What could be the tax rate in the new economic package according to Biden?
President Joe Biden will present his American Families Plan next week. To pay for the social spending bill tax increases on the wealthy are being proposed.
President Joe Biden has already stated that he wants to raise the corporate tax rate to help pay for his infrastructure bill taking shape in Congress. Now sources say that he will propose tax increases on the wealthy to pay for his third spending package that will address long-standing inequality.
President Biden will address a joint session of Congress 28 April where he will unveil his American Families Plan, which will focus on social spending for child care, universal pre-K, free community college and paid family leave.
Biden plans to equalize taxes on wages and wealth
The latest proposal by President Biden, according to people familiar with the proposal told Bloomberg, would see a near doubling of the capital gains tax for people earning more than $1 million a year. The new marginal rate on capital gains tax would go from 20 percent to 39.6 percent. The income tax rate would rise to 39.6 percent from 37 percent. The new top rate means that federal tax rates for wealthy investors could be as high as 43.4 percent once coupled with an existing surtax on investment income.
This is in line with what he campaigned on, reversing the current system that taxes income from wages more than returns on investments. President Biden earlier this month argued in a speech that raising taxes on corporations is necessary to level the playing field for average Americans. "I'm not trying to punish anybody, but damn it, maybe it's because I come from a middle-class neighborhood, I'm sick and tired of ordinary people being fleeced," Biden said.
This matches Joe Biden’s campaign plan to tax capital gains like ordinary income for $1M and up (his proposed top rate of 39.6% + existing 3.8% net investment income tax = 43.4%). https://t.co/B5bx4LvjIh— Sahil Kapur (@sahilkapur) April 23, 2021
The market reacted swiftly to the news of the tax hikes
Reporting of the tax hikes for the rich caused stocks in the three main indexes on Wall Street to dive on Thursday. But this was “more of a short-term, knee-jerk reaction,” Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago told Reuters. Analysts said that it provided an excuse to take profits ahead of next week's earnings reports from big tech companies.
Passing the tax hikes as is would be hard to get through Congress. "If it had a chance of passing, we'd be down 2,000 points," Thomas Hayes, chairman and managing member at hedge fund Great Hill Capital LLC.
US stocks tumbled Thursday over investors' worries about higher taxes.— CNN Business (@CNNBusiness) April 22, 2021
All three major indexes closed deep in the red. The Dow fell 0.9%, or 321 points. The broader S&P 500 and the Nasdaq Composite also fell 0.9%. https://t.co/UrAymT8l7I
President Biden has said that he is willing to negotiate any tax hikes when he announced his proposed corporate tax increase. After a meeting between the President and a bipartisan group of lawmakers, Florida Republican Representative Charlie Crist told The Wall Street Journal that "compromise wiggle room" was discussed and regarding the percentage rate “maybe not all the way to 28 but 25."
White House Press Secretary Jen Psaki, asked about the capital-gains plan at a press briefing Thursday, said, “we’re still finalizing what the pay-fors look like.”
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