How to tax billionaires—and how not to
livemint.comEditor’s note (June 20th 2024): The Supreme Court has ruled in Moore v United States, upholding the tax at issue (the “mandatory repatriation tax"). The court declined to weigh in on the constitutionality of a tax on unrealised gains. The rich are different from other people. They have more money and, in most places, they pay much less tax.
Going by one broad definition of income that combines consumption and someone’s change in net worth, America’s best-heeled pay just a few cents on every dollar of their fortunes. Lately, those fortunes have ballooned, thanks to a soaring stockmarket. One study found that unrealised capital gains account for $6trn of the $11trn in wealth held by the richest Americans.
Since 2023, as the artificial-intelligence frenzy has fuelled demand for both Nvidia’s GPUs and its shares, the chipmaker’s founder, Jensen Huang, made more than $100bn. But until he sells some of his stocks, all that money is off-limits to the taxman. Cash-strapped governments want to get their hands on a slice of these riches.
Next year Australia will start taxing unrealised gains in employee pension-fund accounts with balances of more than A$3m ($2m). As part of his re-election campaign, President Joe Biden is promising to find $500bn over ten years for social programmes by charging a 25% tax on the unrealised capital gains of individuals who, like Mr Huang and 10,000 other Americans, are worth $100m or more. It is easy to understand why the world’s non-multimillionaires may want to soak the very rich.
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