The Billionaires Tax Proposal

In theory, by the time you read this, we should have passed our infrastructure bill, which has been held hostage now for months by the four parties in Congress who are fighting each other to advance their respective agendas. Four parties? And you thought there were two? Try the Progressive Democrats, the Moderate Democrats, the Populist Republicans, and the Conservative Republicans. The Moderate Democrats and Conservative Republicans are the historical parties in Congress, who would hammer out compromises on all manner of legislation, and while the system isn’t perfect, it supports the greatest economy anywhere, and a culture of freedom that has been the envy of the world for more than two centuries. 

But two fringe groups in both parties have grown to be so influential, they are the equivalent of their own splinter groups, and each really have both of their larger party constituencies completely hamstrung as they try to advance their own agendas. What our government affairs professionals at our various national trade associations are telling me is that the Moderate Democrats and Conservative Republicans aren’t really in charge anymore, and they can’t work their will when outflanked by Progressives on the left, and new-wave Populists on the right. As a prime example of that conundrum, consider that House Democratic leaders have twice scheduled votes on the bipartisan infrastructure plan, and twice had to suffer an embarrassing retreat because Progressives simply couldn’t be aligned with their larger majority, and tow the party line to pass the bill.

And the problem is that any new tax ideas to pay for these aggressive new proposals have enough detractors and nay-sayers that nothing proposed gains any traction, so Democrats are struggling to find up to $2 trillion over a decade to cover the cost of their agenda. They have plenty of ideas that would exceed that figure, but precious few that can muster the support of enough Democrats to get it passed through the narrowly divided Congress. But now Congress has struck upon an idea that has very little in the way of political impact on members of Congress, and little in the way of objection from the public at large.

Democrats are proposing a plan that would upend tax rules for the wealthiest Americans, as the Senate Finance Committee makes a late bid for a new capital-gains tax in President Biden’s social-spending and climate change legislation. The proposal calls for annual income taxes on about 700 billionaires’ unsold publicly traded assets such as stocks, which would eliminate billionaires’ ability to defer capital-gains taxes indefinitely, and it would impose multibillion-dollar tax bills on billionaires whose newfound tax plight would not gain any sympathy from the average American voter. It is expected to raise hundreds of billions of dollars over a decade, though the actual amount would depend on stock prices and on whether courts rule the tax unconstitutional. The money would come from the wealthiest taxpayers, many of whom currently can keep their reported income and tax bills low; under today’s tax system, they don’t have to pay capital-gains taxes unless they sell their assets, and they can borrow against that wealth to finance their lifestyles. 

The pitch to Congressional members who would have to vote for this bill is that the so-called “Billionaires Income Tax” would ensure billionaires pay tax every year, just like working Americans. Further, the idea would be pitched to American voters that no working person in America thinks it’s right that they pay their taxes and billionaires don’t.

As I write this, Congress is trying to regroup and finally agree on a $1.85 trillion social-spending and climate bill after multiple failed efforts. That agreement might allow for the House to pass a $1 trillion, bipartisan infrastructure plan that has been languishing there despite Biden’s repeated pleas to his own party to pass it. This we now know: no social spending bill, no infrastructure package. Let’s hope the four parties in Congress can get their act together for the benefit of the greater construction sector of the economy that drives volume and revenue in the concrete industry.

Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at [email protected]. Follow him on Twitter – @allenvillere.