Manchin Joins Skeptics of Plan to Tax Assets of Billionaires

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(Bloomberg) — Senator Joe Manchin says he’s not yet on board with a proposed billionaire income tax and instead is offering his own proposal to expand a minimum tax on top-earning households, injecting more uncertainty into how Democrats will pay for President Joe Biden’s agenda.

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The West Virginia Democrat told reporters Wednesday that Senate Finance Committee Chairman Ron Wyden’s plan to tax the unrealized gains of billionaires is “convoluted.” He added that he doesn’t like that it solely targets successful business owners who have created lots of jobs and donated to philanthropic endeavors, rather than a broader base of high-net-worth individuals. 

Manchin Joins Skeptics of Plan to Tax Assets of Billionaires
© Photographer: Tom Brenner/Bloomberg manchin

Manchin is among several Democrats expressing skepticism about the tax plan proposed by Wyden as an alternative to raising rates on top earners and corporations to help fund an expansive plan for social programs and to address climate change.

Many Democrats say they like the idea of extracting more tax revenue from the ultra rich in principle, but don’t understand enough about it yet to support it and are concerned about rushing through such a complex plan.

“I think the idea of making sure that billionaires pay a fair share makes a lot of sense,” Virginia Democratic Senator Mark Warner said. “But there’s a reason why we do major tax policy only every few years because getting the details right is important.”

The plan also faces headwinds in the House, where Democrats say they prefer their own tax plan released last month, which relies on more conventional rate increases to fund new social spending. House Ways and Means Chairman Richard Neal has questioned if it would pass constitutional muster, a point also made by Republicans.

The billionaire tax idea upends longstanding principles on capital gains taxation and would require that those with at least $1 billion in assets pay tax annually on their investments, rather than when they’re sold. It’s the latest addition to the potential revenue raisers that Democrats are considering to fund Biden’s nearly $2 trillion economic agenda. The idea, which has been under discussion for years, came to the forefront recently after Arizona Senator Kyrsten Sinema said she wouldn’t support raising corporate or individual rates.

Sinema dodged questions about the billionaire tax, telling reporters after leaving a meeting with White House officials, “I didn’t look at it.”

Wyden Wednesday defended the proposal but didn’t directly address criticism about its complexity, saying there is broad agreement among Democrats that billionaires shouldn’t be able to skirt paying taxes.

“I talk to the Senate Democrats across the political spectrum, they also very much share the idea that everybody ought to pay their fair share,” he said.

Wyden said he’s talked with Manchin about tax fairness “a number of times” that that they agree on the principle that “everybody should pay their fair share.”

Manchin said that instead of the billionaire tax, lawmakers should consider a 15% minimum tax on the wealthy which he is calling a “patriotic tax.”

“There should be a 15% patriotic tax. That’s me speaking, it’s not, I’m not speaking for anybody else,” Manchin said Wednesday. “There’s a patriotic duty that you should be paying something to this great country to give you the protection and the support and the opportunities.”

Minimum Levy

Manchin compared this idea to the minimum corporate levy that Senate Democrats unveiled Tuesday that would require companies with lots of tax breaks to pay at least 15% on the profits they report to shareholders. He said his idea would require that same minimum payment from taxpayers who are able to use deductions and credits to whittle their tax bills down to zero. Manchin, as well as Sinema, another key holdout vote, have both said they support a minimum tax on corporations.

Manchin has not released an official proposal detailing his idea, including who would pay the tax or what income or assets would be subject to the levy. His office did not immediately respond to a request to comment.

The tax code already has minimum tax on high-earning taxpayers, known as the alternative minimum tax. However, the measure was scaled back in the 2017 Republican tax law to hit fewer taxpayers. In 2019 only 0.1% of households were subject to the AMT, according to data from the Urban-Brookings Tax Policy Center.

Narrow margins in the Senate mean that any single Democrat objecting to the plan can block the bill. Still, Senate Majority Leader Chuck Schumer said he thinks Democrats can have a framework of an agreement by the end of the day Wednesday, an ambitious task with a number of outstanding policy issues on taxes, healthcare and family benefits yet to be resolved.

(Updates with Warner in fifth paragraph, Wyden remarks in ninth-11th)

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