The Billionaires Tax Is Back

Eons ago, in the fall of 2021, congressional Democrats mulled potential revenue streams for the Build Back Better Act, the multitrillion-dollar proposal to overhaul the nation’s social safety net, tax system, and climate policy. For instance, Senator Ron Wyden, the chair of the Senate Finance Committee, proposed a “billionaires income tax” on Americans with more than $1 billion in assets.

Fast-forward to 2023: The Build Back Better Act is a footnote in history, an ambitious idea sunk by conservative Democratic Senator Joe Manchin, and Republicans now control the House. But Wyden, along with 16 Democrats, formally introduced the Billionaires Income Tax Act at the end of November this year, offering a blueprint for the party’s economic argument ahead of the 2024 election.

“Look, I believe deeply in success. It’s what made this country so special. This isn’t an attack on success, this is a push for some fairness,” Wyden told me in an interview. “That’s what the public believes in, and why it’s picking up support.”

The legislation targets a practice known as “buy, borrow, die” that billionaires use to avoid paying income taxes: A billionaire buys assets that appreciate in value, borrows against those assets’ increasing and untaxed value, and then passes on the assets to beneficiaries when they die, without paying taxes. Wyden’s legislation would require people with more than $1 billion in assets to pay capital gains taxes on the appreciation of value in these assets—such as real estate, stocks, or collectibles—regardless of whether they are sold.

If it were to become law, such a proposal would likely be challenged in court as soon as the ink of the president’s signature was dry. But Wyden argued that enforcement mechanisms already exist in the tax code; moreover, the Sixteenth Amendment of the Constitution allows for Congress to tax earnings, and proponents argue that this proposal is an income tax, not a so-called “wealth tax.” Wyden also pointed out that Supreme Court justices seemed hesitant to upend the tax code in recent arguments for another tax-related case.

“I think people were kind of surprised how cautious the court was going to be,” Wyden said about recent oral arguments in Moore v. Harper.

Wyden believes that the hundreds of billions of dollars that could be generated from this tax could be used to shore up funding for Social Security and Medicare, both of which are facing impending shortfalls, or address childcare needs. Biden has proposed similar legislation, which would apply to around 20,000 households, as opposed to the roughly 1,000 people who would be affected by Wyden’s plan, but Wyden argued that both ideas had a similar purpose.

“These are bills that are very much complementary, designed to do the same thing and to make sure, as we have this debate, about what kind of economic system we want for our country, that Democrats are going to fight for a tax system that helps everybody get ahead and includes making the most fortunate pay their fair share,” he said.

While it might make for a good conversation-starter, recent history proves that such a proposal would be unlikely to make it through Congress, even if Democrats controlled both chambers once more. It would also likely take a back seat early next year to other tax-related priorities, such as ongoing negotiations to reinstate a version of the expanded child tax credit in exchange for extending research and development credits that many Republicans support.

But to Wyden, what the bill stands for is just as important as its prospects of passage.

“Last time I looked, there’s an election coming up in 2024, something rumored to that effect. And people are going to say, ‘What are you for?’” Wyden said, noting the relative popularity of increasing taxes on billionaires among average Americans. “Now there’s an actual piece of legislation, black-letter text, 17 senators on it—six members of the Senate Finance Committee—and that’s going to give us a chance to force a real debate.”

Vibe check: The woes of the 118th Congress

The Senate left Washington on Wednesday without reaching a deal on a supplemental funding package, including aid to Ukraine, Israel, and the Indo-Pacific region, as a bipartisan trio of senators continued negotiating a deal to reshape immigration and border policy.

Supporting Ukraine is increasingly unpopular with Republican voters, and GOP lawmakers have said they will not support a supplemental package without addressing one of the thorniest and most complex issues in Washington: immigration. Democratic Senator Chris Murphy, independent Senator Kyrsten Sinema, and Republican Senator James Lankford are expected to continue working on a deal over the holiday recess. Despite a pledge by Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell to hold a vote on a supplemental package next year, there are multiple obstacles to passage:

• Whatever immigration deal they announce will likely anger Republicans, who argue it does not go far enough, and Democrats, who believe it goes too far—a dynamic complicated by the fact that no Latino lawmakers are included in the negotiations.
• Even if such a package were to pass in the Senate, its prospects are dire in the House, given the aforementioned lack of widespread GOP support for Ukraine and anger about an immigration deal that hard-liners will see as too soft.
• Congress doesn’t return until the second week of January, just a few days before the Iowa caucuses—where former President Donald Trump holds a sizable lead. A victory in Iowa would further cement his status as the presumptive nominee, and he essentially has unilateral power to tank any deal.
• Congress also needs to worry about keeping the government open early next year, with the deadlines to fund several agencies split between mid-January and early February. “January is not going to be an enjoyable month,” Senator Susan Collins, the top Republican on the Appropriations Committee, told reporters on Tuesday. “Let me just say that. So Happy New Year to all of you.”

Let’s face it: Congress did not function especially well in 2023. Fewer than two dozen bills were signed into law this year, a dramatic decrease from previous years. The House was embroiled in chaos for much of the year, culminating in the ouster of former Speaker Kevin McCarthy in October and the ascension of Speaker Mike Johnson, a little-known Louisiana conservative with minimal leadership experience. Neither chamber managed to pass the 12 appropriations bills to keep the government funded. And if you think 2023 was bad, just wait until we’re in a presidential and congressional election year, when it becomes doubly difficult to pass anything substantive.

Lawmakers are also frustrated. “We don’t work around here,” said Senator Pete Ricketts, a freshman Republican. “Most normal Americans work 8 to 5, and work weekends to get the work done.” The Senate, on the other hand, typically has its first vote of the week on Mondays at 5:30 p.m. and its last on Thursdays at 1:45 p.m. This Tuesday, only 67 out of 100 senators showed up in Washington.

Senator Tim Kaine, a Democrat, said that he used the tactic of appending his priorities to must-pass bills like the annual defense authorization legislation; that way, even if Congress struggles to pass basic legislation, he can tell his constituents that he was able to get agenda items approved. “I got parts of 10 bills in the defense bill [this year],” said Kaine. “If you look at ’24, there may even be fewer bills with the [political] dynamics, but we will pass a defense bill.”

Basically: Congress isn’t operating as it should, and everyone—including lawmakers—knows it. When I asked Democratic Senator Jon Tester on Tuesday whether he believed Congress was functioning well, he gave me an incredulous look and laughed: “Are you serious?”

What I’m reading

Zac Efron wrestles with his legacy, by Daniel D’Addario in Variety
2023 was the year TV really put us through it, by Phillip Maciak in The New Republic
Why isn’t the government doing more about the housing crisis? by Annie Lowrey in The Atlantic
Inside The New York Times’ big bet on games, by Charlotte Klein in Vanity Fair
An egg fried rice recipe shows the absurdity of China’s speech limits, by Li Yuan in The New York Times
Immigrant workers are essential to Wisconsin’s dairy industry. But when they get injured, they’re often cast aside, by Maryam Jameel and Melissa Sanchez in ProPublica

Bonus: My favorite books I read this year

Most of these did not come out this year, because I’m terrible at reading books in a timely fashion. And yes, most of these are fantasy and science fiction, because I love fantasy and science fiction.

The Goblin Emperor, by Katherine Addison
Romney: A Reckoning, by McKay Coppins
Killers of the Flower Moon, by David Grann
Translation State, by Ann Leckie
Nona the Ninth, by Tamsyn Muir
The Hero of Ages, by Brandon Sanderson
The Priory of the Orange Tree, by Samantha Shannon
Witch King, by Martha Wells
Tomorrow, and Tomorrow, and Tomorrow, by Gabrielle Zevin

Pet of the week

Want to have your pet included at the bottom of the next newsletter? Email me: gsegers@tnr.com.

This week’s featured pet is Bam Bam, a playful and balloon-loving boy submitted by Eric Michael Garcia. Bam Bam is one and a half years old, and was adopted from the D.C. Humane Society.