Mar 26, 2024
The fairness of the U.S. tax system, especially concerning billionaires, has recently been a topic of heated debate.
In his State of the Union address on March 7, President Joe Biden highlighted this issue.
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“There are 1,000 billionaires in America,” he said. “Do you know what the average federal tax is for those billionaires? No? They’re making great sacrifices — 8.2%. That’s far less than the vast majority of Americans pay.”
Biden takes issue with this statistic — and proposes a plan to address it.
“No billionaire should pay a lower federal tax rate than a teacher or sanitation worker or a nurse,” he said. “I propose a minimum tax for billionaires of 25%.”
Biden believes that this proposed tax rate would raise $500 billion over the next 10 years.
His proposal was met with a standing ovation from some audience members. However, “Shark Tank” star Kevin O’Leary was left unimpressed.
Wealth taxes
In a recent interview with the Daily Mail, O’Leary was adamant that Biden’s billionaire tax proposal will “never happen.”
O’Leary is not a fan of wealth taxes, pointing out their failure in other countries.
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“The problem with wealth taxes is they've been tried,” he told the Daily Mail. “They've been tried in Britain and in France and it doesn't work. People just leave. Now these people pay 46 percent of taxes so you've got to be careful. You don't want them leaving the country.”
O’Leary was referring to a statistic from a report by the National Taxpayers Union Foundation, which suggested that the top 1% of earners in America paid 46% of all income taxes in the country for the tax year 2021.
When referring to Biden’s State of the Union promise of taxing billionaires 25%, O'Leary added, “None of this stuff is ever going to become law, and everybody knows that. But it's great campaign rhetoric. There was not a whole lot in terms of substance.”
He added, “I'm not being critical, I'm just saying he did the right thing: rallied the troops by bringing out the themes like 'tax the rich!' which worked for him last time.”
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Barrier to a second term
While O’Leary believes that Biden’s proposal was good campaign rhetoric, he points to a major barrier to the president’s reelection — rising price levels.
“Inflation is always the enemy of the incumbent. It doesn't matter who you are in the White House when there's inflation,” O’Leary explained. “People go to the voting booth remembering what it cost them for their cornflakes and milk in the morning, and what it cost to fill up the car to drive there.”
To be sure, headline inflation has subsided in America. The latest data indicates that, in February 2024, the U.S. consumer price index saw an annual increase of 3.2%, down from its peak 9.1% increase registered in June 2022.
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Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
