BIT of Good News: The Billionaires Income Tax is Back!

A Plan to Finally Tax the Most Important Form of Income Among America’s Oligarchs

By William Rice

Regular readers of the Tax Decode will know the recently enacted Trump-GOP budget is terrible tax policy: it gives the great bulk of the benefits to the already wealthy and pays for them with a combination of service cuts for working families and an unnecessary, unsustainable $4 trillion hike in national debt. It’s some consolation, then, that this week there will be reintroduced in Congress an example of excellent tax policy, the Billionaires Income Tax (BIT). Following are seven reasons why the BIT is a hit for anyone who cares about tax fairness.

1. The BIT finally taxes the most important form of income for billionaires and other hyper-wealthy people. Billionaires and those other lucky souls with annual income over $100 million (the only two kinds of people covered by the tax) generally derive little or none of their income from a paycheck. Instead, their principal form of income is the rising value of investments they don’t sell. That’s better than a paycheck, yet under current law is never taxed. The BIT would close this massive loophole for the richest.

2. The BIT would end the scandal of tax-free billionaires. ProPublica has revealed that some billionaires–including Jeff Bezos, Michael Bloomberg and Elon Musk–can completely avoid paying federal income tax, sometimes for years. The BIT would ensure the ultrarich pay income tax in any year in which their wealth grows.

3. The BIT would tax wealth more like work. Workers are taxed on every penny they earn, all year long. The BIT would ensure that the richest households in the country are similarly taxed on their wealth gains as they happen. (Some wealth-over-work bias would nevertheless remain because those gains would be taxed at capital gains rates, which are lower than the rates charged on wages.)

4. Only the very richest households would pay the BIT. Only the tiny, elite group of households with at least $1 billion of net worth or regular annual income topping $100 million would be subject to the tax. Having them pay more in tax would narrow the nation’s wealth and income gaps that destabilize our economy, disrupt our society and endanger our democracy.

5. The BIT would raise half a trillion dollars of revenue to fund services for everyone who’s not superrich. The BIT would raise over $500 billion of revenue over 10 years– again, exclusively from the very richest people in the nation. That’s money that could be used to protect, expand and improve public services like healthcare, education, housing, childcare, retirement security, climate response and more.

6. The BIT’s fairness extends to the billionaires paying it. The BIT recognizes that annual gains in certain assets–like publicly traded stocks and bonds–are easier to assess than those in others, like real estate and private businesses. That’s why the tax would only be due every year on those easily determined gains; those on the gains that are harder to establish would wait until the underlying asset is sold (with interest added for the years tax was due but not paid).

7. The BIT would make the tax code feel less rigged against ordinary people–because it would be. Even if they don’t know the details, lots of Americans accurately sense the tax system is stacked against them and favors the rich. That undermines confidence in the system and makes it easy for conservatives to attack IRS funding as they’ve been successfully doing recently. It’s a vicious circle, of course, because weakening the IRS just makes it easier for the rich to immorally avoid and illegally evade taxes, adding to the sense the code is unfair. The BIT would break that pattern by taxing the very richest among us, and only them, on the kind of income they alone live off of.

The BIT is the brainchild of Sen. Ron Wyden (D-OR), the ranking member of the tax-writing Finance Committee. Companion legislation will be introduced in the House by Reps. Don Beyer (D-VA) and Steve Cohen (D-TN). You might want to contact their offices to express thanks for injecting a BIT of good news into an otherwise dreary tax-policy landscape.