Hilariously, after Wall Street went into the tank for Joe Biden in 2020, he’s now rewarding their financial support by proposing raising the capital gains tax to the highest it’s ever been.
President Joe Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6% to help pay for a raft of social spending that addresses long-standing inequality, according to people familiar with the proposal.
For those earning $1 million or more, the new top rate, coupled with an existing surtax on investment income, means that federal tax rates for wealthy investors could be as high as 43.4%. The new marginal 39.6% rate would be an increase from the current base rate of 20%, the people said on the condition of anonymity because the plan is not yet public.
A 3.8% tax on investment income that funds Obamacare would be kept in place, pushing the tax rate on returns on financial assets higher than rates on some wage and salary income, they said.
The Dow Jones fell 400 points on the news yesterday, though markets are rebounding as of writing.
While the market did initially react negatively, there fortunately isn’t any evidence that capital gains tax rates have any impact on market returns for the rest of us – and one only affecting those earning $1 million+ would have an even lesser effect. The most obvious effect such a tax hike would have is it would incentivize the wealthy to hold into stocks and other investments longer.
For those who replied that itâs the prior year that matters: pic.twitter.com/kWWnskZx2K
— Liz Ann Sonders (@LizAnnSonders) April 23, 2021
On the other hand, these hikes would be lager than anything we’ve seen previously, so it could be different this time. In Europe, only Denmark has capital gains tax rates exceeding 40% (at 42%), while most around around the mid 20s.
The recovery from the coronavirus pandemic has been k-shaped, with sectors specializing in technology recovering the quickest, and low-skilled sectors like food service and hospitality recovering the slowest. Billionaires saw their combined net worth’s skyrocket nearly $1 trillion during the pandemic while the nation suffered double-digit unemployment at times.
If anyone’s going to pony up to pay for the massive debt we’ve accumulated during the pandemic I think we’d all rather it be them – but with Democrats, we all know a similar tax hike affecting the middle class is probably coming next. Is it ever not?
Matt Palumbo is the author of Dumb and Dumber: How Cuomo and de Blasio Ruined New York, Debunk This: Shattering Liberal Lies, and Spygate
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