Home Business The United States may charge billionaires a “rich man’s tax”, Musk scolded-Fortune中文网

The United States may charge billionaires a “rich man’s tax”, Musk scolded-Fortune中文网

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The Democrats in the United States will propose a new proposal this week to tax the unrealized capital gains of billionaires, which may limit the long-term allowable super-rich such as Jeff Bezos and Elon Musk to avoid paying. Tax strategy for income tax. This proposal has already received some support. However, Musk lashed out on Twitter (Twiter): “In the end, they will squeeze other people’s money and find your head.”

Democratic Senator Ron Wyden of Oregon is expected to announce a proposal this week to help pay US President Joe Biden’s budget. Biden’s budget has been cut to approximately $1.75 trillion. The plan appears to be supported by Senator Kirsten Sinema, a moderate Democratic Party of Arizona, and Senator Joe Manchin, a Democratic Party of West Virginia. They opposed the original proposal to abolish tax cuts for people with annual incomes of more than $400,000 and raise taxes on businesses. And Senate Republican leader Mitch McConnell publicly opposed the proposal of a billionaire tax. “Democrats are too eager to increase taxes. Even the money the American people have not earned is put on the tax increase agenda by them.” He said.

According to reports, the billionaire tax will levy taxes on individuals with assets of more than $1 billion or more than $100 million in income in the past three years. All in all, the number of people affected will not exceed 1,000, but the Democrats of the House of Representatives believe that this will bring about $200 billion to $250 billion in revenue in the next 10 years. This proposal would impose a one-time capital gains tax on the wealthiest people in the United States, even if they did not sell assets such as stocks based on asset value appreciation between the beginning of the year and the end of the year.

These so-called unrealized incomes are a key reason why the top 25 wealthiest people in the United States have largely avoided paying income taxes in the past 20 years. In 2007, Jeff Bezos, the richest man in the world at the time, did not pay federal income tax. According to research published by the investigative news agency ProPublica this summer, Elon Musk, the founder of Tesla, the second richest person in the world at the time, did not pay taxes in 2008.

Billionaires often do not cash out their stocks and pay capital gains. Instead, they borrow stocks as collateral to support a luxurious lifestyle. The single-digit interest rate on this type of loan is much lower than the tax. So, in essence, the rich continue to postpone the payment of taxes until the day they sell their assets, which may be 5, 10, 50 years later-or even never happen.

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Christina Rice, director of the Graduate Tax Program at Boston University School of Law, said: “This is one of the biggest tax planning delays and avoidance strategies.”

Recently, people have been talking about wealth taxes. Senator Elizabeth Warren, Democrat of Massachusetts, proposed a broader wealth tax that would tax all the wealth of the wealthiest people in the United States, including ships, real estate, art, and jewelry. But Rice pointed out that these assets are difficult to value, and that such a proposal would require the preparation of new internal tax regulations and the establishment of a new department in the Internal Revenue Service to implement it. All of these require more time and resources.

In addition, she believes that the wealth tax proposal will face many years of legal challenges, and the wealthy may result in more tax avoidance strategies, such as transferring assets overseas to avoid paying taxes. Many European countries’ wealth tax policies have failed, because government departments have collected only a small amount of tax, and management is difficult to maintain.

Rice said that unlike other wealth tax proposals, the new “billionaire unrealized income” tax will focus on assets that are easier to identify, evaluate, enforce, and audit by the IRS. The Democratic Party’s plan also proposes a 10-year expansion plan for the US Internal Revenue Service, which will cost 80 billion U.S. dollars. At present, the size and strength of the US Internal Revenue Service are still largely surpassed by elite lawyers and tax planning teams hired by the wealthy.

What is unclear is how much tax rates the billionaires will pay each year on these unrealized incomes, what will happen if the value of the stock drops, and whether the rule applies to the assets of non-US citizens. Judging from the wealth created by billionaires today, this is not a small sum. Since the outbreak of the new crown epidemic, the wealth of American billionaires has increased by 70%, an increase of 2.1 trillion US dollars.

On October 25th, Tesla’s market value exceeded the $1 trillion mark. The value of CEO Elon Musk’s shares in the company is estimated to reach 232 billion U.S. dollars, of which a large part of the shares can be his personal Debt guarantees. In 2016, he told the Wall Street Journal that he planned to never sell Tesla stock. (Fortune Chinese Network)

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Compiler: Yang Eryi

Democrats are set to introduce a new proposal this week to tax billionaires on unrealized capital gains—potentially limiting a long-standing tax strategy that has allowed the ultrawealthy like Jeff Bezos and Elon Musk to largely avoid paying income tax—and it’s already gaining support. And Musk has already lashed out on Twitter, saying, “Eventually, they run out of other people’s money and then they come for you.”

Sen. Ron Wyden (D-Ore.) is expected to unveil a proposal this week to help pay for President Biden’s budget, which has been whittled down to around $1.75 trillion. The plan appears to be gaining traction with moderate Democrats Sen. Kyrsten Sinema (D-Ariz.) and Sen. Joe Manchin (D-W.Va.), who objected to the original proposal to reverse tax cuts on those making more than $400,000 and raising taxes on corporations. Senate Republican leader Mitch McConnell spoke out against the proposed billionaire tax, saying, “The Democrats are so desperate to raise taxes that they are now proposing to tax money the American people haven’t even made yet.”

The billionaire tax would reportedly focus on individuals with $1 billion in assets or those with at least $100 million in income for three consecutive years. All told, fewer than 1,000 Americans might be affected, but House Democrats believe that over 10 years, it could bring in $200 billion to $250 billion in revenue. The proposal would likely create a one-time capital gains tax for the country’s wealthiest individuals—even if they didn’t sell assets like stock—based on the appreciation of an asset’s value between the start and end of the year.

These so-called unrealized earnings are one key reason the top 25 richest people in America have largely avoided income tax over the past two decades. In 2007, Jeff Bezos—at the time, the wealthiest person in the world—paid no federal income tax. The following year, Tesla founder Elon Musk, by then the second richest person in the world, also paid no tax, according to research published this summer by investigative news outlet ProPublica.

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Rather than cashing out stock assets and paying capital gains, billionaires tend to borrow against their stock holdings to fund lavish lifestyles. The single-digit interest rate on that borrowing is far lower than taxation, so in essence, the wealthy are deferring paying taxes until they sell, which could be five, 10, 50 years from now—or never.

“It’s one of the great tax-planning deferral and avoidance strategies,” says Christina Rice, director of the graduate tax program at Boston University School of Law.

Talk of a wealth tax has been thrown around for some time. U.S. Sen. Elizabeth Warren (D-Mass.) proposed a broader wealth tax that would tax all of the holdings of America’s richest people, including boats, real estate, artwork, and jewels. But those assets are difficult to value, and such a proposal would require writing a new section of the internal revenue code as well as a new division of the Internal Revenue Service to enforce it—all of which takes time and resources, notes Rice.

Plus, legal challenges could last for years, and the measure would probably prompt even more creative strategies by the wealthy to offshore assets to avoid taxation, she says. Wealth taxes in a number of European countries failed because they raised little money, and they were difficult to administer.

Unlike other wealth tax proposals, the new “billionaire unrealized gains” tax would focus on assets that are easier for the IRS to identify, value, enforce, and audit, says Rice. The Democratic plan also calls for an $80 billion, 10-year expansion of the IRS, which has largely been outgunned by the savvy attorneys and tax planning teams that the wealthy can afford to deploy.

It’s still not clear what annual tax percentage billionaires would pay on the unrealized income, what happens if stock value declines, or if the rule would apply to non-U.S. assets. Judging by the wealth being generated by today’s billionaires, it would not be a small amount of money collected. Since the pandemic started, U.S. billionaires watched their wealth grow 70%, by $2.1 trillion.

On October 25, Tesla crossed the $1 trillion mark in market capitalization, bringing CEO Elon Musk’s stake in the company to an estimated $232 billion—with a large portion of his shares pledged to secure his personal debts. He told the Wall Street Journal in 2016 that he planned to never sell his Tesla shares.

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