A proposal to tax the assets of billionaires is now out of consideration as a way to pay for President Joe Biden's social spending and climate plan, U.S. House Ways and Means Chairman Richard Neal said on Wednesday, according to Bloomberg News.
House lawmakers are instead discussing a 3% surtax - on top of the top income rate - for those earning more than $10 million, Neal said, according to Bloomberg.
The Senate's top tax writer, Finance Committee Chairman Ron Wyden, unveiled the idea early on Wednesday, but by afternoon his House of Representatives counterpart, Neal, said the idea appeared to be too complex to succeed.
Biden's Democrats are struggling to reach consensus on the scope of a pair of bills worth about $3 trillion to rebuild the nation's infrastructure, boost social spending and fight climate change. With the narrowest of margins in Congress, and unified Republican opposition, they need near 100% agreement within the caucus to pass anything.
Aides in Congress said the billionaires tax, affecting roughly 700 taxpayers with over $1 billion in assets or $100 million in annual income for three consecutive years, would impose a 23.8% tax rate for long-term capital gains on tradable assets, whether or not they have been sold. It would also allow taxpayers to take deductions for losses on assets.
Neal, along with other Democrats had backed Biden's original proposal, which would raise tax rates on companies and the wealthy, but that idea faces an uphill fight in the Senate.
Referring to the billionaires tax, Neal said: "It will be very difficult because of its complexity."
He added that Democrats are discussing imposing a 3% surtax on taxpayers earning more than $10 million.
Senator Bernie Sanders, a leading progressive, said the billionaires tax was a "step in the right direction" but not nearly enough. "Every sensible revenue option seems to be destroyed," he told reporters. Sanders met with Biden on Wednesday, a White House aide said.
The billionaires tax plan was put forth after Senate moderates voiced opposition to the idea of raising corporate tax rates.
"The president supports the billionaire tax," said White House spokesperson Jen Psaki. "He looks forward to working with Congress and Chairman Wyden to make sure the highest-income Americans pay their fair share."
Two other revenue proposals - a 15% corporate minimum tax and tougher enforcement of existing tax laws - also enjoy backing from the White House and congressional Democrats.
Democratic Senator Joe Manchin, a centrist who has forced Biden to scale back the spending package, reacted with skepticism to the billionaires tax proposal as well.
"I don't like the connotation that we are targeting different people," he told reporters.
Manchin said he would support a minimum 15% tax on wealthy individuals, similar to the 15% corporate minimum tax that Democrats have proposed.
Manchin and Democratic Senator Kyrsten Sinema, another centrist who has opposed various Democratic proposals, met behind closed doors with White House staffers for roughly two hours on Wednesday.
The minimum corporate tax would dovetail with a global corporate minimum tax recently agreed to by 136 countries and aimed at corporations that pay little or no tax by gaming the international tax system.
It would apply to many large American companies, such as Apple Inc, Amazon.com Inc, JPMorgan Chase & Co and Johnson & Johnson.
Some experts say the billionaires tax could be difficult to enforce.
"Government staffers tend to be outmatched by the most sophisticated, best-resourced taxpayers out there," said Steve Rosenthal, a senior fellow at the Tax Policy Center, a Washington think tank.
Top White House tax expert David Kamin wrote favorably about a similar proposal in 2019 while serving as a law professor. But he also noted that it could create "distortions" by encouraging a shift in investments to privately held firms.
Tesla Inc Chief Executive Elon Musk, who early this week was worth about $230 billion, criticized the plan on Twitter.
"Who is best at capital allocation -- government or entrepreneurs -- is indeed what it comes down to," he said. Tesla, an electric car maker, has reaped at least $3 billion in U.S. and local government support, according to Good Jobs First, a subsidy tracker.
Not all billionaires are opposed to the plan. George Soros, the investor and liberal activist, is supportive, his spokesperson told Reuters on Monday.
© 2023 Thomson/Reuters. All rights reserved.