Biden is expected to propose a new tax on the ultra-wealthy.

President Joe Biden is to propose a new sort of wealth tax as part of his 2019 budget request, reviving the debate in Washington about how to tax the wealthiest of the wealthy.

He wants them to pay at least 20% in taxes on a mix of their income and unrealized gains in things like their stock portfolios, which are currently exempt from taxation. 

According to the administration, this would affect the richest 0.01 percent of families, earning $360 billion over the following ten years, with billionaires accounting for half of it.

In a summary of the idea, the administration stated, "For far too long, our tax code has rewarded wealth over work, contributing to rising income and affluent disparity in America."

"With this minimal tax, the wealthiest Americans will no longer pay a lower tax rate than teachers and firefighters."

The proposal comes as Democrats try to resurrect their long-stalled "reconciliation" tax proposals and fulfill campaign promises to raise taxes on the wealthy.

Taxing people's unrealized profits on unsold assets would be a significant change in the tax system and would provide the Treasury with a new revenue source.

Senators Elizabeth Warren (D-Mass.) and Ron Wyden (D-Ore.) have each proposed a wealth tax, but rank-and-file Democrats have already rejected them (D-Ore.).

And, if passed, the idea would almost certainly be challenged as a violation of an obscure taxing restriction in the Constitution.

The plan, first reported by the Washington Post, is expected to be announced Monday as part of Biden's 2023 budget request, which the administration claims will cut the deficit by $1 trillion over the next ten years.

The United States has a progressive tax system, with the wealthy paying the majority of taxes – the Treasury Department estimates that the top 0.1 percent of earners, earning more than $2.8 million, will pay an average federal tax rate of 31.8 percent this year.

However, at the very top of the income scale, progressivity can be abused, with some people able to reduce or even eliminate their tax obligations by borrowing against their stock holdings, which aren't taxed unless they're sold.

Democrats have tried several times in the last year to address this, starting with Warren's plan to levy a yearly tax on the total worth of assets held by the super-rich. The annual appreciation of those assets, according to Wyden, should be taxed.

Biden has also recommended repealing provisions in the tax code known as "stepped-up basis at death," which allow affluent people to leave assets to heirs tax-free.

All of them failed to gain support in Congress, with House Democrats advocating for more typical high-income surtaxes.

If the gap between what is typically considered their income and their unrealized gains is less than 20%, Biden's new proposal would oblige the wealthy to pay the difference.

The White House memo states, "This method implies that the very wealthiest Americans pay taxes as they go, just like everyone else, and eliminates the inefficient hiding of income for decades or generations."

The administration would allow those who are subject to the plan to pay their tax payments throughout the plan years.

According to the administration, "the idea allows wealthy households to spread first top-up payments on unrealized income over nine years, and then five years for top-up payments on new income going forward." "Stretching payments over several years will balance out year-to-year fluctuations in investment income while still ensuring that the wealthiest pay a minimum tax rate of 20%."

"Liquid taxpayers may choose to pay with interest later."

If passed, such a scheme would very certainly be challenged as a violation of the Constitution's prohibition on so-called direct taxes, which are levies that are levied directly on someone and cannot be moved to someone else.

The 16th Amendment, which authorizes Congress to tax people's profits, makes an exception for income taxes.

Unrealized gains, according to the administration, should be deemed income, hence the proposal's name: the Billionaire Minimum Income Tax.

Wyden hailed the approach in a statement.

"President Biden has put out a strong plan that will ensure that billionaires pay taxes every year, similar to my Billionaires Income Tax," he stated.

"There's no way to solve our flawed tax code unless we address the issue of billionaires evading taxes for decades, if not permanently."