President Joe Biden’s plan to nearly double taxes on capital gains is already drawing scorn from some top Republicans who say it will curb investment by stripping away favored treatment for investment income.
‘It’s going to cut down on investment and cause unemployment,’ said Sen. Chuck Grassley of Iowa, a senior Republican on the Senate Finance Committee who helped push through the Trump tax cuts in 2017.
He pointed to pre-coronavirus economic gains, adding: ‘If it ain’t broke, don’t fix it.’
Republicans have started bashing President Joe Biden’s leaked tax plan to hike the top income tax rate while nearly doubling the capital gains rate
Biden is planning to formally roll out his new plans next week as a way to pay for new investments in education, labor programs, universal pre-K, free college tuition for certain income levels, and other programs.
He also would hike the top income tax rate up from the current 37 per cent to 39.6 percent, where it was before the Trump tax cuts.
Along with an existing surtax on investments enacted as part of Obamacare, certain high-income people would pay federal taxes as high as 43.4 per cent.
bring capital gains taxes up to the level of how ordinary income is taxed would end a longstanding policy of providing preferred treatment for income on investments at a preferred level that is meant to spur investment.
Long-term capital gains, currently taxed at the lower rate of 20 per cent, would be equalized at the higher level.
Those top rates aren’t for everyone. The maximum capital gains rate currently goes to individuals earning $445,850.
Biden’s proposed income tax hike would be for those earning more than $1 million a year.
According to Bloomberg News, which cited IRS data from 2018, 0.3% of Americans reported earning more than $1 million and capital gains or losses.
Only about 0.32% of American taxpayers reported adjusted gross income of more than $1 million and capital gains or losses on their returns, according to Internal Revenue Service tax return data from 2018.
Also bashing the proposal was Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee.
He called it an ‘economic blunder’ on Twitter, saying it ‘punishes investment in local biz, economy, technology, expansion. Result: slower growth & investment in U.S. Sabotages economic recovery. And future growth.’
The hikes would pay for Biden’s ‘human infrastructure’ plan, which is intended to compliment his $2.3 trillion infrastructure package – which on Thursday drew a smaller alternative proposal from a group of Senate Republicans.
House Democratic leaders might be able to push it through the House despite their razor-thin majority.
In the Senate, even if leaders try to move it through special reconciliation procedures, every Democrat would have to back it – leaving ample room for negotiation.
Democrats close to the White House are already signaling that a capital gains hike would have diminishing returns once it hits 30 per cent – raising the prospect of a negotiating session.
Biden’s pitch – which earned a ‘like’ that progressive firebrand Rep. Alexandria Ocasio-Cortez of New York attached to a news story about the proposals Thursday, would need to win over centrists like West Virginia Democratic Sen. Joe Manchin.
Manchin has resisted Democratic calls to change the filibuster while holding back support from some Biden nominations and proposals.
The House ‘problem solvers’ group of relative centrists on Friday came out for an indexed increase in gas taxes to fund infrastructure improvements, the Wall Street Journal reported.
‘We cannot afford four more years of crumbling bridges, roads, and tunnels, lead-filled pipes, and failed transportation, which is why the Problem Solvers Caucus is putting partisanship aside to find a solution that brings both parties to the table,” said Rep. Josh Gottheimer (D-N.J.)
The White House has yet to confirm the tax hikes that have been publicly reported – although the Dow Jones average dropped more than 300 points. The Dow ticked up more than 100 points Friday.
