In his second State of the Union address on Feb. 7, President Joe Biden urged billionaires and corporations to “pay their fair share,” repeating the administration’s concept of “reward work, not just wealth.”
The president proposed instituting a minimum tax on billionaires and quadrupling the stock buyback tax.
“Let’s finish the job. Reward work, not just wealth. Pass my proposal for a billionaire minimum tax,” he said. “Because no billionaire should pay a lower tax rate than a school teacher or a firefighter.”
A September 2021 report from the Office of Management and Budget and the Council of Economic Advisers found that billionaires paid an average federal individual income tax rate of 8.2 percent between 2010 and 2018.
Official details surrounding the president’s billionaire minimum tax haven’t been revealed. However, Biden previously recommended this levy in his 2023 federal budget, suggesting a tax rate of at least 20 percent on households possessing a net worth of more than $100 million.
The public policy proposal failed to make its way through Congress last year, and experts say that it’s unlikely to happen with a Republican-controlled House.
In October 2021, Senate Democrats championed a comparable billionaire tax—the “Billionaires Income Tax“—to help fund spending plans. But there were disagreements within the party, including among progressive-leaning Democrats, over the bill’s mechanisms.
In late 2021, Treasury Secretary Janet Yellen spearheaded an international initiative to establish a global minimum corporate tax of 15 percent. More than 130 nations agreed to a general framework for the tax proposal, but there have been delays in implementation on crucial details, resulting in a postponement of the full agreement until later this year.
“I’m a capitalist. But just pay your fair share,” the president said in his address.
Taxing Stock Buybacks
He also called it “outrageous” that oil and gas companies posted $200 billion in profits.“They invested too little of that profit to increase domestic production and keep gas prices down,” Biden said. “Instead, they used those record profits to buy back their own stock, rewarding their CEOs and shareholders.”
The president recommended quadrupling the tax on corporate stock buybacks to 4 percent “to encourage long-term investments instead.”
“They will still make a considerable profit,” he said. “Let’s finish the job and close the loopholes that allow the very wealthy to avoid paying their taxes.”
As part of the Inflation Reduction Act, the federal government introduced a 1 percent excise tax on corporations that repurchased more than $1 million of stock over the course of a tax year. Market experts contend that this levy didn’t dissuade corporations from engaging in this activity, as there was a buyback frenzy last year.
Although the president called out energy companies for their profits and buybacks, Apple topped the list of stock buybacks in 2022, at nearly $90 billion.
Companies will buy back shares if they think the investors have discounted their stocks too immensely or will bolster their financial ratios. Businesses initiating buybacks might also think that there are too few investment opportunities.
Like the billionaire wealth tax, experts don’t think the president would have enough support in the Republican-controlled House.
Overall, Biden said that “our present tax system is simply unfair” because large corporations are taking advantage of the tax code. And, according to the president, these companies are also “taking advantage of you, the American consumer.”
