The IRS has the expertise to enforce President Joe Biden’s proposal to tax the unrealized gains of mega-millionaires and billionaires, Senator Elizabeth Warren contended in the face of criticism over the workability of a proposal she strongly supports.
Warren, a Massachusetts Democrat, said Thursday at a Senate Finance Committee hearing that the Internal Revenue Service has for more than a century audited the estate-tax returns for wealthy Americans who have died. That skill-set makes it possible for the agency to apply taxes on unrealized capital gains among the ultra-rich, she said.
Warren’s remarks address a common critique of plans to tax accumulated wealth or unrealized gains: that determining the worth of hard-to-value assets — like art, real estate or closely held businesses — would be an administrative nightmare for the IRS and largely impossible for an agency that has experienced staffing shortages and budget cuts.
IRS Commissioner Chuck Rettig at the same hearing bolstered Warren’s claim. He said that the auditors who work on estate-tax returns are among the agency’s “best,” and encouraged Congress to boost funding for tax enforcement.
“We have the most sophisticated financial examiners on the planet, some of the most dedicated folks on the planet in this particular space,” Rettig told the Senate panel. “We need to support them by providing them tools, resources, training.”
Rettig said that the IRS has received about 300,000 estate-tax returns in the past decade. Warren said that volume indicates that the IRS would be equipped to handle the returns from roughly 20,000 Americans who would be required to pay taxes on their unrealized gains annually under Biden’s proposal.
“The estate tax has got to be generally harder to administer because, by definition, it applies to new taxpayers every time it is paid — because it is triggered when someone dies and an asset is transferred to an heir,” Warren said. “By comparison, the president’s billionaires tax would mostly apply to the same taxpayers year after year.”
Biden’s proposal to levy a 20% minimum tax on the unrealized gains of those taxpayers worth at least $100 million is unlikely to become law anytime soon, because the idea doesn’t have enough support in a Senate with a 50-50 partisan split. However, Democratic lawmakers are likely to continue to pursue proposals to tax accumulated wealth.
The idea of taxing unrealized gains has gone from a fringe idea popular only among very progressive lawmakers to a mainstream Democratic policy in only a few years.
