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Biden to float historic tax increase on investment gains for the rich

EconomyApr 22, 2021 07:30PM ET
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2/2 © Reuters. FILE PHOTO: U.S. President Biden speak at the White House in Washington 2/2

By Jarrett Renshaw and Trevor Hunnicutt

WASHINGTON (Reuters) - President Joe Biden will roll out a plan to raise taxes on the wealthiest Americans, including the largest-ever increase in levies on investment gains, to fund about $1 trillion in childcare, universal pre-kindergarten education and paid leave for workers, sources familiar with the proposal said.

The plan is part of the White House's push for a sweeping overhaul of the U.S. tax system to make rich people and big companies pay more and help foot the bill for Biden's ambitious economic agenda. The proposal calls for increasing the top marginal income tax rate to 39.6% from 37%, the sources said this week. It would also nearly double taxes on capital gains to 39.6% for people earning more than $1 million.

That would be the highest tax rate on investment gains, which are mostly paid by the wealthiest Americans, since the 1920s. The rate has not exceeded 33.8% in the post-World War Two era.

News of the proposal - which was a staple of Biden's presidential campaign platform - triggered sharp declines on Wall Street, with the benchmark S&P 500 index down 1% in early afternoon, its steepest drop in more than a month.

Any such hike would need to go through Congress, where Biden's Democratic Party holds narrow majorities and is unlikely to win support from Republicans. It is also unclear if it would have the unanimous backing of congressional Democrats, which would be essential in the Senate where each party holds 50 seats.

"If it had a chance of passing, we'd be down 2,000 points," said Thomas Hayes, chairman and managing member at hedge fund Great Hill Capital LLC, referring to stock market indexes.

Sources said details would be released next week before Biden's address to Congress on Wednesday. Details of the plan may change in coming days. White House officials are debating other possible tax increases that could ultimately be included such as capping deductions for wealthy taxpayers or increasing the estate tax, sources told Reuters.

Biden has promised not to raise taxes on households earning less than $400,000.

Tax details related to the plan, which has been in the works for months, were first reported by the New York Times on Thursday morning.

White House press secretary Jen Psaki said the president would discuss his "American Families Plan" during his speech to Congress but declined to comment on any details.

She said the administration had not yet finalized funding plans but stressed Biden's determination to make the wealthy and companies pay for new programs.

"His view is that that should be on the backs ... of the wealthiest Americans who can afford it and corporations and businesses who can afford it," Psaki said.

She said Biden and his economic team did not believe the measures would have a negative impact on investment in the United States.

Yields on Treasuries, which move in the opposite direction to their price, fell to the day's low.

CAPITAL GAINS

Biden's new plan, likely to generate about $1 trillion, comes after a $2.3 trillion jobs and infrastructure proposal that has already run into stiff opposition from Republicans. They generally support funding infrastructure projects but oppose Biden's inclusion of priorities like expanding eldercare and asking corporate America to pay the tab.

Tax hikes on the wealthy could harden Republicans' resistance against Biden's latest "human" infrastructure plan, forcing Democrats to consider pushing it - or least some of the measures - through Congress using a party-line budget vote known as reconciliation.

Senator Joe Manchin, a moderate Democrat from West Virginia who wields outsize power due to the party's slim majority, said recently said he was wary of expanding the use of reconciliation.

Biden's proposal should be viewed as an aggressive negotiating tactic, said Steve Chiavarone, a portfolio manager and equity strategist at Federated Hermes (NYSE:FHI).

"You should expect that you will get at least initially the biggest, baddest, most progressive policy proposals with the understanding that they won't get everything they want but define the scope of the negotiation. Maybe Biden doesn’t get 39%, he will get 29%" tax rate, he said.

Wealthy Americans could face an overall federal capital gains tax rate of 43.4% including the 3.8% net investment tax on individuals with income of $200,000 or more ($250,000 married filing jointly). The latter helps fund the Affordable Care Act, popularly known as Obamacare.

Currently, those earning more than $200,000 pay a capital gains rate of about 23.8% including the Obamacare net investment tax instituted as part of that law. For tax year 2021, the top marginal tax rate remains 37% for individual single taxpayers with incomes greater than $523,600 and $628,300 for married couples filing jointly.

Erica York, an economist at the Tax Foundation, said the proposal would put U.S. capital gains taxes at the top of the global charts. Average capital gains taxes in Europe are around 19.3%, and the highest rate there is in Denmark, which collects 42%. France and Finland charge 34%.

For residents of some states and cities that assess their own capital gains levy, Biden's plan would push the total capital gains rate to more than 50%, York said. The rate would rise to 56.7% in California, 68.2% in New York City and 57.3% in Portland, Oregon, York said.

Biden to float historic tax increase on investment gains for the rich
 

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Comments (46)
taylor jason
taylor jason Apr 23, 2021 1:55PM ET
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time to dump adr and buy gdr
nahid veisi
nahid veisi Apr 23, 2021 3:02AM ET
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his move cause most of investers take their money other countries
Catholic Man
CatholicMan Apr 23, 2021 1:47AM ET
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The arrogance of thinking you can steal from one set of people to pay for a different set of people who don't want to work.
Benjamin McIntire
Benjamin McIntire Apr 23, 2021 1:47AM ET
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Lmao yeah thats totAlly it pal
Javier Vargas
Javier Vargas Apr 23, 2021 12:49AM ET
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I'm sure the money is being wired the heck out of here before having to give 60% to welfare.
Benjamin McIntire
Benjamin McIntire Apr 23, 2021 12:49AM ET
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Huh?
Steven Jacobs
Steven Jacobs Apr 22, 2021 11:03PM ET
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This is a nonfactor unless u make BANK! Im not making $250K w my wife so no matter
Benjamin McIntire
Benjamin McIntire Apr 22, 2021 11:03PM ET
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Lots of ppl on here working at mcdonalds: noooo! but you (I) might one day ;( ;( ;(
Bubba Born
Bubba Born Apr 22, 2021 10:58PM ET
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No one likes paying taxes, me included. But what is worse, is filing taxes! What a complicated, botched-up, corrupted system. Simplify it and take out the write-offs. Reduce the size of government. You would find people happy to pay taxes instead of feeling like they are being raped every April.
Benjamin McIntire
Benjamin McIntire Apr 22, 2021 10:58PM ET
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Agree the tax code is a mess, should be simplified and loopholes closed
William Faulkner
William Faulkner Apr 22, 2021 10:57PM ET
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Don't they get it. Raising corporate tax rates mean less income. Less income means lower returns on invested capital. Corporations then have to raise prices or cut costs to effectively increase returns. And who pays for those decisions? Average people. It's so frustrating. No matter the path it always heads back to consumers or tax payers. Effectively both being one and the same. Sigh.............
Mark Henline
Mark Henline Apr 22, 2021 10:35PM ET
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so that would be crypto. at 60.percent tax. on the luxury investments
Kaveh Sun
Kaveh Sun Apr 22, 2021 9:29PM ET
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Dont raise tax on me man! Hat/e it, for me a dollar earn in investing is much harder than a dollar earn in wages. I spend counless hours of studying companies.
Joseph Almanza
Joseph Almanza Apr 22, 2021 9:29PM ET
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you make more than 200k?
Benjamin McIntire
Benjamin McIntire Apr 22, 2021 9:29PM ET
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Lmfao sooo hard sitting at computer looking at numbers
David David
David9 Apr 22, 2021 8:13PM ET
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if this is true... we are done, market will crash, real estate is finished, cryptos done too... we all might go back to farming days and just try to survive making enough to eat and that's it...
Bill Bill
Bill Bill Apr 22, 2021 8:13PM ET
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It is not that bad. Buffet will keep paying less taxes than me, so the market will be fine. Also, he would not get reelected for sure, so long term you need not worry.
Benjamin McIntire
Benjamin McIntire Apr 22, 2021 8:13PM ET
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Oh look another market doomsayer. How original.
James Wicke
James Wicke Apr 22, 2021 8:01PM ET
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I think you need to edit this article. He promised NO ONE making under $400k would see an increase in their taxes. Its only recently that they changed that to households making $400k. That would be reported as a broken promise if truth is your objective.
Bill Bill
Bill Bill Apr 22, 2021 8:01PM ET
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Retirememt would affect everyone because the weak market will be a bigger loss on the common man.
Bill Bill
Bill Bill Apr 22, 2021 8:01PM ET
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But, this is why I believe it will not happen.
Kelly Mayer
Kelly Mayer Apr 22, 2021 7:33PM ET
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Doubling tax rates will only exacerbate tax evasion, and removing entire fortunes out of the US.
Gene Kret
Gene Kret Apr 22, 2021 7:29PM ET
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Sleepy Joe really doesnt know what he is doing, Come on Man, you know there are puppet masters. Oh and btw, lookout for the highest unemployment that the US has ever seen.
Kevin McCarthy
Kevin McCarthy Apr 22, 2021 7:27PM ET
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I miss Trump. S&P would be around 5000 right now and trade deficit would be a surplus within 3 years. now trade deficits headed to 3+ trillion and S&P 500 wil be lucky if it is even over 500 by the time the dust settles.
Anh Nguyen
Anh Nguyen Apr 22, 2021 7:27PM ET
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what happen on March 2020?
Benjamin McIntire
Benjamin McIntire Apr 22, 2021 7:27PM ET
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Rofl the blind adherance of this guy towards a womanizing vulgar disgrace is astonishing. Wanna bet he also tries to virtue signal people who don’t align to his religious beliefs too?
Kevin McCarthy
Kevin McCarthy Apr 22, 2021 7:27PM ET
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Benjamin McIntire  LOL, I don't believe in religion. but go figure a liberal *******wouldn't understand that intelligent people can see through Biden, who womanizes little girls, and all of his fascist plans. Trump may have been an idiot, but he was an American idiot who loves this country. Biden kneels and apologizes like a bi t  ch to the family of a criminal who took too many drugs at once and committed suicide by overdose, which is blamed on a hard working white man, who now has to go to jail for trying to do an unreasonable job.
Ac Tektrader
Ac Tektrader Apr 22, 2021 7:26PM ET
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cif History is an indication...raising taxes on the very wealthy and the large corporations will have little or no effect on employment. Our economy is not a suppy side economy, it is a demand driven economy, driven by consumers. Consumer demand is the job creator, not the corporations. the corporations do not consider tax po!icy the major issue when they hire people. they hire because they have a growing customer base. hiring more people to run a growing business means more revenue and a chance for higher profits. Since Reagan, large corporations the super wealthy, and banking interests have been getting a free ride with ever larger tax breaks, "special treatments" and legal protections. some in these groups get out of paying any taxes, sometimes getting undeserved tax credits, and undeserved legal protections, all of this at the expense of ordinary Americans. it's time they started paying for the privileges they receive over the rest of us. It's time they pay their fair share.
Seamus Hackett
Seamus Hackett Apr 22, 2021 7:26PM ET
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Well yeah demand will stay the same but that cost for the corporations will get levied back on the consumers so nobody wins
Ad Cline
Ad Cline Apr 22, 2021 7:26PM ET
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in the past that has not happened. Market share for corporations is a primary focus in modern capitalist economies. any price increases usually are due to material, labor costs and transportation. taxes are not a serious issue because they only effect a corporation if there is a profit.
Anthony Anthony
Anthony Anthony Apr 22, 2021 7:25PM ET
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More money for the dirt poor chit
Silence Dogood
Silence Dogood Apr 22, 2021 7:18PM ET
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Because those losses will NEVER be passed onto the poor.. lmao
Mike Edwards
Mike Edwards Apr 22, 2021 7:15PM ET
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I am so happy that I no longer have to hear Warren Buffet whine that his secretary pays a higher tax rate than he does. Are you happy now, Mr. Buffet?
Jacob Steinschlag
Jacob Steinschlag Apr 22, 2021 7:01PM ET
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99% of the comments here are paid russian trolls
Kelly Mayer
Kelly Mayer Apr 22, 2021 7:01PM ET
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CCP trolls. there are about 20 million CCP trolls on full out anti US propaganda. The data has come into public domain now. This 99% russia is the perfect example.
Ad Cline
Ad Cline Apr 22, 2021 7:01PM ET
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Jesus kelly 20 million Russian trolls that's a lot. its got to be costing Putin and his henchmen a lot a money, your imaginary source.must be all knowing. kelly I know someone that maybe you should talk to..he works at mental health facility near your home.
Felipe Daniel
Felipe Daniel Apr 22, 2021 6:39PM ET
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There you have it, Biden wants to tax the middle class, not just the wealthy. Trump was better for the economy and the survival of this country.
Jack Zhang
Jack_A Apr 22, 2021 6:39PM ET
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the opposite of what you said is true, check facts
Gordon Edgett
Gordon Edgett Apr 22, 2021 6:32PM ET
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DOA
Steve Lora
Steve Lora Apr 22, 2021 6:11PM ET
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Biden is a hologram. He is not making decisions and the rats from far left have hijacked the party. Hes a rubber stamp now
WILLIAM HAGERTY
WILLIAM HAGERTY Apr 22, 2021 5:22PM ET
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take care of your own kids
John Healy
John Healy Apr 22, 2021 5:22PM ET
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And don’t have em if you can’t afford em! The United States is awash in currency and adrift in an ocean of tax and welfare. Can’t afford to house, feed and clothe you children? Let the government do it! Don’t want to work? No problem, the government will pay you to stay home! It’s just like California but on a MUCH larger scale! If there was a truly capitalist country left somewhere on the Earth, I would consider going. This is certified boloney.
Jon Fenwick
Jon Fenwick Apr 22, 2021 5:02PM ET
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Impeach the whole Democrat party.
Jon Fenwick
Jon Fenwick Apr 22, 2021 5:01PM ET
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Impeach the whole Democrat party.
 
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