The plan of President Joe Biden to increase the top capital gains tax rate to a historic high of 44.6% has drawn sharp criticism from economic experts concerned about its potential negative impact on the US economy.
Plan of Joe Biden to Increase the Capital Gains Tax
According to Fox News, the Treasury Department outlined in its report the proposal of Joe Biden in the fiscal year 2025 budget, which aims to raise the top marginal rate on long-term capital gains and qualified dividends to its highest level in over a century.
This hike would push the rate to 44.6%, the highest level since the tax was introduced in the early 1920s. E.J. Antoni, an economist and research fellow at The Heritage Foundation, told Fox News Digital that "investment is the real driver of economic growth."
Antoni noted that investment fuels productivity gains, facilitates the establishment of factories and machinery, and enables businesses to provide their workers with "tools and equipment that allow them to increase their productivity, to increase wages, etc."
Antoni cautioned that taxing capital gains could lead to less investment, reducing economic growth.
"If you're going to tax something, you get less of it... And that's just as true for investment as it is for anything else," he told the outlet.
"Taxing capital gains means less investment, it means less economic growth, and it means the rise in people's standards of living is going to slow dramatically," he added.
The Treasury Department's report said the 44.6% rate is a mix of proposals, including raising the top ordinary capital gains rate from 20% to 37%. The bulk of the tax hikes impact those with taxable income exceeding $1 million.
However, Antoni said such a tax hike would have broad economic impacts and that inflation would affect the price of equities, like stocks, which means that taxing gains from selling equities also taxes inflation.
Proposals of Joe Biden Are 'Really Dangerous'
Mike Palicz, director of federal tax policy at Americans for Tax Reform, expressed concerns about the proposed capital gains tax hike.
He told Fox News Digital that these "are the really dangerous Biden proposals that a lot of people miss when it's rolled out from Treasury," and they even "come out and say, 'we're advocating for a top capital gains rate of 44.6%'."
Palicz also emphasized the importance of individuals' savings and investments in realizing the American dream.
"This is people's nest egg. This is them saving, them investing - it's their American dream. And here is Biden coming out with the highest proposed capital gains tax in 100 years," he told the outlet.
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