Yellen says billionaire tax died but Biden bill still gets wealthy Americans to pay ‘fair share’

Treasury Secretary Janet Yellen told CNBC on Friday the $1.75 trillion framework for President Joe Biden’s climate and social spending priorities is “fully paid for” in part by asking wealthy Americans to pay more taxes.

“We tried to design a package of revenue raisers that would be acceptable to members of Congress. We paired back on some rate increases that weren’t acceptable to members of the Senate,” Yellen told CNBC’s Sara Eisen in an interview on “Worldwide Exchange” from Rome where Group of 20 leaders are gathering for their first in-person summit since the Covid pandemic.

“The raisers we have, though, are appropriate, fair. While there isn’t a mark-to-market billionaires’ tax, I think it’s been agreed that individuals earning high incomes … will pay a surtax on their income tax rates,” Yellen said. “That hits really high-income individuals.”

The proposal for a tax on unrealized gains on billionaires’ wealth was scuttled and there were questions about whether it would even be constitutional.

Yellen, a former Federal Reserve chair, is accompanying Biden on his overseas trip at the G-20 summit and the United Nations Climate Change Conference in Glasgow, Scotland.

Before leaving Washington on Thursday, Biden announced a deal with Senate Democratic holdouts on a blueprint for spending on a wide range of programs to ease financial burdens on families and children while funding the renewable energy economy.

If passed, the massive spending bill would impose a 15% minimum tax on corporate profits by large corporations, adopt the 15% minimum global tax brokered by Yellen and apply a 5% surtax rate on individual income above $10 million. That rate would rise another 3% on income above $25 million. The Democrats’ plan also includes a 1% surcharge on corporate stock buybacks.

“I don’t think these investments will drive up inflation at all,” Yellen said Friday. “First of all, they’re fully paid for — and not by imposing taxes on anyone earning less than $400,000 but by asking corporations, high-income individuals to pay their fair share, and by investing in the Internal Revenue Service so that they can boost compliance, which has fallen to low levels,” she added. “We have a huge amount of uncollected tax revenue, a tax gap that’s estimated at $7 trillion over a decade.”

At the G-20, Yellen will be taking a victory lap on the global minimum corporate tax, which all member nations have agreed to. The deal was negotiated among more than 130 countries.

Biden had hoped that rallying Democrats behind the framework for his spending priorities would be enough to push a separate bipartisan infrastructure bill, which already passed in the Senate, across the finish line in the House. However, the House on Thursday abandoned plans for an infrastructure bill vote with progressives seeking more time to consider the implications of both bills.