Last Tuesday, West Virginia Senator Joe Manchin shot down President Biden’s proposal to impose a minimum 20 percent tax on billionaires.
Biden unveiled this proposal as his plan to raise $360 billion in revenue on Monday. The plan also targets those worth more than $100 million and raises the tax level to 20 percent on their full income as well.
Manchin said that he does not support the taxation of unrealized gains. This type of taxation would create a precedent of taxing the value an asset accrues before it is sold.
Manchin told The Hill, “You can’t tax something that’s not earned. Earned income is what we’re based on.” He continued, “There’s other ways to do it. Everybody has to pay their fair share.”
“Everybody has to pay their fair share, that’s for sure. But unrealized gains is not the way to do it, as far as I’m concerned,” Manchin added.
If passed, the tax plan is likely to be struck down by the courts because it is unconstitutional on its face, as pointed out by Jonathan Turley. The Constitution narrows Congress’ taxation powers to barring direct taxes unless they are spread evenly.
Article 1, Section 8, Clause 1 of the Constitution states that “all Duties, Imposts, and Excises shall be uniform throughout the United States.” Additionally, Article 1, Section 9, Clause 4 states that “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.”
Senate Republican Whip John Thune of South Dakota, who is a member of the Finance Committee, also weighed in. He told The Hill, “The problem with that particular tax is that it’s a tax on unrealized gains.”
“It’s essentially taxing people before they get the income, and that seems like a really dangerous precedent in tax law because if you have a gain one year and then a huge loss the next year, how’s the government going to pay people back for their losses?” Thune said.
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He continued, “We’ve always had a principle in our tax policy that again has to be actually realized, income has to be received before it can be taxed, and this completely undermines that principle.”
“It’s a wealth tax basically, but I think it’s a dangerous precedent.”
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