Biden wants wealthy to pay on luxuries
WASHINGTON – Steve Cohen is an uber-rich man with an enthusiasm for expensive art.
The hedge fund magnate, estimated by Forbes to be worth more than $17 billion, has amassed a personal art collection that rivals the works found in some museums.
According to Fortune magazine, Cohen’s collection includes paintings and sculptures by Picasso, Andy Warhol, Jeff Koons and other celebrated artists. In 2015, the New York Post’s Page Six identified him as the secret buyer who plunked down $143 million at a Christie’s auction to purchase the world’s most expensive sculpture, Alberto Giacometti’s life-sized bronze statue called “Man Pointing.”
The estimated value of Cohen’s collection: $1 billion. But under current law, Cohen pays no taxes on his art unless he sells a particular piece.
President Joe Biden is looking to close that loophole by ensuring that the uber-rich pay taxes on such assets as stocks, artwork, or fine wines as they gain value – even if they choose not to sell them.
Artwork and other nonliquid assets, such as land, homes and high-end jewelry, are more than just an expensive indulgence for the super wealthy like Cohen, who did not respond to a request for comment. They’re also a way to lower the owner’s tax burden.
The value of such assets often rises steeply over time. Even though the assets become worth significantly more than their purchase price, the owner doesn’t have to pay capital gains tax on them until he or she sells them.
“There’s a big problem right now where you can, as they say, hold your assets until death and then end up never having to pay tax,” said Jonathan Choi, a professor at the University of Minnesota Law School and a specialist in tax law.
To end that practice, Biden is proposing a “minimum income tax” on American households worth more than $100 million. The plan calls for the wealthiest Americans to pay a tax rate of at least 20% on their full income, including unrealized gains from assets that have increased in value since their purchase.
Biden, who pledged during his presidential campaign to raise taxes on the wealthy, billed the proposal as a fairer tax code that would prevent the nation’s highest earners from paying a smaller share than middle-class Americans.
“I’m a capitalist: If you want to make a million bucks, great,” he said while unveiling the tax plan at the White House on March 28. “Just pay your fair share.”
The tax would impact only the superrich – about 0.01% of American households representing the 700 richest Americans. The White House estimates it could bring in an additional $360 billion in tax revenue over the next decade.
But financial experts said it’s difficult to estimate whether the tax would generate the kind of revenue the White House is projecting, partly because determining the value of some assets can be a tricky business.
Even so, they said, forcing the wealthy to pay taxes on those assets would help correct what has long been a serious inequity in the American tax system.
“The greatest injustice of the U.S. tax system is that the billionaires pay less, relative to their true economic incomes, than ordinary Americans,” said Emmanuel Saez, an economics professor and director of the Center for Equitable Growth at the University of California, Berkeley.