Biden to ask for ‘billionaire minimum tax’ again in State of the Union

President Joe Biden will again call for a “billionaire minimum tax” during his State of the Union address on Tuesday.

Although details have not been released, Biden previously proposed a minimum tax for billionaires in his 2023 federal budget, calling for a 20% levy on households with a net worth of more than $100 million.

In the original plan, the 20% tax applied to “total income,” including regular income and so-called unrealized gains, or investment growth, the US Treasury Department pointed out.

“This minimum tax would ensure that the wealthiest Americans no longer pay a lower tax rate than teachers and firefighters,” the White House said in a press release Monday, noting that the average federal tax rate billionaires’ income is usually around 8%.

However, Biden’s original billionaire minimum tax hasn’t gained traction in Congress and it’s even less likely to happen with a Republican-controlled House now, experts say.

“I view this billionaire minimum income tax as a courier bill to highlight some of the problems with our tax code,” said Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center.

Senate Democrats pushed for a similar billionaire tax in October 2021 to help fund their national spending agenda. But the plan never gained widespread support within the party.

“I don’t see a lot of support for the Biden billionaire minimum tax on the Hill,” Rosenthal said.

Even with more support, Biden’s billionaire minimum tax could face other hurdles, experts say.

“I’m pretty skeptical of the Biden billionaire minimum income tax — both administrative and legal,” Rosenthal said, describing the initial proposal as “very complicated.”

The Tax Foundation also expressed concerns about Biden’s initial proposal, arguing that the plan adds “new compliance and administrative challenges for an already overburdened IRS.”

The Senate version of the billionaire minimum tax has also raised legal questions, with experts asking whether unrealized gains are considered income, which is taxable under the 16th Amendment.

There are also debates over the definition of “billionaire” and the calculation of the net worth of politics. Experts say that if it’s a “direct tax”, it has to be divided by states based on population, which isn’t possible because some places don’t have billionaires.

“I would characterize the landscape here as a lot of uncertainty as to whether or not this would pass the constitutional test,” Tax Foundation senior policy analyst Garrett Watson previously told CNBC.

However, Senate Finance Committee Chairman Ron Wyden, D-Ore., has insisted that their plan is constitutional because it calls for “taxing capital gains income annually” — a concept that is already part of the Tax Code.