Introduction
President Joe Biden has proposed a significant increase in the capital gains tax rate, aiming to raise it to 44.6%. This move marks the highest rate since the tax’s inception in 1922 and is part of his broader economic agenda.
Impact on Trump’s Tax Cuts
President Biden plans to allow the expiration of the Trump tax cuts, which he argues have primarily benefited the wealthy and large corporations. Contrary to Biden’s claims, 2/3 of American households received tax cuts under Trump’s tax plan, with significant benefits for middle-class Americans.
Corporate Tax Rate Increase
Biden’s proposal includes raising the corporate income tax rate, which was previously reduced under Trump and Republicans to below China’s rate.
Biden’s campaign indicated a desire to increase the corporate tax rate back to 35% or at least to 28%, which would surpass both China’s and the European average.
Critics argue that this would negatively impact American businesses and their competitiveness globally, resulting in potential wage reductions for workers.
Middle-Class Americans Affected
Grover Norquist, President of Americans for Tax Reform, emphasizes that increasing corporate taxes ultimately harms middle-class Americans. Higher taxes on corporations lead to increased prices for consumers and lower wages for workers.
Additionally, individuals with retirement savings in 401(k)s or IRAs would see a decline in their life savings due to falling stock prices.
Biden’s Economic Agenda
Biden’s economic policies have been criticized for benefiting a select few while harming many. Significant amounts of money have been directed towards corporate subsidies and student loan bailouts. Critics argue that these policies do not address the needs of the broader population and instead focus on enriching certain groups.
Capital Gains Tax Proposal
Biden’s 2025 budget proposal includes a significant increase in the capital gains tax rate to 44.6%, the highest since its creation.
This proposal aims to address perceived preferential tax rates that disproportionately benefit white taxpayers. In states like California, the combined federal and state capital gains tax rate could approach 60%.
Impact on Small Business Owners
Small business owners who sell their businesses after years of hard work would face substantial tax burdens under Biden’s proposal. After paying various taxes throughout their business operations, they would see nearly half of their earnings taken by federal and state governments upon selling their business.
This high tax rate could deter investment in the U.S., as other countries like China have significantly lower capital gains tax rates.
Conclusion
President Biden’s proposed increase in the capital gains tax rate to 44.6% represents a significant shift in tax policy, with potential widespread effects on American businesses, middle-class Americans, and investment in the U.S. Critics argue that these changes could hinder economic growth and disproportionately impact those who save and invest for their future.