Why a Wealth Tax Is a Bad Idea

Billionaires are better at figuring out what to do with their money than the government will ever be.

- Katherine Mangu-Ward

THE PRESIDENT’S BUDGET is the lawmaking equivalent of a vision board or a mission statement: a moderately delusional wish list that is intended to provide motivation. The president’s budget is never legally binding—Congress still retains some tenuous grip on the purse strings—but it is always instructive.

President Joe Biden has long been, in the immortal words of Editor at Large Matt Welch, a rusty weather vane, creaking reluctantly in the direction that the winds of his party blow. With his new budget proposal, the breezes have finally brought us to the shores of a serious wealth tax debate.

Biden isn’t calling his proposal a wealth tax, of course. It’s the “Billionaire Minimum Income Tax,” and it imposes a minimum 20 percent tax on the income of households with more than—oddly—$100 million in wealth. Biden’s proposal is smaller and more pragmatic than the earlier variants from Sens. Bernie Sanders (I– Vt.) and Elizabeth Warren (D–Mass.)—par for the course with Biden. Most notable is that even with implausibly optimistic estimates of the federal government’s ability to collect, the whole mess is supposed to raise an average of a mere $36 billion per year over the next 10 years.

The University of California, Berkeley, economist and Warren adviser Gabriel Zucman estimated what several billionaires would pay under the plan’s 20 percent tax on unrealized gains in illiquid assets, pinning JeffBezos’ bill at $35 billion, Warren Buffett’s at $26 billion, and Jim Walton’s at $7 billion.