A billionaire tax could bring in more money to government coffers and it may help ease income inequality, but it won't help bring down inflation, which devastates low-income Americans. Instead, the tax may worsen inflation by encouraging spending beyond the economy's capacity to produce.

Washington has an ambitious infrastructure and social spending agenda these days, and a chronic government deficit and debt that are stretched beyond conventional limits. That's why it's on the hunt for additional revenues in the usual place: the billionaire class.

It's an easy political target for a couple of reasons. One, it's a small group, and therefore, it doesn't have that much voting power in a democratic society. Two, billionaires are the richest among the rich, and taxing them promotes social justice. And three, multimillionaires and billionaires have a reputation for finding ways to get around the tax code and pay lower taxes.

Here are a couple of quotes from the proposed U.S. government budget for the fiscal 2023 year:

“The tax code currently offers special treatment for the types of income that wealthy people enjoy. This special treatment, combined with sophisticated tax planning and giant loopholes, allows many of the very wealthiest people in the world to end up paying a lower tax on their full income than many middle-income households.

“To finally address this ongoing problem, the Budget includes a 20% minimum tax on multi-millionaires and billionaires who so often pay indefensibly low tax rates. This minimum tax would apply only to the wealthiest 0.01% of households — those with more than $100 million — and over half the revenue would come from billionaires alone.”

That's why a billionaire tax is popular among Americans. A vast majority (64%) of U.S. adults, including 72% of liberals and 57% of conservatives, support a tax increase on the country's wealthiest people.

That's according to a recent survey by The Balance. The economics and finance website asked 1,800 eligible voters about public support for President Joe Biden's Build Back Better (BBB) plan and 31 individual proposals within the sweeping social infrastructure plan, including a proposed 5% increase on the income tax of Americans making over $10 million.

But the results of the survey should be interpreted with extreme caution. People who were asked about the tax don't have to pay for it. Nevertheless, the results support the point that the billionaire tax is a popular tax among most Americans.

Apparently, respondents were also concerned that additional government spending, when the economy faces supply chain bottlenecks and labor shortages, will lead to higher prices. As a result, it will worsen inflation, which acts as a regressive taxation on low-income people, and it's considered the top economic problem by roughly one-third of Americans surveyed by Gallup recently.

Julio Gonzalez, CEO and founder of Engineered Tax Services, Inc., believes that a billionaire tax may not work as it will drive wealthy families to tax havens.

"I think it will bring less money into the government's coffers since they will simply relocate, much like the wealthy C-Level executives and families have left California and New York for Texas and Florida," he said. "They will simply move, divide assets and find tax havens, and thus, inflation will only get worse as less money actually goes to the government to pay down debt. We've tried this before. It didn't work then and it feels like we are going back to the future."

But, perhaps, there's something different this time around.

Washington may have a good reason to believe it can prevent billionaires from getting around the tax.

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