Biden's Budget Proposes Tax Changes Targeting Wealthy Taxpayers

Introduction

President Biden's proposed $7.3 trillion fiscal year 2025 budget includes several tax changes aimed at wealthy taxpayers. These changes include a minimum tax on billionaires, the elimination of certain tax preferences, and an increase in the capital gains tax rate for high-income earners.

Minimum Tax on Billionaires

The budget proposes a new minimum tax of 20% on households with a net worth of over $100 million and an annual income of over $10 million. This tax would apply to income from all sources, including investments, wages, and business profits.

Elimination of Certain Tax Preferences

The budget also proposes to eliminate or reduce certain tax preferences that benefit wealthy taxpayers, such as the carried interest loophole and the stepped-up basis for inherited assets. These changes would raise an estimated $200 billion over the next decade.

Increased Capital Gains Tax Rate

Currently, long-term capital gains are taxed at a maximum rate of 20%. The budget proposes to increase this rate to 39.6% for households with taxable income over $1 million. This change would raise an estimated $53 billion over the next decade.

Impact of Tax Changes

The proposed tax changes would have a significant impact on wealthy taxpayers. According to the Peter G. Peterson Foundation, the 20% minimum tax would affect about 700 of the wealthiest households in the United States. The elimination of certain tax preferences would also raise taxes on many wealthy individuals and families.

Conclusion

The proposed tax changes in President Biden's budget are designed to raise revenue and reduce the tax burden on low- and middle-income earners. The changes would have a significant impact on wealthy taxpayers, but they are unlikely to be passed in their current form by Congress.