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'It's really unprecedented ': Breaking down the biggest tax changes in Pres. Biden's budget

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President Biden's fiscal 2023 budget proposal calls for higher taxes on the wealthy.

MADISON (WKOW) -- President Joe Biden's budget for the upcoming fiscal year, which the White House released Monday, includes new ways of taxing the rich and raises taxes on businesses.

The budget introduces a new minimum tax targeting the wealthiest 0.01 percent of Americans. The federal government would place a 20 percent minimum tax on all the assets of those with a net worth of more than $100 million.

"It's really unprecedented," said UW-Madison economics professor Noah Williams. "One aspect, in particular, which is novel to this proposal is taxing unrealized capital gains."

Williams said the plan could invite lawsuits because it's a tax that goes beyond income or tangible holdings like property.

"Unrealized income [is] not actually income so does the federal government have the power or the capacity in the Constitution to actually tax it?" Williams said.

Andrew Reschovsky, a professor emeritus of public affairs and applied economics at UW-Madison, said such an approach might now be necessary at a time when so many of the country's uber-wealthy know to avoid liquidizing their assets in money they'd have on hand. Instead, the richest Americans keep those assets stored away as investments - which they can still essentially convert into cash whenever they want by borrowing against those capital gains.

"The value of their stocks, their portfolio, investment portfolio has risen and as long as they don't sell those stocks, they don't pay any taxes on it," Reschovsky said. "And in many cases they will never pay taxes on it because it will be in their estate."

The White House estimates the tax would generate $361 billion in new tax revenue over the next decade. 

Democrats defended the proposal as part of a plan to pay off some of the country's debt while creating more of a level playing field for taxpayers.

"I thank the president for this budget, which invests in our future, lowers costs on everyday families, and increases workers’ paychecks," Rep. Mark Pocan (D-WI) said. "His budget also takes steps to ensure the wealthiest Americans pay their fair share in taxes which will, in turn, reduce the national deficit."

Republicans criticized the overall budget as one that spent too much on liberal causes while failing to adequately grow defense spending. Conservatives also said the tax increases would disincentivize risk-taking when starting to expanding businesses.

"The Biden Budget continues the Democrats’ destructive agenda of out-of-control deficit spending, tax increases, and higher debt that will further weaken the U.S. economy," Sen. Ron Johnson (R-WI) said.

U.S. Capitol with money background

Corporate tax hike also proposed

The White House budget also proposes raising the corporate tax rate. For much of the past 30 years, the tax rate on businesses was on a sliding scale between 15 and 35 percent depending on how much a company made.

The 2017 Republican tax cuts flattened the corporate rate to 21 percent across the board. Biden proposes raising the tax to 28 percent, noting it's still lower than where the highest levels were before 2017.

"The 2017 tax cut reduced the corporate tax rate tremendously and many corporations pay relatively low actually taxes regardless of the rate because there are lots of deductions," Reschovsky said.

Williams noted the increase would still put the U.S. back toward the higher end of world economic powers in terms of how much they tax businesses. He added the proposal risked making it more commonplace for corporations to relocate their headquarters overseas even if much of the work was still happening in the U.S. as a way to duck some of the taxes.

On the other hand, Williams added the 2017 tax cuts did not generate the level of new corporate investment its loudest supporters projected it would.

"We've seen maybe some impact but not as large as proponents had argued," Williams said.

Capitol Bureau Chief