Two men, dressed in beige, look to the horizon toward what appears to be a lake in the desert. In the famous scene from “Lawrence of Arabia” that Steven Spielberg said was the best “miracle” ever put on film, the lake evaporates as Omar Sharif draws near — it’s not really a lake at all, but an optical phenomenon caused by refraction known as a mirage. While this natural event can also be observed in real life on both desert sands and highway asphalt, there’s a new type of mirage, one political in nature, rising from the swamp of Washington, D.C.
From a distance, the “billionaires’ minimum income tax” in President Joe Biden’s $5.8 trillion budget blueprint appears as a palpable pay-for, raising $360 billion in new revenue over 10 years, helping to reduce the deficit and claiming to help level the wealth gap between the rich and poor.
But when one steps closer (and actually reads the proposed language), the tax is anything but its title.
First, the tax would apply also apply to all millionaires making more than $100 million. Second, the tax doesn’t just levy a 20 percent tax on income but applies to unrealized gains on every asset belonging to the household — be it a business, farm, patent or other intellectual property, retirement or other investment.
While legislators have attempted to propose taxing unrealized capital gains before — including a wealth tax by Sens. Elizabeth Warren and Bernie Sanders, as well as the now-infamous “double death tax” that would have upended multigenerational American farms, ranches and small businesses — the strange aspect of this proposal is that almost no one likes it.
Lawrence Summers, former Treasury secretary under President Clinton, made his opposition clear when he said, “The billionaires’ tax is a bad idea whose time will never come. … It’s mislabeled to give it a kind of populist appeal.” In an interview with CNBC, Rep. Josh Gottheimer provided even more doubt when he stated, “The billionaire tax and how they’ve put that forward doesn’t make much sense. … I really don’t think that proposal is going anywhere.”
There’s many reasons to dislike this proposed tax, including the huge administrative burden and costs it would take for families to comply, not to mention the reality of adding yet another enforcement issue for the bogged-down IRS, already 6 million and counting unprocessed returns behind.
In addition, legal experts are mulling the notion that defining unrealized gains on assets as taxable income may not even be constitutional — not to mention how to split up this direct federal asset tax among states, given that not all states have billionaires.
Then there’s the overall implication of reforming our tax laws to begin capping what essentially amounts to “success” also known as the American Dream. European countries tried this method of attempting to fill government coffers in the name of wealth equality, only to have it backfire in their bureaucratic faces. The wealthy began to leave countries that instituted a wealth tax and the resulting revenue shortfalls became a burden on the middle class.
Of the 12 wealth taxes instituted in European countries in the ’90s, only three remain.
Nevada will be closely watched during this election cycle. Sens. Catherine Cortez Masto and Jacky Rosen have a lot on their plate — including inflation, spiking gasoline prices, economic recovery from COVID, the second-worst unemployment numbers in the country and supply chain issues. Supporting this new tax proposal just to pay for more government spending would remind Nevadans that political consequences, unlike mirages, are very real in these challenging times.
Rich Robledo is a small-business owner and real estate broker. He writes from Las Vegas.