President Joe Biden has unveiled his plan for $3.6 trillion in tax increases for the nation's wealthy and on big corporations to pay for his $4 trillion infrastructure and jobs bills, showing the most detailed plans for paying for increased spending on climate change, reducing income inequality, social services programs, and more.
The proposals released on Friday will mean higher taxes on investment sales, income, and the transfer of assets and will reverse former President Donald Trump's tax cuts for the country's richest taxpayers, reports The New York Times.
The tax hikes will begin at the end of 2021, when the top individual tax rate will climb from 37% to 39.6%, with the new rates applying to income of over $509,300 for married couples who file joint returns and $452,700 for single taxpayers.
Taxes on capital gains would almost double under the plans with the proceeds of selling an asset climbing from 39.6% to 40% for people earning over $1 million. But that may not be the end of the capital gains tax for many people because the income is also subject to a surtax of 3.8% that helps to pay for the Affordable Care Act.
This means that in some states, high-earning taxpayers may face capital gains tax rates of over 50%, the highest rate in 100 years.
The Biden plan also calls for higher income taxes for corporations going up from the current 21% to 28% and ends tax breaks for energy companies that are polluting the environment. The administration also plans to spend money to beef up the IRS to bring in more agents to pursue corporations that cheat on their taxes.
The plan does say that the increases will be offset by $1.2 trillion in tax credits and benefits to encourage green energy technology and to expand child care and low-income housing.
Republicans are already denouncing the plans, that were released in the first Treasury "Green Book" since 2016, a tradition the Trump administration had not followed. Some moderate Democrats may also follow.
"This is truly tax and spend on steroids,” said Douglas Holtz-Eakin, the president of the American Action Forum and former chief economist of President George W. Bush’s Council of Economic Advisers. He pointed out that the proposed tax levels would be "higher than any 10-year period in modern history."
The capital gains tax increase, if approved, would also be retroactive to April 2021 to prevent a deluge of assets from being sold before the increase becomes law, but a separate plan to apply income taxes to unrealized gains for assets that are transferred upon death would go into effect on Dec. 31.
The U.S. Chamber of Commerce is also slamming the tax proposals.
“Perhaps the only thing besides a resurgence in the global pandemic that could reverse America’s economic recovery is the administration’s proposed tax increases on employers and investment,” said Neil Bradley, the group’s chief policy officer.
“The tax on capital gains would hit two-thirds of capital investment," he said. "The tax on corporations would hit 1.4 million small businesses and would impose on America’s largest businesses the highest tax rate in the industrialized world.”
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