During his State of the Union speech this week, the president again called for a Billionaire Minimum Income Tax to be levied on the richest households appreciating assets.

Pass my proposal for a billionaire minimum tax, Biden said. Because no billionaire should pay a lower tax rate than a school teacher or firefighter.

While Biden didnt go into details on the billionaire minimum tax in his speech, he did release a detailed plan as part of his 2023 budget proposal. It would require the 0.01% richest families in the U.S.households with total net wealth of at least $100 millionto pay at least 20% on their income and unrealized gains on assets such as stocks. A 2021 report from the White Houses Office of Management and Budget and Council of Economic Advisers found that as of now, the U.S.s 400 wealthiest billionaire families pay an average federal tax rate of 8.2%.

Wealthy households paying a tax rate of at least 20% on their income and unrealized gains wouldnt owe any more; those paying less than that would have to make up the difference.

While its labeled a billionaires tax, the richest multi-millionaires would also pay it under Bidens proposal. The White House has previously said more than half of the revenue generated would come from billionaire households.

Taxing unrealized gains

The tax on unrealized gains is the big change here. Under the proposal, the richest households wealthincluding gains on unsold stocks, bonds, privately-held companies, real estate, etc.is taxed, instead of just their income. The White House contends it is unfair for the richest households to be able to hold onto appreciating assets for generations that are never taxed.

If a wealthy investor never sells an asset that has increased in value, those investment gains are entirely ignored for income tax purposes when the assets are passed on to an heir, the White House said about the proposal in 2021.

The tax on unrealized gains would be able to be paid over five years. The proposal also includes a one-time tax on current accumulated wealth, which could be paid over nine years. To prevent double taxation, the very wealthy would be able to reduce the taxes they owe when they eventually sell their property or stock by what theyve already paid.

Here is a simplified example of how it might work: Lets say a billionaire owns $2 billion in stock at the start of one year that increases in value to $3 billion by the next. The billionaire would owe up to $200 million in taxes based on the 20% tax of the $1 billion increase,, even if they didnt sell any stock. The exact amount of the tax due would depend on whether the billionaire had any other income, and how much they paid on their other income.

Republicans and even some Democrats are opposed to the proposal, and with Republicans in control of the U.S. House of Representatives, there is next to no chance that the proposal will go anywhere.

Many tax experts say it would be complicated and cumbersome for the IRSalready stretched thinto implement. The right-leaning Tax Foundation says it also wouldnt provide a stable source of revenue for the government, as most of the tax would be collected in the first decade from previously accumulated capital gains.

Bidens new minimum taxwould accelerate receipts for the federal government, but create serious administrative and legal challenges, writes Steven Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center.

Valuing assets is complicated

Under the plan, each year the wealthiest households would be required to to estimate the value of their assets as of Dec. 31 of the taxable year and report everything, separated by asset class, to the IRS. Tradeable assets would be valued using end-of-year market prices.

The super-rich own lots of assets, which would require lots of valuations, Rosenthal writes. The IRS would be tasked with assessing these valuations, and the agency is underfunded and lacks agents with the necessary experience to properly audit complicated tax returns. Thats not to say that couldnt change, but at the moment, it would put even more strain on an agency that already isnt operating well.

Making the situation especially complicated is that many of todays billionairesincluding Bill Gates, Jeff Bezos, Elon Musk, Mark Zuckerberg, etc.have much of their wealth tied up in tech stocks, which can be highly volatile from one year to the next.

A tax on unrealized gains has serious implementation issues due to the difficulty of obtaining the market value of net assets, says Erica York, senior economist at the Tax Foundation. The market value of taxable assets net of liabilities would have to be determined each year, and the high share of privately held businesses among the wealthy would aggravate the problem.

Take Musk. In 2021, Musks net worth rose by $121 billion, according to CNBCs Robert Frank, meaning he would owe $24 billion in taxes. Then, in 2022, Tesla stock sankand so did Musks net worth, by over $100 billion. Had he paid the $121 billion from 2021, the government would owe him tens of millions of dollars back, just one year later (or a tax credit for a future year of gains).

It illustrates one possibility of how the tax could work, York says, noting thats a simplified version of how the tax might play out. Musk may also have ordinary income that he paid taxes on, which would reduce the minimum tax bill on his net worth.

He could also take the option to spread payments out over equal installments. The $24 billion in 2021 could be spread over five years, for example, paying $4.8 billion for five years. In 2022, the refund or credit would be applied against his remaining balance.

Again, thats a simplified version of how the tax might play out. And there is an exception in the law for taxpayers determined to be illiquid. This means that their tradable assets make up less than 20% of their wealth; the taxpayer would only include the unrealized gains on those tradable assets in the calculation of their minimum tax.

But for the estimated $361 billion in revenue it would raise over the next decade and the opportunity to make the wealthy pay their fair share, the complications and headaches might be worth it to Biden.

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Under terms of a preliminary lawsuit settlement filed Friday, Paxton made no admission of wrongdoing to accusations of bribery and abuse of office, which he has denied for years and called politically motivated.

But Paxton did commit to making a remarkable public apology toward some of his formerly trusted advisers whom he fired or forced out after they reported him to the FBI. He called them rogue employees after they accused Paxton of misusing his office to help one of his campaign contributors, who also employed a woman with whom the attorney general acknowledged having an extramarital affair.

Both sides signed a mediated agreement that was filed in the Texas Supreme Court and will be followed by a longer, formalized settlement.

Attorney General Ken Paxton accepts that plaintiffs acted in a manner that they thought was right and apologizes for referring to them as rogue employees, the final settlement must state, according to court records.

In all, eight members of Paxtons senior staff joined in the extraordinary revolt in 2020, and they either resigned or were fired. The attorney general said he settled with the four who sued under Texas whistleblower law to put to rest this unfortunate sideshow.

I have chosen this path to save taxpayer dollars and ensure my third term as attorney general is unburdened by unnecessary distractions, Paxton said in a statement.

The $3.3 million payout would not come from Paxtons own pocket but from state funds, which means it would still require approval by the GOP-controlled Texas Legislature.

Settlement of the case, which Paxtons office fought in court for years, means he will avoid sitting for a civil deposition at a time when a corruption investigation by federal agents and prosecutors remains open. In turn, the attorney generals office agreed to remove an October 2020 news release from its website that decries Paxtons accusers and to issue the statement of contrition to former staffers David Maxwell, Ryan Vassar, Mark Penley and James Blake Brickman.

The whistleblowers sacrificed their jobs and have spent more than two years fighting for what is right, said Maxwells lawyer, TJ Turner. We believe the terms of the settlement speak for themselves.

The settlement also prevents Paxton from seeking the withdrawal of a 2021 appeals court ruling that state whistleblower law applies to the attorney general.

The agreement does not include any provisions limiting the ability of Paxtons accusers to make public statements or cooperate with federal investigators.

The deal comes more than two years after Paxtons staff accused him of misusing his office to help Austin real estate developer Nate Paul, whose business was also under federal investigation. The allegations centered on Paxton hiring an outside lawyer to investigate Pauls claims of misconduct by the FBI.

Paxton and Paul have broadly denied wrongdoing and neither has been charged with a federal crime.

In the wake of the revolt, an Associated Press investigation in September found that Paxtons agency has come unmoored, with seasoned lawyers quitting over practices they say slant legal work, reward loyalists and drum out dissent.

But the investigation, accusations and a separate 2015 securities fraud indictment for which Paxton has yet to face trial have done little to hurt him politically. He easily defeated challenger George P. Bush in a contested GOP primary last spring, went on to decisively beat his Democratic opponent and secure a third term in November and has filed a steady stream of legal challenges to the administration of Democratic President Joe Biden.

While swearing in Paxton to another four years on the job last month, Republican Gov. Greg Abbott described it as an easy call during the midterm elections to keep backing him.

I supported Ken Paxton because I thought the way he was running the attorney generals office was the right way to run the attorney generals office, said Abbott.

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A team of quants at the $465 billion Allspring Global Investments, which publishes an annual view on possible winners for footballs biggest game, says its painfully split down the middle for Sundays contest. In their calculation, they look at alpha, or how well a team performs throughout any given season versus what the market had expected of them.

The Eagles, with 15% NFL alpha, and the Chiefs, with a reading of 16%, seem to have been cut from the same cloth this season: identical records, identical seeding, near-identical expectations, and near-identical NFL Alphas, says Matt Robinson, a portfolio manager at the firm. 

The Chiefs and the Eagles are right there next to each other in terms of alpha for this year they were almost inseparable in terms of their performance relative to expectations, he said in an interview. Its a tough one this year. Allspring went with the Eagles by 1.5 points, noting that lower-Alpha teams are undervalued in the postseason. 

Professional bookmakers seem to be just as befuddled as the quants. When betting for the game opened, the Chiefs were slight favorites but the odds have now shifted toward the Eagles. Betting apps such as FanDuel currently list Philadelphias team as favorites, but only by 1.5 points. Thats the fourth-tightest Super Bowl point spread in history, according to handicapper Jimmy Boyds website.

The team at Allspring say theyve called 13 of the last 19 Super Bowls correctly. Last year, they chose the Los Angeles Rams  the winner though theyre not counting it as an accurate projections because the victors would have needed to win by two more points for the forecast to have been correct. 

The spread in this seasons alpha is the narrowest its ever been, said Robinson. So as much as Id like to say weve got the Eagles by a mile or the Eagles are severely mispriced, this is actually probably as efficient as the prices have been since weve been doing this.

Robinson and his team say not much separates the two teams and it could very well come down to a single play as time expires. All we can do is hope that the Eagles have at least one more Philly Special hidden away for that moment, they wrote. This reporter, whose beloved Buffalo Bills failed to make it to the big game, agrees: Fly, Eagles, fly!

Robinson says no pair of teams was more exemplary of the NFL alpha concept as the New York Giants and the Denver Broncos. The Broncos had Russell Wilson as their quarterback, and he was supposed to lead them to double-digit wins. But the team bungled its way to a 5-12 record and a -47.9% alpha reading, the worst in the league. The Giants, meanwhile, ended the 2022 season with an alpha reading of 38.5% after its coach Brian Daboll managed to make lemonade out of his fresh bag of lemons, leading his team to a 9-7-1 record, Allspring wrote in a report of its findings. 

As for the Bills, who left all of Western New York depressed after a divisional-round walloping by the Cincinnati Bengals, research shows that they could underperform expectations during the 2023 season, says Robinson. That doesnt necessarily mean that theyre going to have a bad year though. Phew. 

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