(USNewsMag.com) – President Joe Biden is proposing to increase the top capital gains rate, raising it to levels not seen in over a century, and some economists are warning that it would be devastating to the economy.
The U.S. Treasury Department issued a report in early April revealing Biden’s proposed budget for fiscal year 2025 would push the top marginal rate higher on qualified dividends and capital gains to 44.6%, a spike that could be devastating according to some experts. The U.S. has not seen such an increase in capital gains tax since the early 1920s.
Heritage Foundation research fellow and economist E.J. Antoni said that the “real driver of economic growth” is investment, which increases productivity gains by increasing factories, machinery, and wages. Antoni said investment will decrease if capital gains taxes increase, meaning “less economic growth” and slowing down improvements in the standard of living for Americans. He also argues that tax increases could incentivize federal policymakers and lawmakers to keep inflation rates high to guarantee higher tax revenues.
Americans for Tax Reform (ATR) director of federal tax policy, Mike Palicz, called the Biden proposal “really dangerous.” He noted that it’s the “highest proposed capital gains tax” in a century and that it would destroy the “people’s nest egg” and “their American dream.”
A recent social media post from ATR warned that combined with higher state taxes, many people could end up paying income tax at rates over 50%. The proposal also increases taxes on unrealized capital gains by 25% for people with a net worth exceeding $100 million.
An analysis by the Peter G. Peterson Foundation shows that the government could pull in almost $800 billion in total from the increases.
As the next presidential election nears, Biden will face more scrutiny over the next few months about the state of the U.S. economy and will have to make his case to voters that a second Trump presidency would not be more beneficial to their wallets.
Copyright 2024, USNewsMag.com
