President Joe Biden has proposed a new tax bill that would impact the nation’s top 100th of 1% of households; to be clear, this is not the 1%, but 0.01%. This plan would reduce the deficit by $360 billion over the next ten years. This bill would increase the income tax on people worth more than $100 million. It’s a 20% tax to these individuals total income including unrealized capital gains, asset growth, and other taxable earnings.
About The Tax Bill
Under this bill, there would be an increase in income tax and stocks which typically are only taxed once they’re sold. While most politicians agree the current tax laws reinforce income inequality, many are still wary of this bill. While on the surface it appears to be straightforward and only impact a select few people, the nebulous description of “unrealized income” is the challenge. For starters, what is “unrealized income”? Secondly, how do you assess individual wealth at scale?
Another aspect of this bill is it would increase the capital gains tax on those earning more than $1 million and put higher levies on those who treat “property sales” like a transfer.
Who Would Be Impacted?
Households with more than $1 million worth of assets will be impacted by this tax. This means that out of the 200,000 households with more than $1 million in assets, around 100,000 will be affected. Most of these households are dominated by elderly couples who live off their assets and maintain them in stocks and other financial investments. The tax rates will vary according to each household’s situation.
Something many politicians agree on (Democrat and Republican) is this proposal will eliminate numerous tax deductions and loopholes many take advantage of to pay fewer taxes than they should.
Surprisingly, many Republicans have expressed their support for this proposal. Many Republican leaders in Congress agree that only 2% of the wealthiest households benefit from today’s tax laws. Meanwhile, 94% pay the same taxes as they did more than 30 years ago.
What’s The General Opinion?
From the point of view of Democrats and many Republicans, this proposal is a good solution to the long-enduring tax problem. It will encourage middle-income families to pay taxes, which will, in turn, raise money for public investments in education and health care. However, there are several Republicans who think that this proposal will weaken their position.
From the point of view of the Democrats, this move by President Biden is a great step in the right direction. It will encourage wealthy households to pay their fair share of taxes and help reduce income inequality. Politics aside, criticism stems from the inability to identify “unrealized income.” While on the surface this appears to be a win/win for all sides, many have stated they feel this is an uphill battle.
The tax proposal will help lower-income households that have benefited very little from the growth of their assets while they got wealthier over time. As such, it is likely to get harsh criticism from Republicans.
Photo by Harold Mendoza