White House/Lawrence Jackson
- Bloomberg reports that Biden is getting more serious about some taxes targeting the rich.
- The increases come amidst growing economic disparity throughout the pandemic.
- Capital gains, larger corporations, and high-earners could feel the impact of the hikes under talks.
- See more stories on Insider's business page.
President Joe Biden is getting even more serious about raising taxes on the wealthy, according to a new Bloomberg report. It likely won't look like a "wealth tax," though.
Biden hasn't said he'd enact a wealth tax like the one proposed by Sen. Elizabeth Warren, and instead he's reportedly considering alterations to the tax code that would increase taxes on high earners without creating a brand-new tax that targets wealth.
Biden has already said that Americans making over $400,000 will see a "small to significant" tax increase. High-earning Americans could see their income taxes increase to 39%.
Now, the deputy director of the National Economic Council, David Kamin has told Bloomberg what other tax changes are currently under discussion. One is eliminating the stepped-up basis, something that Treasury Secretary Janet Yellen has already been eyeing.
That measure has to do with inheritance, and how inherited assets are valued for tax purposes. Current law lets assets that have gained value since they were originally acquired be valued at their market price and only taxed on increase from the value at the time of inheritance – not any of the prior gains.
Also under consideration, according to Bloomberg, is increasing the tax rate on capital gains, taxing them at the same rate as the income tax.
Capital gains - profits made from selling assets like stocks - are taxed differently from income once the owner has had the asset for over a year. The rates for those gains are generally lower than the income tax. Throughout his presidency, Donald Trump mostly weighed even more cuts to capital-gains tax rates. Biden's proposal could bring the rates up to 39% for those making the most money, a far cry from rates that currently come to around 20%. Also, wealthier Americans are exactly the type of people likelier to own assets that can be sold for a capital gain.
Finally, Biden wants to raise taxes on business.
Yellen is working toward creating a global minimum corporate tax rate, under the idea that if the US can convince most other countries to set the corporate tax rate at a certain level, Biden can raise corporate taxes without fear of multinationals leaving the country.
Growing disparity has underscored the push for a tax increase
According to Bloomberg, the "administration's intentions" have been reinforced by the K-shaped recovery taking place throughout the pandemic in which high-income Americans have seen their jobs and wages grow, while low-income Americans experience the opposite. Biden himself used the term during a 2020 presidential debate.
Throughout the pandemic, low-wage and minority workers have been hit the hardest; those low-wage jobs may also not return post-pandemic, requiring workers to learn new skills and move into different fields. On the whole, workers globally have lost $3.7 trillion in wages during the pandemic, while the world's billionaires have added $3.9 trillion to their cumulative net worths. In the US alone, billionaires added $1.3 trillion to their net worths during the pandemic.
Biden's $1.9 trillion stimulus did offer some relief - and increased consumer confidence - for low-income Americans. That package was passed through reconciliation, which seems to be the most likely route forward for any Democratic tax hikes.
Tax increases - and what the wealthy are (or aren't) paying - have been a hot topic
A new report found that the top 1% of Americans are avoiding taxes more than anticipated; they've been failing to report about 21% of their income.
There's also been a more targeted push by progressives to introduce a new tax on wealth. Warren introduced a new bill that would increase taxes on the top 0.05% of households. If the measure had been in place in 2020, it would have raised $114 billion from billionaires alone.
White House Press Secretary Jen Psaki has said Warren and Biden share similar objectives for addressing that "those at the top are not doing their part," but the two ultimately have different plans.
In an interview with Bloomberg, Warren praised the American Rescue Plan and Biden's continual advocacy for it. "There is momentum now for real change, and tax policy is a critical part of that change," she told Bloomberg.
Warren also recently Sen. Bernie Sanders and other progressive Democrats in introducing a bill that would target corporations where CEOs are at least 50 times more than the median worker. That bill could raise up to $150 billion in 10 years.