$8.5 Trillion in Untaxed Assets: Data Shows Why 'We Need a Billionaire Income Tax'
Examining recently released data Federal Reserve data for 2022, Americans for Tax
Fairness (ATF) found that the roughly 64,000 U.S. households with at least $100
million in wealth—less than 0.05% of the population—controlled more than one in
every six dollars of the country's "unrealized gains," profits that
aren't taxable until the underlying asset, such as a stock position, is sold.
"But the ultra-wealthy don't need to sell to benefit: They can live off low-cost loans secured against their growing fortunes. And once inherited, such gains disappear completely for tax purposes," ATF's Zachary Tashman and William Rice explained in the new analysis.
"While most Americans predominantly live off the income they
earn from a job—income that is taxed all year, every year—the very richest
households live lavishly off capital gains that may never be taxed."
That small, ultra-rich fraction of U.S. society is sitting on more unrealized capital gains than the bottom 84% of the country—roughly 110 million households—combined, Tashman and Rice noted.
Most of the typical U.S. household's unrealized capital
gains are in the form of their homes, which face state and local property
taxes. But 93% of the unrealized gains of America's wealthiest are tied up in
businesses, stock portfolios, and mutual funds, ATF found. As a result,
mega-rich individuals such as Tesla CEO Elon Musk—the wealthiest man on the
planet—wind up paying little to nothing in
federal income taxes.
Between 2013 and 2018, leading U.S. billionaires paid an
average federal tax rate of just 4.8%, according to a previous ATF analysis.
"This is why we need a billionaire income tax,"
the group wrote on social media Wednesday, pointing to legislative
proposals reintroduced late last year in both
chambers of Congress.
Sen. Ron Wyden's (D-Ore.) Billionaires Income Tax would
tax the tradable assets of individuals with more than $100 million in annual
income or more than $1 billion in assets for three consecutive years, according
to a summary released by the Oregon Democrat's office.
In the House, Reps. Steve Cohen (D-Tenn.) and Don Beyer
(D-Va.) unveiled a bill that
mirrors President Joe Biden's call for a minimum income tax for billionaires.
The legislation would require ultra-wealthy households to pay a 25% annual tax
rate on their income, including unrealized gains.
Last month, the U.S. Supreme Court heard oral arguments in
a case backed by right-wing groups aiming to preemptively outlaw any tax on
unrealized gains. The justices—with the notable exception of Samuel Alito, who
was urged to recuse from
the case due to his connection to a lawyer representing the
plaintiffs—appeared unlikely to
issue the kind of sweeping ruling demanded by right-wing organizations such as
the U.S. Chamber of Commerce.
ATF's analysis found that the wealth of America's
billionaires and centimillionaires has exploded in recent years as Republicans
have enacted massive tax cuts for the rich while wealth tax proposals have
languished in Congress.
"The cumulative $8.5 trillion of unrealized capital
gains held by America's billionaires and centi-millionaires in 2022 has jumped
by more than half–or $3.2 trillion–just since the last Fed survey year of
2019," Tashman and Rice wrote. "That increase continues a
decades-long upward trend among the richest households in the United
States."
To begin reversing the trend and addressing the extreme and dangerous stratification
of U.S. society by wealth, Tashman and Rice argued that Congress must
"curb the economic and political power of the richest households by
annually taxing their investment gains–whether realized or not–just as workers'
wages are taxed now, every year, all year round."
"Without this necessary reform to our system of
taxation," they warned, "the growth of untaxed income at the very top
of our economy will continue to accelerate, to the benefit of a tiny few and
the detriment of everyone else."