For a few brief hours on Wednesday, Democrats seemed to coalesce around a tax on billionaires.
The viability of that tax now looks shaky, and one impacted investor is happy. He thought it was “baloney” anyways.
Investor Leon Cooperman told Insider loopholes should be closed instead of taxing billionaires more.
For a few brief hours on Wednesday, it seemed like Democrats would be moving forward with proposing a tax on billionaires.
With Democrats are still hammering out the details of what exactly will be in the final package, the tax focused on billionaires looks like it’s getting chopped. The architect of the tax, Senate Finance Chair Ron Wyden, told Insider’s Joseph Zeballos-Roig that “this is not done” as he fights to keep it alive.
But at least one person who would be impacted by the proposal would be thrilled to see it on the cutting room floor.
“I think it’s all baloney,” billionaire investor Leon Cooperman, who is known for, among other things, his work at Goldman Sachs, told Insider on Wednesday. “I don’t think it’s constitutional. It’s not going to happen.”
Cooperman – whose net worth is valued at $2.5 billion by Forbes – has been a vocal opponent of the outright wealth tax continually proposed by Sen. Elizabeth Warren. Him and Warren have had a years-long back and forth over the topic.
“I believe in a progressive income tax structure, and that rich people should pay – and do pay – more in taxes,” Cooperman said. “We, however, don’t need new forms of taxation. Get rid of the loopholes. It’s unbelievable.”
He added: “They’re attacking billionaires for no reason.”
Some loopholes that could be closed, according to Cooperman: Eliminating carried interest, which taxes profits from private equity at the more preferential capital gains rate, and the 1031 exchange for real estate, which lets property sellers defer their capital gains taxes if they get a replacement property.
“There should be a minimum tax. I agree with the 15% on corporations,” Cooperman said, seemingly referring to a corporate minimum proposal by Democrats. “Where I disagree is a wealth tax. You’re going to create unnatural actions by people. It can be a prescription to buy gold and things like that.”
The billionaires’ income tax floated by Wyden is not quite an outright wealth tax. It would tax the value that billionaires’ assets – like stocks – accrue during the year. Normally, those assets are taxed only if they’re sold, something that people with massive holdings like Elon Musk and Jeff Bezos aren’t doing. That means that the incomes many of the ultrawealthy live on – sometimes borrowed against those holdings – remain untaxed. White House economists found that, accounting for gains on assets as income, the 400 wealthiest families in American pay about 8.2% in income taxes year.
The billionaires proposal treats those gains as income, and taxes them at the same rate as they would be when sold.
“This should be constitutionally safe. It’s clearly an income tax, not a wealth tax,” David Gamage, a law professor at Indiana University, told Insider. Constitutionality – an issue that Cooperman brought up – has been one issue floated around an outright wealth tax, because it taxes net worth, while the 16th Amendment grants Congress the power to collect taxes on income.
“I think this is quite safe, not a hundred percent perfectly beyond challenge, but quite safe constitutionally,” Gamage added.
But even if it’s constitutionally safe, it’s not going anywhere anytime soon. The proposal didn’t make it into the slimmed-down $1.75 trillion social spending package that the White House unveiled on Thursday. That’s good news for the country’s 700 or so billionaires, although it may be a temporary reprieve if the policy returns in a new form. And Democrats are still proposing a surtax on Americans who earn at least $5 million.
“There’s no sympathy for billionaires,” Cooperman said, adding: “But it makes no sense to me. Just raise the income tax, have a minimum tax, no problem with that. We don’t need wealth taxes.”
Read the original article on Business Insider