Tax Update Blog

Treasury Secretary puts kibosh on enacting wealth tax

February 23, 2021 | Blog
By Jay Heflin

Treasury Secretary Janet Yellen on Monday cast doubt on enacting a wealth tax during an interview with the New York Times.

“It’s not something that President Biden has come out in favor of,” she said.

Instead, Biden is expected to propose increasing the top corporate income tax rate to 28 percent, from 21 percent, and “get rid of subsidies for fossil fuels,” Yellen said.

The Treasury Secretary also mentioned that the Biden Administration supports eliminating the step-up in basis for capital gains taxation and modifying carried interest.

The Biden Administration is expected to propose tax increases when it releases its “recovery” plan. The recovery plan is expected to be released after passage of the $1.9 trillion rescue plan, which is currently making its way through Congress.

Earlier this month, Yellen said that while tax increases will likely be included in the Administration’s recovery plan, the full effect of those tax increases might be delayed so that they do not interfere with the economy recovering from the pandemic.

“Tax increases to pay for at least part of it [the recovery plan] that would probably phase in slowly over time,” she told CNBC on February 18, 2021.

The Biden Administration not supporting a wealth tax flies in the face of high-ranking Democrats, like Senate Finance Chairman Ron Wyden (D-Ore.).

In the prior Congress, Wyden released a proposal that would tax capital gains as ordinary income for the top 0.3 percent of taxpayers.

Senator Elizabeth Warren (D-Mass.), who sits on the Finance Committee, originally proposed taxing household net wealth above $50 million at a 2 percent rate per year and net wealth above $1 billion at a 4 percent rate.

Senator Bernie Sanders, an Independent from Vermont who caucuses with Democrats, proposed a graduated tax system for joint filers, beginning with a 1 percent tax on net worth over $32 million and increasing to an 8 percent tax on net worth over $10 billion.

It is not clear how these Senators will react to President Biden opposing a tax that they have supported for quite some time.


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