Biden's Tax Proposals Keep Expanding
Please note that Progressives have their eyes fixated on a 43.4% Capital Gains Tax.
Leakers told Bloomberg that Mr. Biden will tax capital gains for taxpayers who earn more than $1 million at the personal income tax rate, which he also wants to raise to 39.6% from 37%. Add the 3.8% ObamaCare tax on investment, and you get to 43.4%. And that’s merely the federal rate. Add 13.3% in California and 11.85% in New York (plus 3.88% in New York City), which also tax capital gains as regular income, and you are heading toward the 60% rate range.
Keep in mind this is on the sale of gains that are often inflated as assets are held for years without adjustment for inflation. Oh, and Mr. Biden also wants to eliminate the step-up in basis on capital gains that accrues at death.
Tax Foundation Notes
- President Biden’s #AmericanFamilyPlan will likely include a large increase in the top federal tax rate on long-term capital gains and qualified dividends, from 23.8% today to 39.6% for higher earners.
- When including the net investment income tax, the top federal rate on capital gains would be 43.4%. Rates would be even higher in many U.S. states due to state and local capital gains taxes, leading to a combined average rate of 48% compared to about 29% under current law.
- Under President Biden's tax plan, 13 states and D.C. would have a top combined capital gains tax rate at or above 50%: 56.7% CA 54.3% NY 54.2% NJ 53.3% OR 53.3% MN 52.4% DC 52.2% VT 50.7% HI 50.6% ME 50.4% CT 50.3% ID 50.2% NE 50.2% MT 50.0% DE (58.2% NYC) (57.3% Portland, OR)
The above is from a Series of Tweets by the Tax Foundation.
What's Going On?
In a nutshell, Biden's tax proposals keep getting more and more radical.
There is no way these ideas will pass in the Senate.
Currently, two Democrat Senators stand in the way of these tax hikes. They are Senator Joe Manchin of West Virginia and Senator Krysten Sinema from Arizona.
Biden will place tremendous pressure on those two Senators.
While it is highly unlikely they would go for anything as radical as what Biden now proposes, the more ridiculous Biden sets the initial bar, the higher the final compromise.
Biden's problem is not just with the Senate. Democrats hold a very narrow majority in the House.
On April 14, Fox News reported House Democratic margin shrinks to 2 votes with swearing-in of Republican Julia Letlow.
That gives Republicans 212 seats to 218 for Democrats.
Tie votes fail in the House so the loss of just 3 votes would kill a bill.
Democrats are favored in two of the three House special elections that will be held over the next two months.
That would make it 220-213 with one more special election on November 2, also slated to go blue ultimately making it 221-213 if things go how they now lean.
At 220-213, Democrats cannot afford to lose 4 votes.
Still More Complications
I recall there are roughly a dozen Democrats in districts that Trump won or the Democrat Representatives barely won their races.
If accurate, that makes the math even more daunting, especially as a number of Democrat House members have unique tax demand of their own to increase the SALT (State and Local Income Tax) deduction as it used to be.
Enter Jerry Nadler
"No one should ever be taxed twice on the same income. It's not fair and it's not just."
I certainly agree!
Unfortunately, Nadler does not mean what he says, but the key point is seventeen Members of the NY House delegation agree on SALT.
Where is This Headed?
I am no longer certain the House can pass anything at all that the Senate with different priorities will go along with.
Meanwhile, the more demands the progressives make, the more likely they come away with nothing at all.
Ultimately, after a long period of bickering, I do expect a more modest increase in taxes than what we see on the table now.