A global tax on billionaires? Janet Yellen says ‘no’

Treasury Secretary Janet Yellen has said that the US opposes a proposed global wealth tax on billionaires. (File Photo: Reuters)
Treasury Secretary Janet Yellen has said that the US opposes a proposed global wealth tax on billionaires. (File Photo: Reuters)

Summary

The Treasury secretary came out against the proposed global levy, which proponents say would stop the rich from shifting wealth into countries where they can avoid paying the tax.

FRANKFURT—The U.S. opposes a proposed global wealth tax on billionaires, Treasury secretary Janet Yellen said, rejecting an idea floated by Brazil, France and other nations to tip the economic scales away from the megarich.

It is Brazil’s turn to lead the Group of 20 major economies this year and the country has called on the group to develop a coordinated approach for taxing ultrawealthy individuals who can move their money into low-tax jurisdictions. The goal is to mirror a global minimum tax on corporations, which roughly 140 countries signed up for in 2021 but has since run into roadblocks in the U.S. and elsewhere.

Yellen said the U.S. wouldn’t support the talks on the issue. She is due to meet later this week with finance ministers from the Group of Seven advanced democracies, who are expected to discuss the global wealth tax.

“We believe in progressive taxation. But the notion of some common global arrangement for taxing billionaires with proceeds redistributed in some way—we’re not supportive of a process to try to achieve that. That’s something we can’t sign on to," she said.

Along with ministers from Brazil and France, officials from Spain, Germany and South Africa have discussed a plan that would require billionaires to pay taxes worth at least 2% of their overall wealth every year.

Levying the tax globally, proponents say, would stop the rich from shifting their wealth into countries where they can avoid paying the tax. That would allow countries to raise more in tax revenue to finance other priorities and use the tax code to reduce income inequality, which has widened sharply in recent decades.

“This is exactly what we did with minimum taxation on corporate tax," French Finance Minister Bruno Le Maire said last month. “It would be the same on the international taxation for the wealthiest individuals."

Most countries apply their income taxes based on a person’s residence. The U.S., unusually, taxes its citizens on their worldwide income, already making it harder for Americans to escape taxation by shifting assets and earnings abroad.

While the Biden administration has proposed significantly raising taxes on high-income Americans, it has shied away from a wealth tax, which seeks to annually collect a share of an individual’s net worth. President Biden has instead pushed for a plan that would require Americans worth more than $100 million to annually pay a 25% tax on all of their earnings, including unrealized capital gains.

Capital gains in the U.S. are now generally taxed at a top rate of 23.8% when the asset is sold, meaning increases can go untaxed for years. Income, including wages, is taxed as it is earned at a rate as high as 37%, plus other levies. The Supreme Court is expected to weigh in soon on a case that could create a constitutional prohibition on taxing wealth.

Yellen helped spearhead the global agreement on corporate taxes, which sets a 15% minimum that companies must pay in jurisdictions where they operate. But with Republicans opposed to it, Congress hasn’t approved the deal.

Write to Andrew Duehren at andrew.duehren@wsj.com

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