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What's in a (tax) name?

Write-Off: The Tax Blog

The destination based cash flow tax, or, as it was loving referred to among the large circle of economists who loved it, the DBCFT, was, at least in the minds of it supporters, an amazing tax. But, we don’t have one. One reason, I have heard talked about among tax people, is simply because the marketing of the tax was bad—starting with the name. DBCFT does not roll off the tongue. It does not conjure up favorable images of who will pay, or not pay, the tax. It’s too technical—not named so the every-person can understand it.

What we name taxes matters.  I call this phenomena optical taxation, where we pick names for taxes that conjure up images that make the tax appealing (if we want to pass it), or, make it look bad (if we want to get rid of it).

Why, why the discussion around tax names? On Monday, President Biden released his budget, and it included a tax on people with more than $100 million in assets that taxes changes in the market value of those assets. What to call it? Here are some things I have seen:

  • Tax on Unrealized Gains
  • Minimum tax on billionaires
  • Billionaire Minimum Income Tax
  • Billionaire Tax
  • Billionaires Income Tax
  • The Stock Tax on Centimillionaires
  • Minimum accrual tax for high-wealth households
  • Tax on unrealized asset gains
  • Wealth Tax

These names are trying to get a three things: Who pays this tax, what is being taxed, and, the motivation for the tax.

Who pays? Those above $100 million in wealth, so, it seems odd to call it a billionaire tax. But, we really want to conjure up images of the very, very wealthy, and, ever since we realized that, for example, Senator Sanders is a millionaire, we can’t talk about millionaires being rich anymore. So, we talk about billionaires, even when we are literally talking about taxing people that have 1/10th of what a billionaire has (although who are still doing very well for themselves).

What is being taxed? While what we call all taxes matters for perceptions of the tax, this one is especially an interesting case. Why? Because the goal of this tax is to tax people with a lot of wealth, but, who the current income tax does not require much tax from. So, the construct we want to tax is wealth, but, it is not a tax on wealth. Further, those who would call it a wealth tax are almost certainly trying to  conjure up images of the Constitutional challenges a wealth tax would face. But, rather than being a wealth tax, the tax actually taxes changes in wealth. But, those changes in wealth are not currently what the tax code calls income, and, not what a lot of people think of as income (although some do!).

What is the motivation for the tax? Some versions of the name want to emphasize it is a minimum tax, which conjures up images of the fact that without this tax, these very wealthy people pay very little in tax, and, this tax is just creating a small little minimum floor on what they should pay (based on a radically new tax base—because right now, they are currently paying the minimum tax on their very low incomes).
It will be interesting to see the name we settle on, and where the discussion goes from here.

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