Biden’s Plan to “Tax the Rich” Is Unlikely to Stop with Billionaires

Below is my column in the Hill on President Joe Biden’s new tax on “unrealized gains.” After the President rolled out the new tax, his economic adviser Jared Bernstein went on Fox News and had a moment of uncontrollable honesty. He blurted out to Bret Baier that “it is very much a tax on wealth.” For the White House, it was a cringe-worthy moment. After going through considerable effort to cover this tax in sheep’s clothing, Bernstein ran out of the White House screaming “Wolf, Wolf.” Indeed, the new tax is being framed as a “pre-payment” to avoid the obvious: that it is an unconstitutional wealth tax.  Bernstein’s statement is now likely to feature prominently in court filings challenging this tax if it ever secures congressional approval.

Here is the column:

Announcing his new taxation plan to raise an additional $1 trillion, President Biden repeated his oft-stated assurance that “I am a capitalist.” The concern raised by his new plan, however, is not one of capitalism but constitutionalism. While not addressed in the president’s remarks, the Biden White House is planning to introduce a new type of income tax that would fundamentally change the taxation powers in the United States. Taxing the “unrealized gains” of billionaires is likely to be popular, but it may also be unconstitutional.

It is difficult for average Americans to fret over the tax burdens of Jeff Bezos or the roughly 700 other billionaires who would be subject to this change — but this would be a new tax which, if successful against billionaires, is unlikely to stop with them.

Politicians have long turned to the “Eat the rich!” battle cry when things are not working out politically or economically. When struggling in the 2020 Democratic presidential primaries, Sen. Elizabeth Warren (D-Mass.) pledged a wealth taxdeclaring that she was coming after “the diamonds, the yachts, and the Rembrandts too.” Then-New York City Mayor Bill DeBlasio, another Democratic contender at the time, was barely registering in the polls when he promised that “we will tax the hell out of the wealthy.”

Now, facing record lows in polls (including only 33 percent approving his handling of the economy), President Biden is picking up the same class-warfare cudgel. Indeed, in defense of this new tax, Sen. Bernie Sanders recently compared American billionaires to Russian oligarchs.

There is no question that taxing billionaires always makes for good politics, but it can also make for bad cases when an income tax is not based on actual income. Like today’s popular call to seize the yachts of Russian oligarchs, the gratification of taking from the “super rich” can be lost if you have to give it back.

The Biden tax would raise an estimated $360 billion in new revenue over the next decade. It would target households worth more than $100 million that do not already pay 20 percent tax to increase the tax burden to that level on their “full income.” However, what the Biden administration is calling “full income” would be subject to the additional tax.

Income tax focuses on actual income or gains acquired by citizens in any given year. That includes “capital gains” when you sell an asset for more than its original purchase price. It is “realized” when you sell it.

Democrats now are seeking “unrealized gains,” even though an asset has not been sold and could go down in value. It is a more sophisticated version of Warren’s wealth tax, but it is arguably just as unconstitutional.

The Constitution originally imposed a narrow limit on Congress’ taxing authority. Article I, Sections 8 and 9, barred any direct tax unless it’s “apportioned among the several states” in proportion to population. In other words, it must be spread evenly among every person in every state.

In 1895, Congress sought to impose an income tax, but was stopped by the Supreme Court in Pollock v. Farmers’ Loan & Trust (1895). The court barred any such tax “upon property holders in respect of their estates, whether real or personal, or of the income yielded by such estates, and the payment of which cannot be avoided.”

That case led to the ratification of the 16th Amendment, which allows Congress to levy “taxes on incomes” without apportionment. Yet it expressly states that “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Biden, however, is now asserting the right to tax not only income but assets. Rather than wait for a taxpayer to sell an asset and tax those gains, he wants to start collecting taxes now.

The Biden White House insists this is merely “a prepayment of tax obligations these households will owe when they later realize their gains. … This approach means that the very wealthiest Americans pay taxes as they go, just like everyone else, and eliminates the inefficient sheltering of income for decades or generations.” Framing the tax of assets as a pre-payment still leaves it a tax on current wealth rather than income.

There is also the daunting logistical task of valuation and why some assets may be counted over other assets.

The same is true about a home. A family house likely will grow in value, and that value can be captured as a property tax by states. Yet the federal government cannot also take that value as a “prepayment of tax obligations” on an asset that might go down in value or not be sold for decades.

The targeting of billionaires is a brilliant way to get the public to accept a new type of tax. Once allowed, though, it can then be used on any asset and against any tax bracket to tax “unrealized gains.” If history shows anything, it is that the government tends to operate like a gas in a closed space: Expand the space, and the gas will fill it evenly.

Taxing 700 fat-cats is not going to erase the towering debt of the government. That would require exploiting new, untapped sources of income. Unrealized gains would open up a massive amount of potential taxable assets. Moving from 700 billionaires to 22 million millionaires would be based on the rationale of rich people not paying their fair share. After all, many would be holding the very same stocks or shares or assets. With almost 60 percent of citizens paying no income tax, the need for such revenue is only likely to increase.

Democrats have argued for years for a wealth tax. The Biden proposal is as clever as it is cynical. The White House is betting that it picked the least popular group to target in order to get average citizens to accept a new type of tax; once accepted for billionaires, the question then becomes a matter of discretion, as Congress taps other brackets for revenue.

During the 2020 Democratic primary debate, Warren was applauded when she rubbed her hands together and gleefully explained how she would take some of the wealth of fellow candidate John Delaney. Delaney was worth $65 million, so he would arguably miss Biden’s cutoff. But Warren’s theatrics show how this is unlikely to stop with “The 700.” She treated Delaney’s wealth like it belonged to her and others, an irresistible windfall of public funds.

During the French Revolution’s “Reign of Terror,” Pierre Gaspard Chaumette, president of the Paris Commune, rallied the mob by quoting the French philosopher Rousseau that “when the people shall have nothing more to eat, they will eat the rich.” As shown in 1793, lawless measures rarely stop with those first targeted. No one is suggesting millionaires will be carted off in tumbrels to the guillotine. However, taxation can prove an insatiable appetite — when the feast on the rich begins, it is unlikely to end with a first course of billionaires.

Jonathan Turley is the Shapiro Professor of Public Interest Law at George Washington University. Follow him on Twitter @JonathanTurley.

53 thoughts on “Biden’s Plan to “Tax the Rich” Is Unlikely to Stop with Billionaires”

  1. I know of one rich guy who didn’t want to pay his taxes. He took in many millions of dollars but he couldn’t find the money from those millions to pay his taxes so he had to take out a one million dollar loan to satisfy the governments tax requirement. You know him too. Here is what The Washington Post had to say about this guy. Over the course of 14 months, the Chinese energy conglomerate and its executives paid $4.8 million to entities controlled by Hunter Biden and his uncle, according to government records, court documents and newly disclosed bank statements, as well as emails contained on a copy of a laptop hard drive that purportedly once belonged to Hunter Biden …

    The new documents — which include a signed copy of a $1 million legal retainer, emails related to the wire transfers, and $3.8 million in consulting fees that are confirmed in new bank records and agreements signed by Hunter Biden — illustrate the ways in which his family profited from relationships built over Joe Biden’s decades in public service …

    The contract, signed on Aug. 2, 2017, stated that Hunter Biden would get a one-time retainer of $500,000 and would then receive a monthly stipend of $100,000, with his uncle James Biden getting $65,000 a month. Joe Biden didn’t know anything about what his son and his brother were doing. Wink wink.

  2. “If you’ve got a business, you didn’t build that.” ~Barack Hussein Obama

  3. The comfort of the rich depends upon an abundant supply of the poor. – Voltaire

    1. At least one of those greedy, corrupt Bidens is about to go down. Where’s Hunter?

    2. “The comfort of the rich depends upon an abundant supply of the poor.”

      Asserted by those stunted mentalities who believe that wealth is a static quantity.

  4. A much smarter approach to expanding social mobility (which is the Democrat’s goal and most Repubs too) would be to create a new non-profit entity — the Human Development organization (HumDev) which facilitates individuals and families building their human capital (education, crafts and trade skills, health, child development, financial savvy, etc.). The current 50% limit of charitable giving would be lifted to 90% for HumDev philanthropy, and the Estate Tax made also an individual choice of investment in HumDevs vs. paying the government.

    Where are Repubs? Why are they always responding with “no” to progressives?…why can’t they outsmart progressives with their own creative, forward-thinking free-market solutions to improving the opportunity society?

    1. (HumDev) which facilitates individuals and families building their human capital (education, crafts and trade skills, health, child development, financial savvy, etc.).

      That would be public education. But public education is much to busy pushing race fables and explaining the dysphoria attached to a fraction of a fraction of the population.
      Reading and ciphering are not high on the priority list.

  5. It is an explicit tax on wealth. It is also apparent that it will eventually filter down to the middle class like the AMT, which was supposed to tax only a relatively few millionaires.

    Has anyone on this blog never paid the AMT?

  6. All you tax cheats have been IDed. And you will pay your fair share.

    The extra cash will go to Ukraine.

  7. Am I the only person who sees through this fraud? Biden is proposing a tax that he knows will be stricken by judicial review.
    Review will take months even on a fast track but it will not occur before the budget is adopted. This will allow him to claim offsets against his profligate spending. When the tax is thrown out, the spending will go to the deficit and he can claim that the courts caused the deficit to be as large.

  8. A huge percentage of one’s health depends upon behavior
    Correct. Choices are important. The most import choice is picking your parents.

  9. Typical democratic crap. After all those rich never really earned that wealth. It was everyone else who earned it, right! It all belongs to the state and we just get to play with the amount allotted to us until it reverts to the state. I think this system was already used once, where the King owned the country and the lords or wealthy were given castles and land for giving homage to the King. You were supposed to supply men at arms to the king in time of war and pay a substantial amount of the income to the king from the estate placed in your hands by that same king. Was that not feudalism. Are we now serfs also? Are the aforementioned wealthy now supposed to drop by the White House, bend your knee and kiss the king’s ass for the privilege of your wealth and paying him his tax. Also this has been tried in several European countries and was subsequently rescinded reportedly. I remember the “millionaires tax” in France a few years back. It was rescinded. The millionaires just moved across the channel to the tax haven of the UK.
    I do agree that many agencies have outlived there usefulness and should be terminated (like most of them). Most of the these agencies could be handled by a mildly strong AI with algorithms. The DNC and it’s minions respond like an algorithm. “I have a question”-answer “Nazi”, “the debt is staggering”-answer “tax the wealthy for their fair share”, “What’s a fare share”- answer “Nazi”, “I have a question about these class programs and privilege”, Answer “CRT is only discussed in Law Schools and Graduate studies and we won’t answer you because you’re a racist and a Nazi”.

  10. One possible idea for debate would be transforming real estate and property taxes into a “Flat Tax” (same percentage for all Americans). Income tax could be exclusively only be money invested into stocks, bonds, etc. and any gains/losses when sold.

    In this system, both owners and renters would be paying the taxes but regular income would only be taxed if invested. This also provides less government intrusion into personal privacy. It’s impossible to tax rich people on gains/losses in investments until they sell the investments. If we tax “unsold” investment gains, that would increase taxes for any American owning a 401K plan.

    1. Ok …on the surface.
      A simple sales tax is far easier to administer. The more you make the more you spend, the more you spend the more you are taxed. (only after repealing the 16th amendment)

  11. we can raise the same amount of $$$ by taxing the ~40% of taxpayers making 20k or less ~$570 a year!! after all….no representation without taxation…’cause its EQUITABLE!!!

  12. I don’t how many times he repeated the plan will lower the cost of prescriptions and child care. He repeated the response every time he was pressed with a question. This will not stop at the wealthy. Will this include the appreciation on your home? If it make’s itself through it will destroy pensions and 401’s. Just the redistribution of wealth and government dependence, plain and simple. Hopefully it will be stopped.

    So, this is the administration you wanted over Orange Man? Yes that’s right Man not Woman, Man there’s a distinct difference.

    1. Biden’s tax and spend policies destroy the nation’s ability to grow. It reduces the standard of living of its citizens. Federal spending should be drastically curtailed, leaving a lot of that spending to the states, cities or the people.

      We would all be a lot richer with a higher standard of living but for the big spenders in Washington, who are mostly thieves robbing the US treasury.

  13. t households worth more than $100 million that do not already pay 20 percent tax to increase the tax burden to that level on their “full income.

    I know its lawyer speak, ie, impossible to decipher with out paying a tax lawyer. So I need help with the concept.

    From this piece of the article. I interpret it to mean. Net worth $100million. Income $10 million. IF, the tax payer is paying 5% income tax on $ 10 million income. A new calculation will bring the total tax due from $500k ($10 million X 5%). Now becomes $20 million tax liability. Exactly where is the person supposed to get $19.5 million cash?

    Of course the unspoken part, What is “taxable income”? That little nugget is defined by politicians, Joe Biden, Elizabeth Warren, Bernie Sanders, Nancy Pelosi, Chuck Schumer. etal. The simple solution is to redefine taxable income….and watch the economy collapse.

    All of this is standard political gaslighting. Biden complaining “the rich” pay a to small portion of their income as tax….The exact amount Joe Biden codified into income tax law.

  14. A big crisis is we have one party that wants to totally abolish entire agencies and the other party that wants agencies to only grow (never shrink in proportion to the original mission) until they mission-creep into government-run-amok status. American’s have no major political party that wants to improve the efficiency of agencies instead of abolishing them. Voters have two very bad extreme choices.

    For example: Democrats once strongly opposed torture, covert blacklisting and warrantless domestic spying but have continued to fund these GOP programs (even though the original mission has largely shrunk in size). The net result – ironically – is that a mission originally focused on Osama Bin Laden now targets some Trump supporters or non-violent trespassers (environmentalists) blacklisted by Virginia’s Fusion Center (exploiting 9/11 secrecy laws). Mission creep harms voters of both parties but there is no major party to vote for. This is not only demeaning for voters but also for government bureaucrats trying to justify mission-creep.

    1. A big crisis is we have one party that wants to totally abolish entire agencies and the other party that wants agencies to only grow
      I want to eliminate agencies that have no constitutional basis for existing. Dep of educaiton, just one example. Not a single person would notice.

  15. An important point that no one mentions when discussing a wealth tax: EVERYONE, including those with limited assets, would have to file a wealth tax return, at least initially. Otherwise how would the government know who is subject to the tax? Then the government has a record of everything significant that you own.

  16. “If history shows anything, it is that the government tends to operate like a gas in a closed space: Expand the space, and the gas will fill it evenly.” Such a great analogy. And tax on unrealized gains would be a nightmare, but just shows how desperate the government is for money after borrowing and spending trillions that they insisted was not a problem at all. They will go to where the money is and try their best to take it – what they really want is your 401k. That’s where the real money is. Looks like this is the first step. Must be stopped. Great points all!

    1. The U.S. population has increased around 16% in the past 20 years, going from 287 million too 334 million people. Yet the federal government has increased spending from about $2 trillion a year in 2002 to $6 trillion a year today. A 200% increase.

      Yet that is not enough to satisfy the greed of Democrats. They want more.

  17. Taxing the uber-rich is nothing new. The Rule Against Perpetuities was designed to prevent large estates from being kept in one family for more than one or two generations. The rule was one of the devices developed to limit the very rich avoiding taxes indefinitely.

    The 1% complain that 60 percent pay no income tax, that a tiny minority disproportionately bears the tax burden. There is a reason for that-

    They have all the money.

    1. that a tiny minority disproportionately bears the tax burden. There is a reason for that-

      They have all the money.

      We are back to income vs wealth.

      The govt knows to increase income tax revenue, they increase the revenue from the bottom 90%. Not the top 1%
      The media tag line on this story is 47% pay no income tax at all.

      Getting that 47% to pay 3% would raise far more taxes.

      That brings us back to a national sales tax.

      While good concept will never happen, because Income tax law is where politicians get some of their grift. AND the 16th amendment would have to be appealed before the people would support it.

      The 16th amendment….and we are back to the unconstitutionality of a wealth tax.

    2. Everyone should have skin in the game, no matter how little. It makes everyone more equal and provides a way of gaining self respect.

      Jeff, you wouldn’t understand those things.

      1. “Everyone should have skin in the game.” Wrong and foolish. You tax things you want to discourage- tobacco use for example. Taxing peoples salary earnings discourages work, which is antithetical to a well functioning economy. Taxing large inheritances, high frequency algorithmic-based trading, risky derivatives etc. instead adds a risk premium to economically risky behavior. Taxing lower income peoples’ wages doesn’t increase “buy-in” whatever that means (Show me your “self-respect coefficient”). It just means those people now have less money for food and housing and diapers and encourages things like working under the table to avoid tax. It’s worth mentioning that in my living memory every Republican presidential administration has implemented some version of regressive taxation policies and the result has been a deep recession each time. The 92 recession made HW Bush a 1-time prez, Bush 2 came in with a surplus and left with a multi trillion dollar deficient and the entire economy mired in the deepest recession (2008) since the Great Depression, and Trump threw the kitchen sink at the economy in terms of stimulus and all he got was 2 years of anemic GDP growth followed by a recession:

        What does that tell you about the fundamentals of the economy?

        1. “You tax things you want to discourage- tobacco use for example.”


          The idea of a tax is to raise money so that there is money for the government to run and do its designated duties. You desperately need a course in economics.

          “You tax things you want to discourage”

          Raising prices in any fashion discourages use, but that is not the primary reason for the income tax.

          “Taxing peoples salary earnings discourages work”

          When work is how people get money to fill their bellies, taxing them doesn’t discourage work. It encourages cheating. 90% tax rates would discourage rich people from making the nation richer by enriching themselves.

          Dirt McGirt, I won’t correct you any further. You have no understanding of economics. If you want the quickest, easiest and one of the best ways to understand your relationship to the political economy, read Milton Friedman, Free to Choose.

          [Just as an aside, smokers leave the economy with more pooled money, not less. If you stop them from smoking, they will use more of the pooled economy than they would have if they had continued smoking.)

          1. SMeyer I’m afraid You need a much deeper understanding of macroeconomics if you’re going to be able to contribute meaningfully to this discussion. I’d recommend Per Jacobson, Olivier Blanchard and Stan Fischer if you’re looking for modern macro that’s based on scholarship. They’ll give you a good sense of what the IMS is and why it’s important and the benefits and drawbacks of various taxation regimes. good place to start. Oh! I know-Next time I visit the IMF I’ll see if they have a coloring book you can use! That’s probably more your speed since you’re posting all this clownish nonsense. I checked and there’s no Macroeconomics for Dilettantes in the library, unfortunately.

            1. Dirt, since you don’t even know what taxes were for, I think you are above your pay grade. You can name names who won’t disagree with anything I said. It is one thing to parrot names. It is another thing to understand what they are saying.

  18. Not only unconstitutional but unmanageable. It would require and audit and evaluation of all holdings every year. Appraisals on property, artworks etc. all have subjectivity and would be subject to disputes. In addition what happens when the assets decline in value? Do they get a large tax deduction for the loss?
    How about unintended consequences if forced to sell stocks or companies to pay the taxes since it is unrealized there is no gain to pay it from, it may well require liquidation.
    If instituted it will then expand to more and more people. Just like the income tax.
    Let’s hope this proposal dies a proper death.

    1. @Tony

      In other words, shake-downs, and I agree, it wouldn’t stop with the rich, while taxing assets is medieval lord and serf regression, and you’d better bet we’d all be included eventually. Class is a huge deal – quite possibly our only remaining societal ill of its magnitude – bet this solution is puerile at best, totalitarian at worst. Socialism is never the answer; tyranny doubly so. This would bother me less if it werent the Democrats attempting to seize even more unilateral control over our lives.

  19. I disagree with wealth taxation for the reasons Prof Turley mentioned but also the following: A wealth taxation voted in now has to be retroactive based since it is not purely income related. That is, it changes the rules for how much one owes the government after the fact of the generation of wealth. Income taxes whatever their merits and weaknesses are at least not retroactive. Wealth taxes would be close cousins of “bills of attainder”, laws singling out certain individuals, in this case based upon past events and situations. Secondly, wealth taxation would include non-transactional increases of one’s wealth. Incomes are usually transactional and investments are extended transactions. It is easy to quantify transactions since they are monetary based for the most part. But one’s thriftiness and taking care of their property and other tradeoffs one makes with himself or herself profoundly affect their wealth status. Think of other goods like health and education. A huge percentage of one’s health depends upon behavior (not smoking, not over eating, exercising, not getting involved with illegal drugs) and a huge percent of one’s knowledge and wisdom comes from their own initiative (like reading , thinking , writing and efforts to expand one’s experiential horizons) Should we demand the extremely healthy to volunteer more of their time and demand that the very wise concentrate on problems they may not want to concentrate on? Taxation based on transactions (like income and sales taxes) lends itself much easier to questions of fairness and justice than wealth taxation.

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