Some thoughts on the House tax plan — and a couple additions that would make it really powerful

It *is* a significant tax increase on multi-millionaires — especially business owners whose income has boomed
- Rate rises from 37% to 39.6%
- Surtax of 3% above $5 million

1/N
For very high-income business owners:
- There's an additional tax of 3.8%
- The Trump 20% business income deduction disappears

Meaning their tax rate would increases from 29.6% today (80% of 37%) to 46.4%

This is real change

2/N
The changes to corporate taxes are less ambitious

- Corporate tax rate stays at 21% for companies making $5 million or less
- For big corporations, rate increases to 26.5% (and 16.5% on foreign profits) — in both cases below the Biden plan (28% and 21% respectively)

3/N
Now a potentially big problem comes into view: because of the low corporate tax rate, there would be major incentives for business owners to operate as corporations (taxed at 21%-26.5%) instead of passthrough (taxed at 46.4%)

BUT: there's a solution

4/N
Solution is: include a provision that deems all unlisted corporations as passthrough companies — with their profits taxed at 46.4% at the individual level!

$$$

5/N
Ok, now the second key limitation & margin of improvement

The bill would increase taxes on multi-millionaires, but it would leave billionaires off the hook

It would not make any difference to the ~0% rates of Bezos, Musk, Buffett, etc. revealed in the ProPublica leak

6/N
But a solution is within reach

The Senate finance committee wants to tax the unrealized capital gains of billionaires

This is a *great* idea

I found this article on the Internet that explains why

7/N

washingtonpost.com/outlook/2021/0…
If you combine the House tax increase on multi-millionaires (+ treat private corporations as pass-throughs) with the Senate plan to increase taxes on billionaires, you could get a real, comprehensive increase in tax progressivity, reversing part of this trend

/ End

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More from @gabriel_zucman

16 Sep
What is the revenue potential of taxing capital gains at death, thus closing the infamous "step-up" loophole?

Spoiler: it's unfortunately quite low

To really tax the rich, Democrats should focus on taxing the stock of unrealized capital gains today

Thread

👇👇👇

1/N
Taxing gains at death would barely raise $100B over 10 years

Why?

Dems are considering a $5m exemption

Since half of large estates are unrealized capital gains and the estate tax has a $10m exemption, the capital gains tax base is ~half of the current estate tax base

2/N
2019 estate tax statistics show that there is only $50B in taxable estates (above the $10m exemption)

$25B of these are unrealized gains.

With a tax rate of 25%+3.8%, that's only $7.2B in revenue per year

Or less than $100B over 10 years

3/N
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