The plan, however complex it may end up being in its many devilish details, rests on a surprisingly simple idea: that billionaires should pay tax on their incomes, just like tens of millions of working Americans do every year. That’s hardly radical stuff.
It all starts with the idea that an income tax is supposed to tax the gains from both labor and capital, the two major sources of one’s “income.” Our income tax does not. Ever since 1920 at least, the US has failed to tax the rise in value or “mere appreciation” of an asset until it is sold or otherwise disposed.
So the rich hold a lot of non-cash bearing assets. Where’s the harm in that? The trouble continues because the fortunate few can take advantage of their “unrealized appreciation” when they borrow, which is tax-free under an income tax. (Once again, homeowners know this because they can take out home equity loans without paying any income tax.)
The Billionaires’ Tax Plan is not a wealth tax. It is a step needed to perfect the income tax, to make it be what is was always supposed to be: a tax on both wealth and work. Income is income, and the “income” that comes without having to break a sweat or get out of bed deserves to be taxed at least as much as the income most of us get by actually grinding it out on most days.
But the morality of the moment comes down to simple math: Something is better than nothing. The Billionaires’ Tax Plan is not a perfect solution to the problem of wealth inequality or even to the structural problems in our tax system, as illustrated by Buy Borrow Die. But right now, billionaires like Musk and Bezos have the ability to avoid paying any income tax.
That has to change, and the sooner we get started changing it, the better. A century is a long time to wait for the wealthiest persons in the history of the world to pay something to their home country. And something is better than nothing.