Its founder, the most epically rich billionaire Elon Musk, has also been known to avoid paying personal income taxes, according to ProPublica.
The twin solution from Democrats — who want money to fund universal pre-K, a Medicare expansion and a host of other priorities — would seek some redress from the men as well as their companies:
Musk is no fan. “Eventually, they run out of other people’s money and then they come for you,” he said on Twitter of the billionaire tax proposal. He did not mention Tesla’s reliance on government help.
About that billionaire tax. It appeared like an elegant, if hastily thrown together, solution Tuesday and was already in serious jeopardy Wednesday.
Instead of being stuck behind their moderates, now Democrats are stuck between them.
- Sen. Kyrsten Sinema of Arizona won’t accept tax rate hikes, even for corporations, which saw a massive cut in the Trump years.
- Manchin thinks a tax on the wealth of billionaires, which Sinema supports, is divisive.
So Democrats are still working on a way to tie their caucus together, deliver President Joe Biden his promised platform and sew up the expanded social safety net for all Americans.
The tax on billionaires could be a game-changing concept in a country where income inequality has been a top issue. Most new wealth is concentrated among the very rich.
Why is a billionaire tax necessary? The biggest billionaires often don’t appear to live off their own billions. Rather, they keep value in their companies or assets, avoid taxes by never selling them and instead borrow spending money from creditors. When they die, their heirs pick up where they left off.
How would a billionaire tax work? It’s complicated. Wyden’s plan stretches to 107 pages.
CNN’s Tami Luhby summarizes: “For tradable assets, such as stocks, billionaires would pay capital gains tax, currently 23.8%, on the increase in value and take deductions for losses annually. They’d be able to carry forward the losses to offset future taxable income and capital gains, and in certain circumstances, to carry back losses for three years.”
Billionaires could spread a first whammy tax bill in 2022 over five years and there’s a method to let them claim losses. Wyden has a clever way to handle billionaires transferring wealth to real estate and other non-tradable assets, not taxing them annually but rather applying an additional interest charge when they are sold.
That’s an interesting side point, actually: The senator sticking up for billionaires to avoid income taxes is Manchin, whose state of West Virginia does not currently house any billionaires, according to Forbes.
Is a tax on billionaires legal? It would be if Congress passed a law. Billionaires have plenty of lawyers. They’d argue it violates the Constitution. The case would go to court.
Billionaires’ wealth is often tied to company stock. Rather than sell it and pay capital gains, they borrow huge amounts of tax-free funds against their stock value. They live off the borrowed cash while their bottom lines grow and pay much less in interest than they’d pay to the IRS.
When they need new loans, there are banks waiting in line.
Where are the billionaires? California has the most billionaires, even though it lost two of its richest people in the last year: Musk and Oracle’s Larry Ellison moved to Texas and Hawaii, respectively. But California still gained 24 billionaires in the past year, according to Forbes.