On Thursday, news broke that the Biden Administration is planning to introduce a plan that would nearly double the capital gains tax rate for the wealthy. The president is expected to announce the proposal coming week as part of the “American Families Plan,” intended to boost the social safety net.
The proposal will reportedly tax capital gains for Americans earning $1 million or more at a rate of 39.6%. In combination with the existing Obamacare surtax on investment profits, the total rate could reach 43.4% for top earners. Major indices dropped on the news, with the Dow falling 1.2%, while the NASDAQ dropped 1.3%.
According to White House Press Secretary Jen Psaki, Biden’s plans were not finalized, but “His view is that that can be on the backs of the wealthiest Americans who can afford it, and corporations and businesses who can afford it.”
The plan falls short of more extreme pitches from members of his party, including a proposal of Senator Elizabeth Warren to tax the overall wealth of rich Americans. This proposal, however, only intends to raise taxes whenever assets are sold.
The Biden administration is pitching this as a way to address the wealth gap in the United States, as well as the misalignment between income taxes (top income tax rate currently at 37%) and taxes on long term capital gains, which is currently at 20%.
What do you think, is this proposal a good way to fund social plans or will it have an adverse impact on the economy?