Arnold, Cuban propose matching income tax rates, higher buyback tax
Billionaires across the political spectrum have come out against California’s Proposition 40, a wealth tax, arguing it would push the ultrawealthy and entrepreneurs out of the state and weaken California’s long-term income-tax base and competitiveness. Some of those billionaires say they prefer rooting out wasteful government spending or improving the lot of the less well-off.
But even billionaires who are skeptical of wealth taxes support elements of progressive change to the tax code, and several have put forward their own federal proposals.
John Arnold, an energy investor and philanthropist, said “turning a couple knobs on the existing code” would help ensure the very wealthy pay a fair share of taxes and help rein in the federal deficit and inflation. Arnold, 52, would match the tax rates on long-term capital gains and ordinary income, which is taxed at higher rates. “Income should be taxed at the same rate regardless of whether it is earned from labor or unearned through capital gains or interest,” he wrote in an email, including gifts. He would index the original cost of an investment to inflation to capture its true return, apply higher rates to higher levels of income regardless of the type of income, and count gains as realized when they are transferred as a gift or at death, in addition to when they are sold. Arnold said that would eliminate loopholes that some tax scholars say contribute to growing wealth inequality.
Billionaire entrepreneur Mark Cuban has voiced skepticism over wealth taxes, partly because he says the hit could stunt investment in startups and small businesses. Cuban, 68, instead would have employees receive stock at the same pro rata share that a company’s CEO gets in compensation, saying stock-market participation is a sure way to increase wealth. He said he has paid his employees partly in equity since he started his first company in 1983. People fall behind without “appreciable assets,” he wrote in an email.
Where Cuban sees promise in amending the tax code is in raising the 1% tax on corporate buybacks of stock, reasoning it won’t influence companies’ behavior. He would also increase taxes on “windfall profits” of greater than $1 billion per transaction — for example, when he sold the Dallas Mavericks, a sale that is currently subject to a capital-gains tax. The higher taxes could be deducted before the seller receives the sale proceeds. “It’s less painful and doesn’t change behavior,” Cuban wrote.
Arnold would also take aim at owners of sports franchises, saying he would cut tax benefits for team owners, who can currently write off much of the value of their teams. “If someone’s worth a trillion,” he said, “they need to pay a share of that in taxes and make sure that gets recycled back into government services.”
Other billionaires have offered different directions. Amazon founder Jeff Bezos, 62, in a May CNBC interview advocated eliminating federal income tax for the bottom half of workers — those with a maximum adjusted gross income of $53,801, according to the right-leaning Tax Foundation’s analysis of 2023 IRS data. Many people in the bottom half don’t pay income tax. While there could be a debate about whether he should pay more in taxes, Bezos said, vilifying the ultrawealthy and upping their taxes wouldn’t be enough to help those in need.
New York investor Bill Ackman criticized wealth taxes on social media last December but also said the tax system should be fairer, taking aim at the strategy known as “buy, borrow, die.” The wealthy can borrow, tax-free, against appreciating assets that don’t throw off cash, and if they hold the assets until death, their heirs can avoid taxes on those gains. Ackman proposed taxing such personal loans by the amount they exceed the assets’ original cost basis, when the loans aren’t short-term.