As the number of billionaires increases, new demands for wealth taxes emerge

A mobile billboard calling for higher taxes for the ultra-rich depicts an image of billionaire businessman Jeff Bezos near the United States Capitol on May 17, 2021 in Washington, DC.

Drew Angerer | Getty Images

A new billionaire is being created on average about every 30 hours during the Covid-19 pandemic, according to a new report from Oxfam, a global charity focused on poverty eradication.

Now, 573 more people worldwide can claim billionaire status than in 2020 when the pandemic began, for a current total of 2,668 billionaires.

At the same time, their wealth increased by 42% or $ 3.78 trillion during the Covid-19 pandemic, to a current total of $ 12.7 trillion.

Yet this year 263 million people are at risk of falling into extreme poverty, signaling growing wealth inequality exacerbated by the pandemic.

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According to Oxfam, the growing gap between haves and haves highlights the need for more taxes for the wealthiest.

“We really need Congress to step in and the administration to step in and tax the richest people in our society so we can really start investing in public services and workers,” said Irit Tamir, director of the private sector department at Oxfam. America.

The report comes as business leaders, politicians and billionaires meet face to face this week in Davos, Switzerland, for the first time in two years.

Capitol Hill political leaders, including President Joe Biden, have put forward their own proposals to make the rich pay more.

“Right now, the average billionaire – there are about 790 in America – has an 8% federal tax rate,” Biden tweeted on Sunday.

“No billionaire should pay a lower tax rate than a teacher, firefighter, electrician or police officer,” he said.

There are two main ways that policymakers can “tax the rich,” according to Howard Gleckman, a researcher at the Urban-Brookings Tax Policy Center.

This includes taxing the income or taxing the wealth of the rich.

“In general, what we do in the United States is income tax,” Gleckman said. “We will not really tax wealth.”

This could change, based on some proposals that have been made. A key idea that has received attention is the taxation of unrealized capital gains or the value of assets that have not yet been sold.

This can be tricky with private companies, particularly when it comes to determining a value that both the IRS and owners can agree on. Consequently, an idea of ​​Senator Ron Wyden, D-Ore., Asks for the annual application of this tax only to listed assets. Other non-traded assets would instead be taxed at the time of sale.

This approach could become complicated for taxpayers if the value of their assets falls and they have to reconcile the taxes they have already paid.

Another approach would be to get rid of a mechanism that allows people to avoid paying taxes on increases in the value of assets over the course of their life, formally known as an increase in the base on death.

For example, suppose you buy a stock for $ 10 and then it is worth $ 100 when you die. When your heirs receive the shares, their base will be $ 100, according to the current rules. As a result, they will not be taxed on the $ 90 increase in value that occurred during your lifetime.

This could be changed so that heirs owe tax on any earnings over the original cost basis or on the $ 10 you originally bought the stock at.

However, a key drawback to this change is that it would take the government a long time to increase revenue, as it requires the owner of the stock to die and their heir to sell it. “It can take decades,” Gleckman said.

With any of the proposals, the government will have to strike a balance between generating money and trying to limit the administrative challenges required by any changes implemented.

Most Americans will never have to worry about paying these taxes, even if they have $ 5 million or $ 10 million in business.

“This is really for people with extreme wealth,” Gleckman said.