A billionaire tax? Don’t bet on it

A billionaire tax? Don’t bet on it
The political makeup doesn’t bode well for passing major tax legislation — and a bill that imposes a specific levy on billionaires would be substantial.
MAR 06, 2023

Editor's note: In the second paragraph, the percentage change the proposed tax rate represents has been corrected.

President Joe Biden may have called for a tax on billionaires in his State of the Union address last month, but the idea is unlikely to travel from his speech into law.

Biden pitched a minimum 20% tax on households with a net worth of more than $100 million. That’s 150% higher than the average they currently pay, according to published reports.

The challenge for Biden is that the audience he addressed at the Capitol on Feb. 7 consisted of a Republican House and a Democratic Senate. In each chamber, the parties hold a slim majority.

That political makeup doesn’t bode well for passing major tax legislation — and a bill that imposes a specific levy on billionaires would be substantial.

“I think it’s highly unlikely,” said Steve Wittenberg, director of legacy planning at SEI Private Wealth Management. “Some of what he’s doing is to get the conversation started.”

The chatter about a tax on billionaires began in the previous Congress. A Senate bill was introduced briefly during consideration of what became the Inflation Reduction Act. The Senate measure would have imposed a tax on the assets of the ultra-wealthy, a sharp departure from the current income-based tax code.

The bill was quickly pulled, even though Democrats controlled both the House and the Senate. In the new Congress, Biden not only would have to keep his own party on board with a tax on billionaires, he’d have to convince at least a handful of Republicans to come along.

Tim Steffen, director of advanced planning at Robert W. Baird & Co., sees little chance of that happening.

“It would take some major concessions on a whole bunch of other topics for Republicans to get behind that,” Steffen said.

The likely gridlock at the federal level has inspired Democratic lawmakers to introduce wealth taxes in several state legislatures where the party controls both houses as well as the governorship. But even in blue states, making the rich pay more is not easy.

For instance, a law that imposes the first capital gains tax in the state of Washington drew a lawsuit. Similar obstacles could arise in states that are considering wealth taxes.

“The more extreme the proposals are, if they pass, the more likely you are to see challenges to them,” Wittenberg said.

Floating a wealth tax could be a tactic to raise income tax rates on the rich or close loopholes.

“A tax on unrealized gains seems like a stretch to me,” Wittenberg said.

It’s not just a political heavy lift to get a tax on billionaires approved. There’s also the problem of how it would work.

“It makes for a good soundbite, but I don’t know that you have a practical way to implement it,” Steffen said.

How will Washington respond to the explosion in alternative investments?

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.