US President Biden is set to propose a new 20 per cent minimum tax on billionaires as he unveils his 2023 budget. This proposal would entail US households worth more than $100 million to pay 20 per cent of their tax on income.
“This minimum tax would make sure that the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters,” the document reads.
This will cover both traditional income and and unrealised gains on investment. The later is controversial. Unrealised gains is how billionaires manage to minimise their tax obligations. In the current tax system one has to pay capital gains tax only once when an asset is sold.
“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 document states.
As of now it is unclear if the US Congress will move forward with Mr. Biden's proposal. The purpose of this tax proposal is to reduce deficit. It will raise a significant amount of money from the least amount of people possible. According to the White House, this tax policy will impact less than 20,000 households but bring in $360 billion over the next 10 years.
Last year Senate Democrats had proposed a similar tax policy which would tax unrealised gains but ultimately this measure did not proceed ahead.
According to the Congressional Budget Office, in the fiscal year of 2021, the federal deficit totaled nearly around $2.8 trillion which is about $360 billion less than in 2020.
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