administration is trying to sell its Build Back Better agenda by demonizing the superwealthy, but that’s just the sales pitch. The actual product is a tax bill sent mostly elsewhere, to the already highly taxed “working rich.”

The litany of the supposed tax crimes committed by tech founders and private-equity billionaires is long and well-known: “They pay less than their secretaries do!” They spend money borrowed against their shares, leaving most of their wealth untouched and untaxed until death. Their children inherit those shares, kicking in the step-up in basis, and their massive capital gains are then blasted into the loophole ether, leaving their heirs to pay “only” the 40% estate tax, some of which perhaps they can avoid. Private-equity billionaires do much of the same stuff and also get to use the famous carried-interest loophole. By trading their labor for shares in risky enterprises, the lucky—or very good—ones pay capital gains, not ordinary income, rates on these gains. And all these miscreants are, of course, supposedly hiding tons of untaxed wealth offshore, likely aiming to become Bond villains.

The list is a mix of things critics are right about (the step-up in basis is hard to defend except perhaps as a bulwark against overly high estate-tax rates), that are arguable (carried interest) and that are nonsense (that wealthy Americans hide much of their money offshore untaxed).

Under the actual proposal, capital-gains rates would go up, but the step-up rule to avoid them at death would remain. Carried-interest treatment is only slightly altered and current proposals seem to make this advantage even more exclusive to private equity and venture capital. The Internal Revenue Service would get more money for enforcement, but this would be directed, as usual, mostly against easier targets than the superrich. The IRS likely knows that there are few hidden hoards of American-owned offshore wealth. While few Americans were named in the so-called Pandora Papers, which revealed the shady offshore holdings of many prominent foreign politicians, they are nevertheless tacitly being used to justify raising taxes right here in the 50 states.

There is no wealth tax proposed in the Biden plan, though

Oregon Sen. Ron Wyden

wants not only to tax wealth but to do so annually on unrealized gains, which is truly insane. A wealth tax—as retroactive, unfair, and unworkable as it is—would at least actually hit the superwealthy, the pretend target of the proposed legislation. But as always, it would hit many others much harder who aren’t so famous and powerful.

So who will pay the bulk of the myriad tax increases? Call them the working rich—people with very high ordinary income in a given year. While some also qualify as superwealthy, many will earn high incomes only for a short while (think athletes and movie stars) and use those fat years to finance decades of lower earnings.

The working rich already face—and actually pay—high marginal tax rates on ordinary income, and ordinary income is most of what they generate. These rates can exceed 50% today in blue states and cities (before adding Medicare taxes and all the rest). In our highly progressive tax system, the working rich already pay far higher marginal and average tax rates than their secretaries. They also don’t have many ways to reduce their estate taxes. The working rich seldom resemble the caricatures used in the “make them pay their fair share!” sales pitch.

Now, if you want to argue, as some do, that successful professional couples in New York and Los Angeles who already pay more than 50% in combined federal, state and local income tax should actually pay more than 60%, let’s debate that honestly. After all, progressives pine for the days of 90% marginal rates from when “Leave It to Beaver” dominated the airwaves, even though that fairy tale has been repeatedly debunked as, unlike now, there were enough loopholes available to make the actual taxes paid far lower. Such a hike, phrased as above, would at least be honest. Though “Make this hard-working, already high tax paying couple’s taxes even higher!” is a far weaker battle cry than demanding higher ordinary tax rates for alleged tax cheats like

Jeff Bezos


Warren Buffett

who, unlike our well-off couple above, don’t have much in the way of ordinary income to tax at the forthcoming higher rates.

So why this disconnect? Besides the sad and scary mass appeal of “let’s storm the castle” bombast, another obvious guess is that the rhetorical targets have far more, and far better, lobbyists than those who’d actually pay these new taxes. Some of the superwealthy are clearly in on the game, loudly braying, “Tax me more!” Of course some are sincere and well-meaning. But many are only virtue signaling in the sadly rational expectation that their oxen won’t be the ones that get gored. All of this lets the bill’s proponents talk a good game while continuing to kowtow to some of their biggest donors. A more charitable—but still cynical—explanation is that those writing policy know that going after the easy-to-tax ordinary income of the working rich will be relatively easy and the working rich outnumber the superwealthy by a large margin, leading to far more revenue.

How to settle the long list of tax issues is a subject for fair argument. But what’s blatantly not fair is to rally support by ranting about

Elon Musk,

Peter Thiel

and private-equity billionaires while writing a bill that mostly misses them, and mostly clobbers people already paying through the nose.

Mr. Asness is managing and founding principal of AQR Capital Management.

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