Biden’s Capital Gains Tax Hike: Financial Experts Panic

Clear Facts

• President Biden’s proposal to increase the top capital gains tax rate to a historic high of 44.6% has been met with strong opposition from financial experts.
• The Treasury Department’s report indicates that the majority of the tax increase would impact Americans with a taxable income greater than $1 million.
• The proposal also includes a 25% tax on unrealized capital gains owned by Americans whose wealth exceeds $100 million and a mandatory capital gains tax on transferred family assets after death.

President Biden’s recent proposition to push the top capital gains tax rate to the highest it’s been in over a century has drawn severe criticism from financial experts. They caution that such a move could deal a major blow to the U.S. economy.

“Investment is the real driver of economic growth,” commented E.J. Antoni, an economist and research fellow.

He added, “Investment is what gives you productivity gains. Investment is where you get factories and machines — it’s where businesses are able to provide their workers with tools and equipment that allow them to increase their productivity, to increase wages, etc.”

A Treasury Department report reveals that the proposed fiscal year 2025 budget would escalate the top marginal rate on long-term capital gains and qualified dividends to an astounding 44.6%. Such a hike in the capital gains tax would be the largest since the tax was first implemented in the early 1920s.

“If you’re going to tax something, you get less of it,” Antoni stated.

He continued, “And that’s just as true for investment as it is for anything else. 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.”

The current proposal to raise the capital gains tax is associated with President Biden’s COVID-19 spending, which economists say has contributed to the high inflation rate.

Antoni explains that inflation impacts the price of equities like stocks, meaning a tax on gains when equities are sold also taxes inflation. He warns that increasing capital gains taxes could therefore incentivize lawmakers and federal policymakers to maintain high inflation rates to ensure larger tax revenues.

“These are the really dangerous proposals that a lot of people miss when it’s introduced by the Treasury,” said Mike Palicz, director of federal tax policy.

His concern is echoed by many as he states, “This is people’s nest egg. This is them saving, them investing — it’s their American dream. And here we have a proposal for the highest capital gains tax in 100 years.”

In addition to the high capital gains tax proposal, the Treasury Department’s latest plan includes a mandatory capital gains tax on transferred assets when parents pass away. It also proposes a 25% tax on unrealized capital gains owned by Americans with wealth exceeding $100 million.

Despite these stringent measures, Antoni believes that the predicted revenue gains are unrealistic. He states, “The idea that this is somehow going to raise trillions upon trillions of dollars is once again based on the notion that people will respond by essentially not responding.”

In other words, he believes the higher tax rates won’t necessarily change behavior, casting doubt on the projected revenue increases. The Treasury Department has not yet responded to requests for comment on the matter.

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