The House Ways and Means Committee key missed opportunities in their initial revenue proposals to fairly pay for President Biden’s Build Back Better plans, especially to tackle wealth inequality.
But the Committee’s suggestions include powerful anti-inequality reforms that should be included in final legislation. One of these promising proposals is very similar to an idea of ââa “millionaire surtax” that the Institute for Policy Studies and other tax fairness advocates have been pushing for two years.
As I described the idea here at Inequality.org in September 2019, âThe surtax would apply to income from labor (wages and salaries) and to investment income from wealth, including capital gains and dividends. Thus, those whose capital income exceeds $ 2 million would not benefit from a preferential tax rate. The multimillionaire surtax is easy to understand, simple to apply, and effective, as it covers all kinds of income, making it difficult for the rich to avoid. He’s laser focused on the super-rich. Anyone who earns less than $ 2 million a year will not pay a dime. “
The millionaires surtax was originally introduced in 2019 and reintroduced in 2021 by Maryland Senator Chris Van Hollen (S 2028) and the representative of Virginie Don Beyer (HR 3805). It would institute a 10 percent surtax on the income of couples earning $ 2 million or more (0.2 percent higher). The Tax Policy Center estimated that it would increase $ 635 billion more than 10 years.
The idea was further exposed when presidential candidate Michael Bloomberg offers a 5% surtax on income over $ 5 million.
The Americans for Tax Fairness coalition coordinated a national campaign which now places the concept at the center of federal budget negotiations.
The recently released Plan of the ways and means of the house differs slightly from our original proposal. It would impose a 3% surtax on the incomes of ultra-rich households earning $ 5 million or more per year, raising around $ 127 billion over 10 years. It applies to investment income, including trusts. (See section 138206 âSupplement for high income individuals, trusts and estatesâ on page 652).
Of course, the Holy Grail tax reform would be a total abolition of preferential treatment of capital gains, taxing income from property at the same rate as income from wages. Below that, a surtax on the income of ultra-millionaires is an important step towards equalizing the treatment of capital income and wages.
The surcharge is extremely popular. According to a survey conducted by Hart Research Associates73 percent of voters support a surcharge for millionaires, with 76 percent supporting independents and moderates. Even a majority of Trump voters (57%) and Republicans (53%) support the policy. Surcharge legislation for millionaires has been approved by a wide range of 72 national organizations.
In the coming weeks, Congress will debate the size of the Build Back Better plan and how to pay for it. The millionaire surtax should continue to be part of that mix and could even be broadened by increasing the rate from 3% to 10% – and lowering the income threshold to $ 2 million.
While the millionaire surtax does not address colossal wealth inequalities, it focuses on taxing the income that largely derives from wealth.
Learn more about the millionaire surtax on the campaign website created by Americans for Tax Fairness: www.surtax.org.