America's wealthy have breathed a sigh of relief after U.S. Senator Joe Manchin opposed a $1.75 trillion social spending bill. This opposition is seen as an opportunity for America's wealthiest to evade any tax increases, saving the top 0.1% of Americans hundreds of billions of dollars over the next decade. Stephen Winter, a partner at BDO who mainly advises hedge funds and private equity firms, stated, "It's an understatement to say my clients were celebrating; the opposition has lifted a nightmare."
Democrats devised a $1.75 trillion bill aimed at narrowing the widening wealth gap by enhancing tax credits for children and low-income adults while increasing revenues from the wealthy and corporations. According to the Joint Committee on Taxation, just three provisions within the bill would have raised additional taxes on individuals with incomes over $10 million, generating more than $640 billion over the next decade.
Meaningful Step
Karl Davis, research director at the left-leaning Institute on Taxation and Economic Policy, remarked that although many of the more radical tax proposals from Democrats were scaled back or dropped during negotiations, the bill would still be "a meaningful step towards reducing inequality." The pandemic has accelerated this inequality, with the top 1% now controlling over 32% of U.S. wealth, the highest percentage since at least the late 1980s, according to Federal Reserve estimates, and their share has increased by 2.4 percentage points since the beginning of 2020.
Enormous Gains
Meanwhile, the wealthiest Americans have reaped enormous gains, with net worths on the Bloomberg Billionaires Index rising by 45% since the beginning of last year. The 169 American billionaires listed now have a combined wealth of $3.5 trillion, exceeding the total wealth of the lower half of Americans combined. Despite the vast wealth and significant disparity, the wealthy Americans hastened transactions before the year-end, trying to lock in current prices and take advantage of loopholes. For instance, American billionaires have been selling stocks at more than double the rate recorded last year, ensuring that those sales would not be subject to the proposed additional tax and a 5% tax on income exceeding $10 million, along with an additional 3% tax for those with annual incomes over $25 million.
