On Billionaires and Social Agendas

Taxes that Hit Broad Majorities are Better

Forget what Senator Kyrsten Sinema did to the Democrats; she hurt the country by refusing to vote for the proposed hike on income taxes and on capital gains. The proposal was far from draconian and an appropriate levy on high-earners in an era of soaring stock prices.

But I’m not a fan of the proposed substitute tax on billionaires.

The taxes would pay for an ambitious — some say revolutionary — new program of social spending and climate projects. It should have the support of the country.

To declare that it will be “free” — underwritten only by 700 billionaires — feels like an unhealthy formula for major reform. Major social agendas should be broadly, if not universally, supported.

The New Deal succeeded because it had the support of wide majorities in Congress. Its programs, notably Social Security, touched everyone. It remains hugely popular largely because virtually all workers, in some proportion, both contribute and pay taxes to it.

The billionaire tax has the odor of forced philanthropy. Elite private colleges run this way — big donations from the rich to underwrite soaring budgets and financial aid for most everyone else — but government, especially democratic government, is not a private club. To endure, it must have popular support.

The fact that the billionaire tax would be levied on unrealized gains makes it even less appealing. Most Americans who own a few shares of stock do not think of unrealized gains as profit. Congress would never levy such a tax on all investors; it should not treat billionaires differently.

An alternate proposal for higher brackets on super-high incomes (according to one proposal, over $10 million a year) is much better. A fair tax system can still be a very progressive one. To say that all should contribute does not mean all contribute in the same proportion.

And the obvious loopholes that benefit high-earners should go. Among these, carried interest for private equity managers is indefensible (Chuck Schumer, are you listening?), ditto, the step-up in basis that spares inherited fortunes from being taxed on the true economic gain.

Also ripe for the cutting board: the grantor annuity trust that allows the wealthy to transfer assets to the next generation, reducing or eliminating gift and inheritance taxes on subsequent appreciation. Finally, the mortgage deduction favors wealthy homeowners and the real estate industry, in other words, it discriminates against middle class homeowners and every American who pays rent. It deserves to die.

The Democrats might do all of these, if they have the will. But they should acknowledge the political truism that to enact a major social agenda, they will, in some form, need society writ broadly to buy into it.

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Ways and Means

My new book, Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War, will be published  in March 2022. You can pre-order Ways and Means here: