As Ed pointed out this morning, Joe Biden cleared the one low bar that was set for him last night. By shouting through his entire speech he convinced the media he is "feisty" and "foreceful." But it's worth noting that he also told some real whoppers during his speech, including one which he has been intentionally lying about for several years. He has been called out on this specific falsehood by numerous fact-checkers but last night he trotted it out once again. Here's Biden's bogus claim about what billionaires pay in taxes.
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Pres. Biden proposes a minimum federal tax rate for billionaires at 25%, which he claims would raise $500 billion over the next 10 years: "No billionaire should pay a lower federal tax rate than a teacher, a sanitation worker or a nurse." https://t.co/ocMhOjhBIu #SOTU2024 pic.twitter.com/G2799YXS72
— ABC News (@ABC) March 8, 2024
This is Bernie Sanders style demagoguery at its finest as even the NY Times pointed out.
Mr. Biden was referring to a White House study, released in 2021, that used a “more comprehensive measure of income” than is currently assessed. But it is not technically the tax rate paid under existing federal law.
The report in question included gains made in unsold stocks, which are not taxed until the asset is sold. It estimated the average federal income tax rate paid by the 400 wealthiest families in the United States to be 8.2 percent.
So the gimmick here is that the White House has come up with its own estimate based on unrealized gains, i.e. if a billionaire like Elon Musk owns stock in a company and the value of the stock goes up, they count that as income even if Musk doesn't sell any stock. These are known as unrealized gains and no one is taxed on them.
In fact, the "study" released by the White House only looked at the unrealized gains of billionaires and ignored similar unrealized gains for anyone who owns a home over the last 20 years. If the value of that home has doubled, should you be forced to pay income taxes on the difference? The answer of course is no unless you sell the house and even then a certain amount of the gains are usually sheltered from taxes.
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What the White House is doing here is imagining an alternate tax scheme in which the government taxes wealth instead of income. That's something that Bernie Sanders and Elizabeth Warren would love to see but it's not how our system actually works. Biden has been making this bogus claim for a long time. He made it back in January and the Times fact checked it then. Here's the reality.
Under the law, the top 1 percent of earners in the United States are currently estimated to pay an average federal income tax rate of more than 20 percent, according to an analysis by the Treasury Department in November. An I.R.S. report that specifically looked at the top 400 individual income tax returns found that those taxpayers paid an average income tax rate of about 23 percent in 2014.
Up above is a chart from that Treasury Department analysis. As you can see, the bottom 40% not only don't pay income taxes (the red line), they are actually receiving money from the government (shown as negative taxes). And the top 1% of earners are paying more than anyone else, around 23% in income taxes. If you include corporate income taxes (many in the top 1% own businesses) then the total federal tax rate paid by the top 1% is around 31.5%. There is no teacher, sanitation worker or nurse who is paying that amount.
But again, this isn't something Biden just rolled out last night. He was fact-checked repeated on this same claim including when he used it in last year's State of the Union. Here's FactCheck.org from last February:
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“But no billionaire should be paying a lower tax rate than a schoolteacher or a firefighter,” Biden said in his Feb. 7 State of the Union address, calling on Congress to “pass my proposal for the billionaire minimum tax.”...
Biden’s statements refer to a White House economic analysis that included earnings on unsold stock as income...
...when looking only at income, the top-earning taxpayers, on average, pay higher tax rates than those in the income groups below them. The top 0.1% of earners, with more than $4.4 million in expanded cash income, pay an average rate of 25.1% in federal income and payroll taxes, according to the TPC chart. Those in the middle 20%, with income between $59,700 and $105,900, pay an average of 12.3%.
But the current tax system does not tax earnings on assets, such as stock, until that asset is sold, at which point they are subject to capital gains taxes. Until stocks and assets are sold, any earnings are referred to as “unrealized” gains.
I'm sure a lot of Hot Air readers already knew this and my point isn't to beat a dead horse but just to make clear Biden has been called out on this by fact-checkers for years. Even Politifact got this right in July of 2022, yet another occasion when Bide made this same claim.
"Billionaires in America — there’s 789 or thereabouts. You know what average federal income tax they pay? 8%," Biden said July 6. "Every one of you have a job (in which you pay) more than 8% (in taxes) — every single one of you. If you’re a cop, a teacher, a firefighter, union worker, you probably pay two to three times that."
However, tax specialists say that Biden’s comparison is faulty. First, the 8% figure is a lowball estimate that uses a hypothetical calculation. And second, Biden’s statement ignores that most of the middle-income households he’s referring to pay tax rates of between zero and 15%.
The White House report found that if you include unrealized gains in the income calculations of the 400 richest U.S. families, then their taxes paid would account for just 8.2% of their income.
Economists and policymakers have long debated whether the government should tax unrealized gains. But Biden made it sound like 8% was the standard rate today, not what would happen under a future proposal.
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I like the Politifact write-up because it makes it very clear this is a progressive fantasy which has nothing to do with our actual system of taxation. Politifact notes the actual income tax rate for "the top 0.001% — which in 2019 meant people earning about $60 million or more" was 22.9%, roughly triple what Biden is claiming.
Finally, the Washington Post pointed out in January that Biden has made this bogus claim about billionaires and taxes more than 30 times: [emphasis added]
In the past year, in more than 30 appearances, the president has referred to billionaires paying about 8 percent in federal income taxes. He said it in his last State of the Union address, and odds are he will say it again when he addresses Congress in March...
But if you check Treasury Department calculations for what the richest Americans already pay in taxes, you would see that the top 1 percent pay in excess of 20 percent in income taxes and more than 30 percent in all federal taxes. Even if you drill down to the top 400 wealthiest taxpayers — data that was publicly available on an annual basis until President Donald Trump killed the report — they paid an effective tax rate of 23.1 percent in 2014. These taxpayers — with $127 billion of income — that year paid $29.4 billion in income taxes, or more than 2 percent of all income taxes, the IRS said. That’s more than the bottom 70 percent of taxpayers combined.
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Biden's 8% claim is part of a tax system we don't have and which no other wealthy country has. The whole premise of his comments are false. Whether you look at the top 1% or even the top 0.001%, they are in fact paying their fair share of income taxes. Those 400 billionaires are paying more in federal taxes than the bottom 70% of taxpayers.
Biden has been telling this lie for more than two years. He has been fact-checked on the same claim at least half a dozen times. At what point will he finally give it up?
