the country’s billionaires grew by $1.1 trillion during 2020, according to Forbes, citing a report from the Institute for Policy Studies and Americans for Tax Fairness.
One of the reasons for scrapping the wealth tax could be the challenges inherent in implementing it. U.S. Treasury Secretary Janet Yellen has expressed before that a wealth tax is something that would be difficult to implement, Business Insider reported.
Some of those difficulties might involve the ease with which the ultra-rich can hide their wealth. Tax loopholes, like trusts and inheritances, can significantly reduce net worth. Tax havens are also a tried-and-true way the ultra-rich have been offshoring their money from the IRS for decades.
The global wealth gap is far worse than previously thought, as economists have only recently understood how much money was stashed away in tax havens, Forbes reported.
Berkeley economist Gabriel Zucman recently wrote in a paper published by the National Bureau of Economic Research and described by Forbes, “Statistics recently released by central banks of prominent tax havens suggest that the equivalent of 10% world GDP is held in tax havens globally.”
While Biden might not favor the wealth tax, one issue he seems focused on is tackling tax havens. Part of Biden’s alternative to the wealth tax is to raise the corporate tax rate from 21% to 28% and bring additional revenue through a global minimum tax for multinational corporations. The measure would “increase the minimum tax on U.S. corporations to 21 percent and calculate it on a country-by-country basis so it hits profits in tax havens,” according to a White House fact sheet.
Other proposals include scrapping a corporate tax exemption on the first 10% of earnings produced internationally and ending tax preferences for fossil fuel producers, the Financial Times reports.
Biden’s proposed corporate tax cuts have already been attacked by Wall Street.
Biden’s alternative plan to the wealth tax will be needed to fund the massive $1.9 trillion stimulus package.
Biden intends to use the revenue generated from corporate taxes to fund his goliath of an infrastructure plan, which administration officials say is the most ambitious economic restructuring in recent history, according to the Financial Times.
The plan earmarks funds to tackle the climate crisis and calls for $100 billion to modernize the electricity grid, provide tax credits for clean energy generation and storage, and to plug orphan oil and gas wells, the Financial Times reports. The plan also directs $123 billion toward making homes more energy efficient and $100 billion toward making public schools more energy efficient.
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This article originally appeared on GOBankingRates.com: Biden Ditches Warren’s Wealth Tax in Favor of Raising Corporate Tax, Closing Loopholes, Ending Subsidies