It’s hardly remarkable to hear a Democrat insist that all their ambitious, twelve-figure spending proposals can be realized by simply “asking” (e.g., forcing) wealthier Americans to “pay their fair share.” Joe Biden is no exception. But he innovated a new twist on this insultingly simplistic solicitation in a Wednesday New York Times op-ed when he claimed his budgetary goals would be met by compelling high-income Americans “to pay just a little bit more of their fair share.”
“More,” but never quite enough. Fairness, the sentence implies, is a moving target — ill-conceived and forever just over the horizon. That vagueness is probably necessary if Biden and his fellow Democrats are to succeed in their new effort to reconceptualize the very notion of income and transform it into a pliantly taxable abstraction.
To meet America’s ballooning non-discretionary spending obligations, the Biden White House has endorsed levies on income that has not yet been and may never actually be earned.
“Mr. Biden is expected to announce a new tax on American households worth more than $100 million that would apply to both their earned income and the unrealized gains in the value of their liquid assets, like stocks,” read a companion piece in the Times published alongside Biden’s op-ed. Taxing “unrealized gains” is a cumbersome way of saying that the government is coming for wealth that exists only on paper.
The Biden administration has played with this concept for some time. A March 2022 White House fact sheet introduced the idea of a “billionaire minimum income tax,” which would allow the treasury to confiscate 20 percent of all income among the highest earners, whether they’ve earned it yet or not. They pitched it as a “prepayment on future capital gains” without waiting for the actual “gains.”
This is an idea that bubbled up from progressive imagineers in Congress who, in 2021, posited the notion that the federal government could target the roughly 700 American taxpayers — yes, seven-hundred people total — with $1 billion or more in assets with a confiscatory tax on their fortune’s total assessed value. Even if such a scheme came to pass, Democrats confessed that it might raise $200 billion over a decade. For perspective, the Congressional Budget Office projects a federal budget deficit of $1.4 trillion in 2023.
What the White House is pitching is just another version of Elizabeth Warren’s wealth tax, and it suffers from the same deficiencies. Foremost among them is that the scheme is almost certainly unconstitutional. A wealth tax likely violates the prohibition on “direct” taxes in Article I, Section 9. It makes no effort to satisfy the constraints imposed on Congress in the 16th Amendment, which the courts have upheld insofar as it taxes the transference of wealth. Democrats plan to stretch the bounds of what constitutes taxable income not just to assets that exist but those that don’t. But they might. Someday.
All these linguistic gymnastics — “unrealized gains,” “prepayments on future” income — represent an admission by the administration that a plain-old “wealth tax” is a non-starter. Treasury secretary Janet Yellen admitted as much when she bent over backward in 2021 to insist that a tax on wealth can’t possibly be construed as a “wealth tax.” But her discomfort betrays the unfeasibility of it all. Much like the Biden White House’s proposal to give federal workers a 5.2 percent pay hike — the largest since the Carter administration — the proposal is an aspirational document designed to provide Democratic constituencies with something to fight for.
Still, it’s worth dwelling on, in part, because nothing so neatly summarizes the unsustainability of America’s fiscal trajectory and the implausibility of the idea that the nation’s financial obligations through taxation alone. When you’re reduced to trying to satisfy your creditors by putting unsold assets on the table, you’re broke. What’s more, you’re in desperate need of an intervention to curtail your compulsive extravagance.
Nothing makes a more compelling case for necessary reforms to curtail the growth of America’s spending obligations than the idea that we can spend at this rate indefinitely if only we could tap into America’s limitless stores of imaginary money.