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Biden To Double Capital Gains Tax To Fund Social Spending
President Joe Biden will propose to nearly double the capital gains tax rate for wealthy individuals, or up to 43.4%. This will help fund a plethora of social spending programs designed to address long-standing inequality.
RELATED: 6 Things You Should Know About Capital Gains Tax
Rise in Capital Gains Tax
Sources privy to the unannounced proposal shared the initial figures. Wealthy American investors earning $1 million or more face a federal tax rate as high as 43.4%.
In addition, the proposed marginal 39.6% rate becomes double the current base rate of 20%. Meanwhile, the 3.8% tax on investment income that funds Obamacare will remain. In effect, this pushes the tax rate on returns on financial assets higher than rates on some wage and salary income, they said.
For investors earning more than $1 million in high-tax states, the rates can climb above 50%. For example, New Yorkers will pay a combined state and federal capital gains rate that’s as high as 52.22%. For Californians, it gets higher at 56.7%.
Upon hearing the news, stocks went down immediately. The S&P 500 Index plunged 0.9% at Thursday’s close, its sharpest decline in over a month.
Ten-year Treasury yields fell to 1.54% from an intraday high of 1.59%. Expectedly, Wall Street is far from excited with the proposal. Thomas Hayes, chairman of hedge fund Great Hill Capital, gave their assessment of the plan. “If it had a chance of passing, we'd be down 2,000 points,” he said, referring to the indexes.
Equalizing Capital Gains Taxes With Income Taxes
If passed into law Biden’s proposal can make his campaign promise of equalizing income and capital gains tax rates for wealthy individuals.
Previously, the President said it’s unfair many of the nation’s wealthiest pay lower taxes than middle-class workers. The proposal can reverse a long-standing tax code provision that taxes investment returns lower than labor.
Asked about the proposal, White House Press Secretary Jen Psaki said it’s still a work in progress. “We’re still finalizing what the pay-fors look like,” she said.
Biden is expected to release the proposal next week as part of the tax increases to fund social spending in his proposed American Families Plan program. This program proposes funding for childcare, universal pre-kindergarten education, and paid leave for workers.
Elimination of the Carried Interest
Biden’s proposal will also create a side effect. Equalizing the tax rates for wage and capital gains will curb the so-called carried interest. This is the cut of investment profits collected by private equity and hedge fund managers.
The plan will effectively end carried interest benefits for fund managers making more than $1 million. With the new rates, investors won’t get to pay lower capital gains rates on their earnings. However, those earning less than $1 million may still claim the tax breaks. Unless Biden decides to repeal that provision as well.
Republicans Want None of This
In order for Biden’s plan to work, he will need the support of a few GOP lawmakers in the House and the Senate. However, the Republican Party isn’t keen on lending a hand.
Instead, GOP members insist that the 2017 tax cuts implemented by former President Donald Trump don’t need changing. In fact, the current capital-gains framework encourages saving and promotes future economic growth.
Senator Chuck Grassley (R-IA) said the plan will backfire horribly. The top Republican in the Senate Finance Committee said the 2017 tax cuts are doing the job.“If it ain’t broke, don’t fix it,” he said.
In addition, increasing capital gains tax is going to “cut down on investment and cause unemployment,” Grassley warned. Instead of hiking tax rates, Republicans called for repurposing previously appropriated, unused pandemic-relief funds to help pay for their counteroffer infrastructure plan.
American Families Plan
As the intended recipient of the capital gains tax increases, the American Families Plan aims to increase spending on children and education. Biden will spell out the details of the plan in a joint address to Congress on April 28. Some of the proposed programs include a temporary extension of an expanded child tax credit. This benefit currently gives e parents up to $300 a month for young children or $250 for those six and older.
Watch the CNBC TV report on what higher capital gains taxes could mean for markets and the economy:
Loading ...Do you support increasing capital gains tax rates for wealthier individuals who earn more than $1 million? Tell us what you think about Biden’s proposal and how it affects business. Share your comments in the comment section below.
18 Comments
This ‘idea’ is one of the steps to drive the American Dream down the septic system. By driving these job makers/creators away, which is what this proposal will do, we take a leap, not a step, closer to socialism. For a supposedly ‘well educated,’ knowledgeable “politician,” this is an entirely bonehead move for the U.S.
we need to cut spending not tax the successful. The rich should pay some equitable tax(end tax loopholes) and the mega corporations should contribute tax on their profits at a comesurate rate. Also go after the tax dodgers and those with off-shore holdings.
It’s about time, making that much money you should contribute, not just when it’s a tax write off!!! Go Joe Biden!!
No the government wants to take more money but in the meantime you leave the boarders wide open. Just because people are successful and work hard doesn’t mean the government needs to take it.Take it from your corrupt Kid Joe.
Makes no difference what we say. That incapable man is going to try to ruin America anyway!
The democrats are working with the CCP to destroy America. They stole the election, ended domestic oil production (thus raising prices), they opened the borders, putting a strain on benif8t and medical systems, now they’re raising taxes to drive jobs overseas.
There’s only 2 percent of rich people in the US so where else is this tax money coming from WAKE UP people. It will come out of YOUR POCKET.
People need to wake up. This is just another part of the Marxist Democrats plan to destroy our Republic. Don’t forget that this tax will also affect money on profits made in the Stock market and real estate. Remember what Biden said, he wants to “rebuild America “ but he wants to do that by turning it into a Marxist Democrats dictatorship with them ruling over the people of this country. We need to look at everything he has done and let go on since he took office. They have attacked our freedom of speech and Religion along with our 2nd amendment rights. They have torn down our statues (history). They have rioted, burned and looted and also intimidated citizens and police. They use ANTIFA and BLM terrorist like Hitler used the Brown Shirts. We need to impeach and or recall them or vote them out of office.
Implement the “Fair Tax”…a consumption tax rather than an income tax. Then everyone pays according to what they purchase…high income persons living luxury lifestyles pay more. There would be a base exemption (refund) for all citizens & legal workers to offset the tax for basic needs. This tax would capture spending by illegal immigrants, drug dealers, and undocumented workers who would pay their fair share as well, but would not receive the exemption refund!
Do it!
The long term plan of the NWO is to destroy this country financially and medically. Rothschilds’, Rockefellers’, Bill Gates and others on duty 24/7 seeing to it that it happens quickly. I hate what this country has become, but unfortunately there is nowhere else to go. Prayer and faith are what we have. Refuse the shot and pray we make it until ’22.
@ Mary Morales!! You are a f’n idiot!! Instead of slowing stupid out of control spending by our clueless Politicians you applaud a so called President that has NEVER made a living in the private sector. He has stolen, cheated and sold out the country for his massive personal fortune as a seedy politician and what he is doing now is robbing the successful to give it to these ready for welfare leeches flooding across our southern border as you read this. I’m sick and G’d damned tired of clueless morons like yourself that thinks capitalism and success is a bad thing and laziness and handouts are so great. I’m past livid and know that the only way out of this will be to physically take the country back and hopefully rid ourselves of worthless dolts like yourself at the same time!!
Over 10 years ago, my wife and I invested in a Bio-Tech start-up. These kinds of companies have about a 1% chance of success. On more than one occasion they were on the verge of bankruptcy. Finally they may be acquired by a huge corporation. Doubling the Capital Gains tax will dry up the venture capital for new companies and new technology.
BIDEN IS TOO STUPID TO UNDERSTANBD THE CONSEQUENCES OF THE ACTIONS HE IS TOLD TO TAKE. IF ANYONE THINKS HE HAS THESE IDEAS HIMSELF—GUESS AGAIN. HE AINT GOT THE BRAIN POWER TO WIPE HIS NOSE OR ANY OTHE ANATOMICAL PARTS.
That isn’t the worse of it. Now a report has come out from the government’s own research on MEAT. Biden’s plan is to eliminate BEEF except for 4% a YEAR! It means 1 hamburger a year. Could that be why there’s so much “vegan” and “meatless” food coming out? Who told them this plan? They HAD to know ahead of time. Eliminating beef will kills most restaurants, especially the fast food burger chains. The Tax Foundation has pegged the Capital Gains tax as a big loser. We have got to stop the insanity before they kill us all!!!!
The ones making that much money are the ones that own the businesses! When you cut into their bottom line, they either lay off and make the workers they have do more to make up for less employees or they move the business elsewhere. Biden will ruin this country’s economy doing this!
I really think they should start taxing them selves first. These clowns are making millions under the table and they go after the ones bearly making a buck.
EVER GET A JOB FROM A POOR MAN? EVERY TIME YOU COME TO MY HOUSE I PICK YOUR POCKET; HOW LONG WILL YOU CONTINUE TO COME OVER ? MOST PEOPLE WHO HAVE MONEY DIDN”T GET IT BY BEING STUPID !!!! DA ! I THINK I”LL LEAVE THESE THIEVES !!! THE AMERICAN DREAM EVERYONE ‘IS DYING TO GET TO HAVE; IS NO LONGER HERE !!! GOOD NITE & GOOD LUCK AMERICA !!!
PRAY 4 YOUR COUNTRY !!! J. R.
Obviously Biden and the Democrats wants to make sure they win again because in order to do that they have to have plenty of handouts for those who chose not to work. I know way too many people who are perfectly capable of doing some type of work who are on disability. The entire system is set up to make it impossible for them to work even when they are “feeling good” because they lose their benefits. I am tired of working 6-7 days a week and having a “disabled” friend who calls and whines about my working because they want to do something and I am working. They have basically the same problems that I do, perhaps less disabled then I am, and I choose to work and they choose not to. Granted some people cannot work, but there are way too many people who could, at least some of the time. I am tired of the government taxing the people who use their money to start a business, get it going and then told what they have to pay, etc. to workers, who have nothing, absolutely nothing at stake and yet feel entitled to every benefit that the business owner receives. Equalizing income? How about equalizing work and equalizing potential loss before you equalize the pay? You know, if the company loses profits the workers do too? I mean if you are forced to take them along with your hard work and your chance at failure or loss, they should not just be there for the good times but forced to take loss in salary etc should the bottom line drop out. Come on Biden, don’t sit there and use this “equalizing” stuff for votes, otherwise we won’t have any employers in this country because they won’t be able to afford the employees here at all and we won’t be able to afford the cost of anything they make here.