Demanding a progressive tax on the super-rich has long been a popular topic of conversation with many American Democrats, but such a policy is unthinkable in a Republican administration with a divided Congress.
Now that the Democratic Party again controls both the White House and Capitol Hill, the initiative is officially on the table: On March 1, a group of Democratic lawmakers led by Senator Elizabeth Warren introduced legislation proposing an annual household tax. And institutions worth over $ 50 million, including the value of assets such as real estate and stocks.
With new bridges between traditional capital and the digital asset space emerging almost daily, people with high net worth can convert value to cryptocurrency more easily than ever before. Will a potential wealth tax, if enforced by law, affect their willingness to do so?
Sines Warren’s bill proposes a 2% annual tax on the net worth of any household between $ 50 billion and $ 1 billion, and a 3% tax for those valued at more than $ 1 billion. According to this scheme, this burden will be borne only by the 100,000 richest households in the country, which is more than 0.05% of the distribution of wealth.
Lawmakers say the initiative could generate at least $ 3 trillion in federal revenue over ten years – a pool of resources that can be channeled to support underfunded areas such as education, childcare and infrastructure.
A proposed law must be sanctioned by the United States Senate before it becomes law. Although Democrats and Republicans currently have an equal 50-50 ratio in the House of Representatives, and Democratic Vice President Kamala Harris has an equal stake, most bills require at least 60 votes to pass. According to Bloomberg, Democrats hope to add at least some tax elements to the budget bill, which will be passed later this year.
Unsurprisingly, this initiative drew immediate scorn on the part of right-wing and centrist political forces, as well as in big business circles. In the weeks after the proposal was announced, the Wall Street Journal faced many opponents, arguing that a wealth tax would do more harm than good.
It has been argued that the wealth tax on American millionaires and billionaires will affect the ownership structure of the US stock market: as large American investors are forced to sell their more liquid assets at a reduced price, their tax-exempt partners are willing to buy. Another author argued that capital flight from the stock market as a result of taxing the super-rich would reduce the value of all savings.
Billionaire Leon Cooperman told CNBC that while he believes the rich should pay more taxes, Warren’s training policies are “unprofitable.” He added, “If you miss the wealth tax, go out and buy yourself some gold because people will rush to find ways to hide their wealth.”
Wait, could this gold be digital?
Nowhere to hide
Of course, Cooperman’s irony about using gold to hide his net worth is figurative, pointing to assets that may be less visible to the government than assets in bank and brokerage accounts. As for gold itself, the IRS views precious metals as assets subject to capital gains tax in the long term. Cryptocurrencies certainly do not fall into any of these categories as they are not holdings (unless they are volatile tokens) and no less visible.
If the goal is to literally hide wealth, turning to a store of value that’s automatically tracked in an open, unchanging ledger doesn’t seem like a good idea. Maria Stankevich, head of business development at the Exmo UK cryptocurrency exchange, commented to Cointelegraph: “Today, the widespread adoption of BTC is not directly related to shadow funds, but, on the contrary, to the state of transparent financial assets.” Tim Bion, global government spokesman for OKCoin, added:
“Taxing the super-rich has little or no effect on the growing adoption of digital assets by all Americans and non-Americans, especially bitcoins. […] It would be foolish to think that they (like everyone else) would see Bitcoin as a way to “hide” their wealth, since Bitcoin leaves a permanent digital footprint. ”
Douglas Borthwick, chief marketing officer for digital assets company INX, said viewing digital assets and bitcoin (BTC) as a place to hide wealth is “far from the norm.”