Which Classic Tax Strategies Are At Risk In A Democratic Congress?

Billionaires are the first targets of tax hikes. You’re next.

Take a close look at the tax plan in the budget proposal that came from the White House last week. It probably won’t be enacted, at least not in its present form. But it is a window into the wish list of tax reformers. They aim to kill off a long list of tax avoidance strategies as soon as they get the votes. If not this year, then maybe three years or five years from now.

The so-called billionaire tax, which would levy a 20% rate on both the income and the wealth gains of very rich people, is the most visible part of President Biden’s plan. It turns out that this would apply not just to billionaires but to anyone worth more than $100 million.

It is a threat, moreover, to people with much less money. Why? Because it’s an opening wedge. It introduces the notion of taxing paper gains—wealth increments, that is, that are unaccompanied by realized income. Once this becomes a way of taxing people, some future Congress, hungry for federal revenue, could easily lower the starting point from $100 million to $10 million or even $1 million.