The US will not support a global wealth tax on billionaires, according to Treasury Secretary Janet Yellen — spurning a proposal put forward by Brazil, France and other countries.
Brazil, which assumes the rotating presidency of the Group of 20 major economies this year, wants the organization to adopt a unified approach toward taxing the ultra-rich.
The South American country, which has the seventh-largest population in the world, favors a global wealth tax that would prevent billionaires from moving their money to off-shore tax havens.
Top officials from Brazil, France, Spain, Germany and South Africa have suggested requiring billionaires to pay taxes that amount to 2% of their overall wealth every year.
Those who back the idea say it would close the wealth inequality gap while allowing governments to spend more on social programs with the increase in collected tax revenues.
But Yellen, who is set to meet with the finance ministers from the Group of Seven industrialized nations later this week, said the Biden administration is opposed to the idea, according to The Wall Street Journal.
“We believe in progressive taxation,” Yellen told the Journal.
“But the notion of some common global arrangement for taxing billionaires with proceeds redistributed in some way — we’re not supportive of a process to try to achieve that. That’s something we can’t sign on to.”
The US is one of the few countries in the world to tax its expatriates based on their income overseas.
So even if wealthy Americans leave the country and resettle in a low-tax jurisdiction, they are still required to file returns with the Internal Revenue Service.
In 2021, Yellen was among the most vocal supporters of a global minimum tax on corporations which would have required companies to pay a 15% minimum tax in the jurisdictions where they operate.
But Republican opposition to the proposal prevented it from being enacted.
The Biden Administration has opposed proposals from the progressive wing of the Democratic Party, including most prominently Sen. Elizabeth Warren (D-Mass.), for an “ultra-millionaire tax” that would require households to pay an annual 2% tax on every dollar of net worth above $50 million and 6% on each dollar above $1 billion.
Instead, the White House has touted a plan that would require Americans who are worth more than $100 million to pay an annual 25% tax on all of their earnings, including unrealized capital gains.
Capital gains are taxed at a top rate of 23.8% but only when the asset is sold.
A 2019 study by two economists at the University of California, Berkeley estimated that the 400 wealthiest households in America paid an average tax rate of about 23% the previous year.
IRS data from 2021 showed the top 1% of taxpayers paid 45.8% of federal income taxes, according to the Tax Foundation. The previous year, the top 1% paid 42.3% of federal income taxes.
The same analysis found that the top 5% of earners paid 65.6% of total income taxes in 2021, while the top 10% paid 75.8% of all income taxes — up from 62.7% and 73.7% respectively in 2020.
