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November 1, 2021 | Democrats’ Billionaire Tax Plan Hits a Snag

Is an American author of books and articles on economic and financial subjects. He is the founder and president of Agora Publishing, and author of the daily financial column, Diary of a Rogue Economist.

Don’t tax you

Don’t tax me

Tax that fellow

Behind the tree

– Former United States Senator Russell B. Long

BALTIMORE, MARYLAND – Tax it… borrow it… squander it…

…print up some money to cover it…

…and then inflation comes along and spoils the party.

That’s how we roll!

Over the last 20 years, four of the worst presidents in U.S. history added some $23 trillion to our debt.

Now, we need to keep up with the debt payments… which means we need to keep interest rates low…

…which means we need to print money to buy bonds (to hold rates low)… and run deficits (to create more bonds)… so that we can continue to fund our boondoggles.

The Biden Administration is doing its part… busily trying to keep the jig up by coming out with a huge spending bill – originally $3.5 trillion (with an ultimate $5.5 trillion price tag over 10 years)…

Then, under pressure from its own party, the Biden group decided it didn’t really need to spend $2 trillion of that… so the proposal was shaved down to $1.5 trillion (likely to be far more, as the sun never sets on “sunset” provisions).

Tax the Billionaires

Everybody is now alert to the danger of rising inflation. So the politicians must pretend to be concerned about both sides of the ledger – both income and outgo.

It was the income side they had in mind when they came up with the “billionaire tax.” It allowed them to claim that they would raise trillions in new income without actually taxing “you or me”… but by socking it to the “fellow behind the tree.”

In this case, the fellows behind the tree are very few. You need to make $100 million a year, for three years in a row, in order to join this club. Not many people do that.

So the political costs are negligible… while the political gains (the favorable reviews from jackass reporters… and the hoorahs from the mob) are substantial.

Everybody knows the rich dodge taxes. This would be a way to make them pay “their fair share.”

Tax Future Gains

Trouble is, they dodge taxes by doing exactly what Congress and the IRS have told them to do.

As investors and card players know from bitter experience, you should never count your winnings until you get up from the table. And the tax law, too, says you pay “capital gains” only when you actually have a capital gain.

The proposal from the Democrat team, however, would insist that billionaires pay tax on the gains they haven’t even made yet. In other words, if the stock is up, the rich guy would have to pay a tax on the gain… even while he was still in the game.

Of course, this would mean that he would have to sell his appreciated shares to pay the tax… or strip the capital out of the business.

The result would be a setback, not just for the super-rich, but also the not-so-rich, including thousands of Reddit gamblers, who would see their own shares go down when the big guys sold.

It would also mean that the most successful entrepreneurs wouldn’t want to “go public” at all… since that would expose them to the tax on unrealized capital gains.

Tax Overboard

These thoughts must have crossed the minds of the fantasists on the Biden team. They thought they had a big hit… an Emmy award-winner, for sure.

Then reality came their way. And the reality is this: It is much easier to print money than to tax.

Democrats have “big guy” donors, too. And stock market portfolios.

As we reported last month, House Speaker Nancy Pelosi has gained some $74 million from the feds’ market manipulations since 2004. Senate Majority Leader Mitch McConnell didn’t do too badly, either – with some $31 million in gains.

Nobody wants to strangle that goose. Not as long as it keeps laying.

So, while yammering on about the “pay fors” and “deficit neutral” provisions, the Democrats quietly threw their own tax proposals over the side.

The billionaires tax, for example, was the first to hit the water. It “may have died before the ink was dry on its 107-page text,” says The New York Times.

Pot of Gold

But that wasn’t the only tax proposal the Democrats scuttled.

The Washington Post explained it:

They’ve not only abandoned many of the new taxes on the rich and on corporations that they once promoted, they can’t even bring themselves to “roll back the Trump tax cuts, which every single Democratic lawmaker opposed in 2017.”

“So why have Democrats gotten cold feet? The problem is partly that the Democratic voter base has shifted toward the college-educated, professional class, therefore becoming higher-earning. It’s uncomfortable for Democrats to endorse taxes on their own constituents, particularly when those constituents don’t realize that they, too, are technically rich.”

And here’s The Economist with the last word:

Joe Biden promised to pay for his big social-spending proposals by raising taxes on the rich and nobody else. Now Democrats are rushing to find a big pot of money without raising headline rates of tax at all. They are making a mess of it.

Where will they find this “pot of money”? At the Federal Reserve, of course.

As we’ve been saying… and saying… and saying…

The two parties – Democrats and Republicans – are in cahoots. They both represent the elite. Not the masses.

They spend. They borrow. They print.

The only tax they will raise is the inflation tax… which will fall most heavily on the public, not on themselves.

Regards,

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Bill

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November 1st, 2021

Posted In: Bill Bonner's Diary

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