Democrats' 'Billionaire Tax' Would Hurt Stock Market, Middle Class: Critics (Getty Images)
By Charlie McCarthy | Tuesday, 16 November 2021 09:10 AM
Democrats' plan to tax billionaires would harm capital markets and have a negative effect on the middle class, critics say.
Sen. Ron Wyden, D-Ore., has proposed a tax on the unrealized gains of billionaires as a way to pay for President Joe Biden's massive social spending legislation. Although moderate Sen. Joe Manchin of West Virginia, suspended its advancement by stating his opposition, critics continue to express concerns about the tax.
Opponents say the billionaire tax would harm investment, reduce the number of public companies, and lower the number of people who participate in stock markets.
Fewer companies going public would mean fewer middle-class jobs for people who want to invest.
"The fewer [initial public offerings], the fewer public companies, the more that those who are able to tap those markets will do so, leaving the public to invest in an increasingly shrinking pool of public companies," Curtis Dubay, senior economist for the U.S. Chamber of Commerce, told the Washington Examiner.
"It's disturbing that they would even consider a plan that would put a stake in the heart of U.S. capital markets, dwarfing whatever benefit it might provide for social programs," Hal Scott, an emeritus professor at Harvard Law School and co-director of the Committee on Capital Markets Regulation, wrote in a Wall Street Journal opinion column.
Sen. Wyden's proposal would cut against IPOs because it would treat stocks more harshly than other types of investment.
Billionaires would pay a 23.8% tax on unrealized gains of public stocks, though they would only be subject to a 1.22% interest tax on real estate or privately held companies — and those funds wouldn’t need to be paid until assets are sold.
Gordon Gray, director of fiscal policy at the American Action Forum, told the Examiner that with "sophisticated investors … you will see a bias away from the publicly traded capital markets from heavy investors like this."
"And so, that effect will have a downward pressure on IPOs," Gray told the Examiner. "Directionally, the effect is to have fewer than we otherwise would because this makes them less attractive."
Although the billionaires tax proposal was moved to the side, Democrats still aim to tax the richest Americans — and wealthy individuals are planning ways to avoid paying.
Elon Musk, for one, has attempted to get ahead of any future tax hikes by selling $6.9 billion in Tesla Inc stock.
Even multimillionaire hedge fund manager Adam Wyden, son of the senator, called out his father and "cronies" on Capitol Hill who hate the "American Dream."
"Why does he hate us / the American dream so much?!?!?!?!" Adam Wyden tweeted. "Reality is: most legislators have never built anything… so I guess it’s easier to mindlessly and haphazardly try and tear stuff down."