Kamala Harris Needs a Better Plan for Taxing the Ultrarich

I agree with Warren Buffett that he and his fellow billionaires shouldn’t pay lower tax rates than their secretaries. But I don’t think President Biden’s so-called billionaire minimum income tax is the right way to fix things. I hope Vice President Kamala Harris will propose a different approach.

The Times reported last week that some Wall Street and Silicon Valley donors to Harris’s presidential campaign were quietly trying to persuade her to drop her support for Biden’s billionaire minimum tax, which involves requiring people worth at least $100 million to pay taxes on investment gains even if they have not sold the assets that have appreciated.

The natural reaction to the donors’ behind-the-scenes lobbying is, “How dare you?” Robert Kuttner, a co-editor of The American Prospect, wrote, “You have to wonder, what’s wrong with these people? How much money do you need?”

But if you lower the flame under the rage pot, you start to see that there are some genuine problems with trying to tax what economists call “unrealized capital gains” — paper wealth, in other words.

The way the tax code works now, you don’t owe any tax on the appreciation of an asset such as a share of stock or a bond until you sell it. Then you’re taxed on the difference between what you bought it for and what you sold it for — the capital gain.

Under Biden’s plan, people worth at least $100 million would be taxed at a 25 percent rate on their “full income,” which would include not just standard stuff like wages and investment income (interest, dividends, rents), but also the increase in value of their assets.