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Warren Buffett and Jamie Dimon — icons of American capitalism — have joined the call for the rich to pay more in taxes. Their motives? Publicly, fairness and fiscal responsibility. Privately, perhaps a deeper understanding that an unsustainable tax structure threatens the very economic system that made them icons.
But the irony is stark: the latest proposal for a so-called millionaires tax would do little, if anything, to actually increase the tax burden on those at the very top.
This is a policy built for headlines, not for results.
The ultra-wealthy — Bezos, Musk, Buffett himself — don’t derive wealth from salaries or tips. They live off asset appreciation, capital gains, and strategic borrowing — income streams barely touched by traditional tax code mechanics.
In fact, targeting “income” to tax wealth is like trying to fix a leak by repainting the walls.
Why This Tax Will Hit the Wrong Targets
Let’s get clear: increasing marginal income tax rates from 37% to 40% — or even 45% — may sound aggressive, but it targets the wrong demographic.
The reality:
- Most billionaires don’t earn “income” in the traditional sense
- Their wealth is stored in stock, equity stakes, and deferred gains
- Income taxes apply mostly to doctors, lawyers, executives, and athletes, not hedge fund titans or unicorn founders
The result? The tax falls squarely on high earners with salaries, not the truly ultra-rich with equity-based wealth. It may slow economic mobility more than it solves inequality.
Capital Gains, Carried Interest — The Real Tax Gap
What remains untouched — for now — are the levers that actually propel billionaire wealth with minimal tax friction:
- Qualified dividends & long-term capital gains remain capped at 23.8%
- Carried interest allows private equity and hedge fund managers to pay capital gains tax on performance fees
- No mark-to-market requirement exists, so unsold appreciation isn’t taxed at all
- Loan-based liquidity (borrowing against assets) allows billionaires to fund their lives tax-free
In short: if tax justice is the goal, tweaking income tax rates misses the mark by miles.
Audit Decline: The System’s Blind Spot
Worse still, even existing obligations may go uncollected. The IRS — chronically underfunded and stretched thin — has slashed audits of high-net-worth individuals over the last decade.
That includes:
- Wealthy individuals with sophisticated offshore structures
- Large partnerships and trusts
- Complex pass-through entities
This vacuum invites non-compliance. Tax strategy has become tax avoidance by default, not design.
Global Reflection: What Other Jurisdictions Get Right (or Wrong)
Across the Atlantic, the EU has wrestled with taxing mobile capital and intangible wealth. France’s wealth tax famously chased millionaires to Belgium. Scandinavia avoids wealth taxes but taxes capital gains aggressively and consistently.
Canada, the UK, and Australia are inching toward closing capital income gaps, while emerging markets struggle to track global assets at all.
The U.S. — with its dominance of global financial markets — sits at a unique pivot point. Yet its system, ironically, rewards wealth held, not work done.
What Real Reform Could Look Like
If the goal is structural fairness — not just political theatre — reform must go beyond cosmetic tweaks. Consider:
- Mark-to-Market Taxation
Annual taxation of unrealized gains for ultra-wealthy individuals (as proposed by some Democratic senators) would address the asset appreciation blind spot. - Eliminate Carried Interest Treatment
End the long-standing preference for private equity profits. Tax performance fees as ordinary income. - Raise Capital Gains Rates for Top Earners
Introduce a new top-tier rate — potentially aligned with income tax levels — for gains above a certain threshold. - Expand IRS Enforcement Resources
Modernize audit technology, bolster personnel, and focus on wealth-adjacent structures like trusts and partnerships. - Estate and Gift Tax Modernization
Reframe loopholes in GRATs, valuation discounts, and dynasty trusts — key tools used to avoid intergenerational taxation.
Final Thought: When Tax Reform Becomes Tax Theater
What’s being proposed today is not reform — it’s optics. A “millionaires tax” designed to look tough on inequality while preserving the very mechanics that created it.
Warren Buffett wasn’t being humble when he said he pays a lower rate than his secretary. He was issuing a challenge. And it’s one Washington still hasn’t answered.
Until the U.S. tax code targets how wealth is built, not just how salaries are paid, the system will continue to reward hoarding over contribution — and inequality will keep widening.
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