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EXPLAINER: How would billionaire income tax work?

EXPLAINER: How would billionaire income tax work?

WASHINGTON (AP) — A "Billionaire Minimum Income Tax" is included inside President Joe Biden's fiscal year 2023 budget proposal — small portion of the administration's attempt to lessen the confederate shortfall over the following decade with every one other accompanied by fund new spending. The proposal "eliminates the inefficient sheltering of income for decades or generations," the White House says.

During a press conference highlighting the budget on Monday, Biden said one-hundredth of 1% of Americans would exist theme to the tax. "The billionaire lowest level tax is fair, with every one other accompanied by it raises $360 billion that tin exist used to foot costs for families with every one other accompanied by gash the deficit," he said.

Whether Congress will agree with is a greatest question while the management outlines its hope to tax the nation's highest earners.

Here's how it would work:

HOW WOULD THE TAX APPLY?

The budget proposes that households price additional than $100 million pay at least 20% inside taxes on both income with every one other accompanied by "unrealized gains"— the grow inside an unsold investment's value. For numerous wealthy individuals, the management says, that "true income" never gets taxed since it tin exist held onto for decades with every one other accompanied by occasionally generations.

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EXPLAINER: How would billionaire income tax work?

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Biden's proposal would permit wealthy households to spread some payments on unrealized gains over nine years, with every one other accompanied by at that hour dated for five years on new income going forward. Stretching payments over multiple years is meant to smooth yearly variations inside investing income, while still ensuring that the wealthiest extremity up paying a lowest level tax percentage of 20%. In effect, the Billionaire Minimum Income Tax payments are a prepayment of tax obligations these households will exist in debt when they subsequent register their gains.

This is an extremely nuanced policy. The tax is targeting the ultra wealthy. It's taxing gains achieved from their wealth, nevertheless it's real with every one other accompanied by unrealized income by preference than simply the underlying assets.

That's why David Gamage, a tax rules and regulations professor at Indiana University says "it's not a affluence tax, it's an income tax reform." He says, "This is a lowest level income tax that includes the accurate monetary value" of income that tin exist held for a extremely lengthy time, he said.

WHO WOULD SEE THE IMPACT?

Roughly 700 billionaires would exist affected by the tax proposal, the White House says, estimating that these individuals increased their affluence inside 2021 by $1 trillion, paying violently 8% of their income with every one other accompanied by unrealized gains inside taxes.

"A firefighter with every one other accompanied by a teacher pay additional than double" the tax percentage that a billionaire pays, Biden said throughout Monday's press conference.

Elon Musk, Bill Gates, Jeff Bezos, Warren Buffet with every one other accompanied by Michael Bloomberg are fair a well-known few individuals who could see the income on their holdings taxed under this proposal if it were to become law.

HOW MUCH MONEY WOULD IT RAISE?

According to the White House, $361 billion over 10 years. The budget proposal contains an additional $1.4 trillion price of income raisers, which would include a higher top tax percentage of 39.6% on individuals with every one other accompanied by an grow inside the corporate tax percentage to 28%.

HOW DO VOTERS FEEL?

The theme of tax avoidance has grown inside recent years. A ProPublica report from last June outlined how the wealthiest Americans tin legally pay income taxes that are a fraction of what centre income Americans pay on their income. And a Pew Research Center learning from last April states that most Americans — some 59%— speak they are bothered "a lot" that some corporations with every one other accompanied by wealthy people don't pay their fair portion inside taxes.

A 2017 Gallup poll states that slightly additional than sextet inside 10 Americans speak that upper-income people pay excessively little inside taxes.

IS CONGRESS LIKELY TO APPROVE THIS MEASURE?

Donald Williamson, an accounting with every one other accompanied by taxation professor at American University inside Washington, said "a set of two of years ago, I would've laughed not here loud. Today it's conceivable."

The highest likelihood is into and not here of "reconciliation" — a budget procedure for passing fiscal legislation accompanied by a simple majority of Senate votes.

That will need buy-in from West Virginia Sen. Joe Machin with every one other accompanied by Arizona Sen. Kyrsten Sinema, who have every one objected to proposals to tax the ultra-wealthy inside the past.

Steve Wamhoff, director of tax policy at the Institute on Taxation with every one other accompanied by Economic Policy, says the Democrats "have got this reconciliation automobile that they tin use that to go legislation."

"This is a step in the direction of a a a large amount of fairer tax code."

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Associated Press author Josh Boak contributed to this report.

EXPLAINER: How would billionaire income tax work?

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