Sen. Ron Wyden Targets Billionaires in Tax Push

Sweeping Democratic midterm victories have handed congressional leaders a fresh mandate to target high earners, setting the stage for aggressive tax reforms despite a divided federal government.

Sen. Ron Wyden, D-Ore., set to retake the chairmanship of the Senate Committee on Finance, has already put wealthy taxpayers on notice following the party’s congressional gains.

On taxes, the committee will redouble its efforts to ensure billionaires pay their fair share and hold tax cheats accountable. Democrats will spearhead a tax agenda that puts American families first and requires the ultra-rich and corporations to pay their fair share.

Sen. Ron Wyden, D-Ore., via CNBC

Wyden’s committee is positioned to revive several stalled measures targeting high net worth individuals, including the Ending the Carried Interest Loophole Act. Introduced in April by Wyden and Sen. Angus King, I-Maine, the legislation would tax investment profits as ordinary income and require fund managers to pay tax on deemed compensation annually rather than deferring payments.

Under current rules, qualifying fund managers receive capital gains tax treatment on profits generated from investments held for a minimum of three years. Changing this tax treatment is viewed by experts as a method to help address financial pressure on the Social Security trust fund, which trustees project will run out of reserves by the end of 2032.

Lawmakers are also advancing legislation to close estate planning and borrowing loopholes used by affluent households.

In addition to trust legislation, lawmakers have turned their attention to dynastic wealth and estate tax structures. Senator Chris Van Hollen introduced the Strengthen Social Security by Taxing Dynastic Wealth Act, which aims to roll back estate tax modifications enacted during the 2017 Tax Cuts and Jobs Act by lowering the estate tax exemption threshold to $3.5 million.

While Democrats control both chambers of Congress, President Trump retains veto power. Tax professionals note that immediate enactment remains unlikely.

The proposals are not necessarily anything that will pass over the next two years. But if there is an administration change two years from now, they do give you an indication of what might be on the table during the next administration.

Justin Miller, partner and national director of wealth planning at Evercore Wealth Management, via CNBC

Tax policy analysts note that the prospects for enacting broad and substantial tax code modifications appear limited over the upcoming two years given the division in Washington. However, these legislative instruments will function as discussion vehicles to shape upcoming debates regarding corporate taxation, federal revenue streams, and household assistance.

The Tax Foundation’s Andrew Lautz and Garrett Watson observed in a report that these congressional proposals will serve primarily as messaging and discussion vehicles over the next two years on the direction of the tax code.