Billionaires and tax policy MONEY & MARKETS EXTRA

Tax policy is in focus in Washington — and not just because the tax-filing season just ended.

President Joe Biden recently proposed a budget to Congress that includes a “billionaire minimum income tax.” Mark W. Everson, vice chairman of Alliantgroup, a tax-consulting firm, led the Internal Revenue Service from 2003 to 2007. The Associated Press spoke recently with Everson.

President Biden has proposed a “billionaire minimum income tax” that’s intended to raise $360 billion over 10 years. What’s your view of the proposal and the administration’s approach— requiring that households with net worth exceeding $100 million pay at least 20% in taxes on both income and unrealized gains?

The proposal would turn the tax system on its head. A broadly accepted definition of income is money received from work or investments. The Biden measure would expand that to include “unrealized income,” meaning appreciation in the value of assets which may or may not ever generate a cash benefit. The levy would kick in for Americans with $100 million in assets, not $1 billion. If it became law, this approach would be replicated by any number of states, likely at lower levels of wealth. Who knows where this would take us down the road?

The billionaire tax could resonate as a campaign issue for Democrats. Given your experience with tax policy as IRS commissioner, how realistic a chance do you see of Congress enacting such a tax?

The president’s budget repeats several proposals from last year, including raising tax rates on corporations and high-income individuals and taxing capital gains at ordinary rates at the top end. Those ideas didn’t generate enough support to become law last year, and it’s hard to see them or the billionaire tax passing Congress this year. Like those of many previous presidents, this election-year budget request is largely a political document stating policy positions with minimal prospect of enactment. To address inequality, I expect there will be discussions—and perhaps changes—on estate taxes and the passing of large fortunes from one generation to the next.

The IRS has unveiled a plan to hire 10,000 new employees to help reduce a backlog that made this tax season the most challenging in history. How do you assess the agency’s backlog and operational challenges, and how should they be resolved?

The backlogs in unprocessed returns and correspondence, together with abysmal phone service, are a terrible problem and hurting millions of Americans and employers. The IRS should deploy auditors and collections personnel to work the backlogs, with temporary duty as needed, until the system recovers. As the Biden administration has suggested, Congress should provide multi-year funding to rebuild the agency.