Democrats aim to tax the latent earnings of America’s richest.

USA, country that worships individual success prepares to equip itself with a tax on great fortunes to finance the investment plans of the Democratic president Joe Biden.

Faced with opposition from a portion of Democrats to raising taxes on multinationals to pay for Biden’s infrastructure and social programs, the idea of ​​taxing latent capital gains, that is, earnings stored in large portfolios of stocks, resurfaced.

Today a tycoon like Elon Musk, head of Tesla, or Jeff Kisses, founder of Amazon, do not pay taxes on those dormant profits on the pretext that they do not exist until they are actually collected.

The idea of ​​taxing that latent profit is on the table, House Speaker Nancy Pelosi said Sunday. “We will probably have a tax on the rich,” he said on CNN.

Instead, Treasury Secretary Janet Yellen said, “I wouldn’t call that a tax on the rich.” “But that would make it easier to obtain capital gains, which represent an extremely important part of the income of the richest people and are not currently taxed,” he admitted on CNN.

The proposal targets people with assets greater than one billion dollars or who release income of more than US $ 100 million in three years; which means less than 1,000 taxpayers, according to The Wall Street Journal. Other media say there are about 700 billionaires.

“It would be somewhat modest (only around 1,000 contributors). But what an incredible turning point! ” in American history, tweeted Gabriel Zucman, a professor at the University of Berkeley.

For Pelosi, the tax would contribute to the treasury at least some US $ 200,000 million in ten years; less than the $ 3 trillion to $ 3.2 trillion Biden plans to spend.

Steve Wamhoff, director of the Institute for Fiscal and Economic Policy, said the levy “would create a huge gap in our tax code.”

He stressed that the current code “makes sense” for the middle class, whose properties tend to increase over the years.

“Nobody expects to pay taxes on the appreciation of the value of that asset before selling the property. But the situation is very different for billionaires who can choose to put most of their capital gains sleeping to avoid paying taxes, “he said.

Senator Ron Wyden of the Senate Finance committee should present a final proposal this week, Pelosi said.

Far from the figure

Senator Elizabeth Warren, who had made a more radical proposal in 2020 when she was trying to run for president, supports the idea.

“What we need is a tax that focuses on the fortunes of the wealthiest Americans,” he said on MSNBC on Sunday.

Wyden’s project would target not only stocks, but other assets as well, such as real estate.

Republicans will not cast their votes because they have always opposed such a tax because they believe it will create more bureaucracy and is difficult to enforce.

The latent earnings fluctuate based on the price of the stock. So should the government shell out money if stock prices go down?

For Democrats, the proposal could be considered acceptable after the commitments made by Biden, who drastically reduced the amount of his investment plans.

However, this new tax, although symbolic, would finance at best 10% of what was projected, Pelosi admitted on Sunday.

In other words, the Biden government will have to find other sources of funding for its pharaonic plans.

The “Build Back Better” plan, in favor of social and climate measures, is in the order of US $ 2 billion in ten years. And the infrastructure modernization program will cost US $ 1.2 trillion.

Biden has crushed that “it is about time that American companies and the wealthiest 1% of Americans pay their fair share.”

But until then he had not been in favor of taxing unrealized capital gains and was pushing for higher taxes for multinationals and wealthier households.

In the House of Representatives, Democrats proposed raising the corporate tax rate to 26.5% from the current 21% and the personal tax rate to 39.6% from the current 37%.

But in the Senate those proposals were modified by the moderate Democrat Kyrsten Sinema, who opposes raising taxes.