In part, President Joe Biden was elected by presenting himself as moderate and rejecting the calls by Sens. for wealth taxes. Elizabeth Warren (D–Mass.) and Bernie Sanders (I–Vt.).
Biden is now in the White House. He won’t let go of the idea even though, as with many other tax-and-spend proposals, he couldn’t get the bill through Congress.
Biden first floated what I called the “Biden-Wyden wealth tax,” after Sen. Ron Wyden (D–Ore.In October 2021, he was appointed chairman of Senate Finance Committee. Thanks to Sens. Joe Manchin (D–W.Va.) and Kyrsten Sinema (D–Ariz.They are the ones who saved Biden’s party from its worst policies. It was too much even for Speaker Nancy Pelosi (D–Calif.), who, The Washington PostAccording to reports, the Biden-Wyden wealth taxes were criticized as publicity stunts.
The president has reintroduced a Biden-Wyden variation of his wealth tax to try again in this budget. The White House wants to make it sound easy. The New York Times reports that a White House document described the tax, aimed at those with assets of more than $100 million, as “a prepayment of tax obligations these households will owe when they later realize their gains.”
Politico reports that “illiquid taxpayers may opt to pay later with interest.”
The new version of this tax has many of the same issues as the Biden-Wyden wealth taxes. This could be unconstitutional. The retroactive application of it is against a rule of law principle. Its small impact on a limited number of individuals raises questions about consent by the governed as well as taxation without representation. The valuation of assets that may be subject to fluctuating values over time presents practical problems. Not moving in opposite directions, but finding ways to lessen the government’s tax burden should be our goal. It would be more beneficial for the wealthy to own the money than the Washington lobbyists.
One could have some fun, though, with these two concepts on which Biden-Wyden II reportedly relies—prepayment and “illiquid…may opt to pay later with interest.” Imagine if all the other taxpayers used the same principle for the federal government. The government would be invoiced for future benefits. They’ll owe it to me eventually anyway, so demanding the money now is just “a prepayment of…obligations” the government “will owe…later.” Aside from the current defense spending, Social Security and Medicare expenditures that will provide benefits for me and my possible grandchildren in the future, the value would be appreciated. I would like to prepay that Washington money now.
The government would not be able to meet this demand if every taxpayer had made it. It would not be liquid. The government would have to do what it does now—borrow by issuing bonds and paying the money back later with interest. Although the Federal Reserve can create money, the government has the ability to destroy the value of existing money.
It is apparent that the disparity between the demands for immediate prepayment and long-term possible obligations points to the asymmetrism of the tax collector with the taxpayer. If the collector requests immediate payment, the state has his armed compulsory power to support him. A tax collector has the right to go to court and impose a lien on assets. A taxpayer who wanted their future Social Security benefits or Medicare benefits immediately, rather than waiting to receive them later would get laughed at. The taxpayer wouldn’t be able to get the money back from the government.
However, there is one avenue in which taxpayers are more powerful than tax collectors. The ballot box is where this happens.
Biden may be able to thank the Biden-Wyden tax on wealth that was not passed in such a way as to demand immediate prepayment of future speaking fees or book royalties to past presidents to the IRS, even if he is voted out of office. Once the federal government embraces the idea of “prepayment of tax obligations these households will owe when they later realize their gains”—well, there’s just no telling where that dangerous logic might lead.