scorecardresearch
Friday, Dec 02, 2022
Premium

In the Biden bill, the billionaires beat the working rich

The most striking thing about the tax provisions that made it into the framework President Joe Biden announced Thursday is how they preserve the ability of business owners to accumulate vast fortunes with minimal taxation — while extracting more money from the highest-paid people those owners employ.

NFL Commissioner Roger Goodell, left, and New England Patriots owner Robert Kraft in Miami Gardens, Fla. on Feb. 2, 2020. Wealthy people like Goodell may not fare as well as super-wealthy NFL owners like Kraft come tax time. (The New York Times)

Written by Neil Irwin

In the end, it was the millionaires versus the billionaires. The millionaires lost.

Months of wrangling over how to offset the cost of the Biden administration’s signature social spending bill appeared to culminate in a chaotic Wednesday on Capitol Hill, as hugely consequential tax and spending provisions were either included in the final deal or left out.

The most striking thing about the tax provisions that made it into the framework President Joe Biden announced Thursday is how they preserve the ability of business owners to accumulate vast fortunes with minimal taxation — while extracting more money from the highest-paid people those owners employ. These “working rich,” as investor Clifford Asness has called them, would pay much of the bill for an expanded social welfare system.

Subscriber Only Stories
UPSC Key- December 2, 2022: Why you should read ‘UN Security Council’ or ...Premium
Poet, playwright and linguist…how Savarkar impacted MarathiPremium
Wanted: New York City rat czar. Will offer salary as high as $170,000Premium
‘AAP a one-man party… cannot become BJP alternative,’ says Baijayan...Premium

Amazon founder Jeff Bezos, who is worth nearly $200 billion, would see little change in his highly favorable tax situation. Andrew Jassy, who succeeded Bezos as CEO and received about $36 million in compensation in 2020, is likely to owe more in taxes if the Democrats’ framework becomes law.

Top News Right Now

President Joe Biden had proposed taxing unrealized capital gains of over $1 million at the time of a person’s death, a provision that did not make it into this week’s agreement. He also proposed raising the capital gains tax rate for those with more than $1 million in gains. Neither is part of the tentative deal.

The same can be said of eliminating the carried interest loophole, which allows private equity executives and others who manage investments to, in effect, treat earnings as low-tax capital gains rather than as higher-taxed income.

Advertisement

The tax code favors investment income over wage income in a variety of ways, most notably the 20% tax rate on long-term capital gains that is far below the 37% top income tax rate.

The logic is that this incentivizes investments that strengthen long-term economic potential — that the tax code should give people reasons to put capital at risk in order to grow the size of the economic pie. But one result is that top wage earners face higher tax rates and less ability to delay or avoid taxes altogether than those who make more money from investments.

Advertisement

It shouldn’t be too surprising then that successful high earners aim to turn small fortunes made from their labor into large fortunes tied up in capital. You see it in business ventures owned by media stars such as Oprah Winfrey and Tyler Perry, and athletes like LeBron James and Tom Brady.

The age-old tension between labor and capital might not have the same feel when the laborers in question are richer than most people could ever dream. But the past few days on Capitol Hill suggest that in a political battle between the working rich and the truly wealthy, the wealthy have the political juice.

First published on: 29-10-2021 at 02:48:33 pm
Next Story

‘I am the victim’: AAP councillor Tahir Hussain tells court during hearing on Delhi riots case

Latest Comment
Post Comment
Read Comments
Advertisement
Advertisement
Advertisement
Advertisement
close