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Yellen clarifies billionaire tax stance

Facing public scrutiny over her initial comments ahead of the G7 meeting in Stresa, Yellen was compelled to clarify her position on taxing the world’s wealthiest individuals at a press conference on May 23.

“It is not that I have any objection to imposing a reasonable level of taxation and certainly a minimum level of taxation on very high income individuals in the United States,” she said. “Rather… I'm not supportive of an international negotiation that would involve all countries agreeing to do it, and to redistribute the proceeds among countries potentially based on climate and damage suffered from climate.”

Yellen stressed the Biden administration is “very concerned with… emissions reduction and adaptation” and recognizes certain low income and emerging market countries need financial support — but she reiterated she doesn’t “favor this particular formulation of how to go about doing that as an international tax negotiation.”

This clarification satisfied the Patriotic Millionaires, who agree with Yellen’s concerns around the redistribution of U.S. wealth to other countries.

“We are encouraging a framework akin to Pillar 2 of the 2021 OECD minimum corporate tax agreement. Under this proposed structure, the G20 would set minimum standards for taxing billionaires and the United States would be able to meet that standard however it sees fit,” Pearl said in a statement.

“Meeting that standard could include proposals like President Biden’s Billionaire Minimum Income Tax, and just like with any other tax, decisions around how that revenue would be used are ultimately domestic political considerations.”

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Taxing the wealthiest Americans

The U.S. has by far the most billionaires in the world, according to the Bloomberg Billionaires Index, with 186 individuals passing the major money milestone. China has the next highest number of reported billionaires, at 55, followed by Russia (26), India (25) and Germany (20).

Many of the wealthiest Americans are able to pay an average income tax rate of just 8% on their full incomes — a lower rate than many firefighters or teachers — due to giant loopholes in the U.S. tax system.

The Biden administration has introduced several proposals designed to make the tax system fairer — which Yellen alluded to in her press conference: “It is clear that President Biden and I are committed to progressive taxation. We feel that the tax burden on high income earners and corporations is too low, and we've made many proposals in the 2025 and earlier budgets to rectify that.”

In March, President Biden unveiled his proposed budget for 2025, and used it to reiterate his plans for a 25% minimum tax on Americans with a wealth of more than $100 million, as well as raising the corporate tax rate to 28%.

While some have labeled the proposed 25% levy on the top 0.01% of rich Americans as a “wealth tax,” Yellen said that’s “not exactly” accurate.

A wealth tax is a broad-based tax imposed on an individual’s net wealth, or the market value of their total owned assets — including cash, property, vehicles, jewelry and other valuable items — minus liabilities. This is different to income tax, which is charged against annual earnings, and capital gains tax, which is imposed on profits accrued from the sale of an asset.

Explaining the Biden administration’s proposal, Yellen said: “It is an income tax, that is sometimes referred to as a billionaires tax, although it would kick in at a somewhat lower level of income. But income in that proposal would be defined to include unrealized capital gains, so there are some similarities to a wealth tax.”

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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.


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