Joe Biden To Turn Rich People Into Lunchmeat. Or Into Slightly Less Rich People.
Joe Biden is expected to announce a number of tax increases aimed at the very wealthy when he addresses a joint session of Congress next week, including a big increase in the Capital Gains tax, which is the tax on profits people make from investments. As everyone who pays attention should already know, most of the super wealthy don't get most of their wealth from paid work, but from investment income. So a hike in Capital Gains tax rates would affect the rich a lot more than an increase in the top marginal income tax rate.
But just to be sure, Team Biden is probably going to do both, as Reuters reports, according to "sources familiar with the proposal," which means this is probably one of those intentional leaks for the sake of seeing what the reaction is, not a whistle-blower.
For starters, in addition to increasing the corporate tax rate to a number that is "higher than what it was after Trump's tax cut for the rich but probably not as much as it was before that," the Biden proposal would raise the top marginal income tax rate from 37 percent to 39.6 percent. That's the rate paid on any income over $523,600 a year for single people, or over $628,300 for folks filing jointly.
But the really impressive change here is that Biden's likely to up the tax on capital gains, which is income that comes from the increase in value of investments between when they're bought and sold. Currently that rate is about 20 percent for the richest income bracket. Biden's proposal would almost double that, to 39.6 percent on people with incomes over a million bucks a year.
Reuters notes that would be the highest capital gains taxes, "which are mostly paid by the wealthiest Americans, since the 1920s. The rate has not exceeded 33.8% in the post-World War Two era."
When news of the plan broke Thursday, markets hit a speed bump, with a one percent drop in the S&P 500, "its steepest drop in more than a month."
Try not to cry too hard for the anxieties of the investor class, who have made out like bandits during the pandemic. Reuters managed to find one person who's concerned, but seems to think it'll never happen:
"If it had a chance of passing, we'd be down 2,000 points," said Thomas Hayes, chairman and managing member at hedge fund Great Hill Capital LLC, referring to stock market indexes.
Other revenue enhancers being kicked around in the White House include limiting the amount of deductions the wealthiest Americans can take, or maybe even raising the estate tax, which would no doubt make political friends of the super rich very worried. Then Republicans would run right out and try to scare people whose life savings are a fraction of the minimum amount of wealth affected by estate taxes, because that's always worked before.
We say Biden should go for it.
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