Trash the ‘Billionaires Minimal Earnings Tax’

Mike Castaldo
 |  Guest Columnist

Can you guess the worst bad idea coming out of Washington recently? Your hints: (1) it is opposed by members of both parties; (2) it was tried in Europe and failed miserably; (3) it threatens to upend our current taxation system; and lastly, (4) it is likely unconstitutional. If you guessed the “Billionaires Minimum Income Tax,” then maybe you need to run for political office and teach some current legislators down there what NOT to do.

This proposal would levy a 20 percent tax on both the income and assets of any American household worth $100 million or more. While it claims to raise $360 billion in revenue, there are huge issues with the basic premise of the tax — taxing unrealized gains on the value of your house, land, patents, retirement savings, stocks, etc. even if you don’t have any plans to sell them. Households would be hit with a massive bill the first year the tax would be in effect, so much so that the IRS would allow for nine years to pay it off.

The Billionaires Minimum Income Tax, introduced in the Biden administration’s $5.8 trillion budget blueprint, is so conspicuously offensive that both sides of the aisle already say it’s a no-go including West Virginia Senator Joe Manchin (“…Unrealized gains is not the way to do it, as far as I’m concerned”); New Jersey Democratic Representative Josh Gottheimer, co-chair of the Problem Solvers Caucus (“The billionaire tax and how they’ve put that forward doesn’t make much sense…”); and former Treasury Secretary Lawrence Summers (“The billionaires’ tax is a bad idea whose time will never come”).

And that’s just the Democrats. Republican Senate Whip John Thune was on the record saying, “It’s essentially taxing people before they actually get the income, and that seems like a really dangerous precedent in tax law…”). And it’s not just politicians. A study by Zachary Liscow of the Yale University Law School and Edward Fox of the University of Michigan Law School last year found that 75 percent of Americans were opposed to taxing unrealized gains.

Wealth taxes like the Billionaires Minimum Income Tax have already proven not to work in countries that tried it. Of the twelve European countries that instituted a similar wealth tax in the 90s, only three, Norway, Spain, and Switzerland, remain. Why was it such a failed experiment? It was expensive to administer, people who had assets but little income were hit hardest, and it encouraged the wealthy to leave.

Those thinking that the same wouldn’t happen here haven’t seen the Pioneer Institute report that observed Massachusetts’ net loss of $20 billion to other states, especially New Hampshire and Florida where our taxes are much lower. It’s a fact that the rich will take their assets elsewhere, leaving less taxable income on the table.

Washington’s swamp creatures have suggested various iterations of the wealth tax in recent years to fill the federal government’s coffers (remember the awful double death tax introduced last year?). But these ideas may not even be constitutional. The Billionaires Minimum Income Tax likely violates Article I, Section 2, Clause 3 of the Constitution, which forbids the federal government from assessing “direct taxes” that aren’t apportioned equally among the states. New Hampshire doesn’t have nearly as many millionaires as Texas or California, for example.

We are in a sad situation when the federal government is so desperate to find new ways to excavate our wallets. Last May, our two Senators Jeanne Shaheen and Maggie Hassan introduced a bill to protect our citizens from an unconstitutional out of state tax. “I’m glad to partner with this group of lawmakers on this effort to ensure that New Hampshire workers are protected from opportunistic out-of-state taxing authorities,” said Sen. Shaheen. Let’s add the federal government to the list of ‘opportunistic out-of-state taxing authorities’ and ensure that this new federal asset tax doesn’t go anywhere except the wastebasket.

Mike Castaldo lives in Dover with his wife and three sons. He served in the U.S. Marine Corps -Reserve during the cold war.