Biden's Tax Hike: 11 States to Have 50%+ Capital Gains Rate Under Drastic New Budget
President Joe Biden’s budget proposal has set the stage for tax increase on individuals that could suffocate the economy, making Bidenomics an even bigger drag and sparking heated discussions across political and economic circles.
It’s not far-fetched to suggest that this move would have the Founding Fathers doing somersaults in their graves.
“How would the capital gains tax change under Biden’s FY 2025 budget proposal?” Forbes senior contributor Robert W. Wood asked in a piece published on Sunday,
“For high-income taxpayers, the long-term capital gains tax could nearly double to 39.6%. That proposed capital gains rate increase would apply to investors who make at least $1 million a year. In fact, it is possible to go even higher, as high as 44.6%.”
Wood wrote that the Biden budget plan, which was released in March, would could catapult combined state and federal capital gains tax rates above 50 percent in 11 states: California, New York, and New Jersey, Minnesota, Oregon, Maine, Nebraska, Idaho, Iowa, Kansas, and Georgia.
According to the U.K. Daily Mail, the proposal would push the capital gains tax higher than its been in the century it has existed.
The proposal raises the question: Is this administration testing to see how much it can tax the people before Americans stop working altogether?
Regardless, there are several key issues to be aware of should this capital gains hike go into effect.
First, it will have a negative impact on small business owners who are already juggling enough challenges to make any sane human beings question their life choices.
Small businesses have long been seen as the backbone of the American economy. Under this new tax regime, they could face severe challenges. Higher taxes could deter entrepreneurs from investing in new ventures or expanding existing ones, potentially stifling innovation and economic growth at a grassroots level.
This, in effect, will also have a negative impact on the workforce, which relies on small businesses to provide employment.
Facing the weight of this new tax policy, small businesses could face the inflation of operational costs which might result in them struggling to maintain their workforce, let alone creating new jobs. This could result in a significant slowdown in hiring or even layoffs, leading to fewer opportunities on the local level.
Conversely, larger corporations, those equipped with the resources and expertise to navigate complex tax regulations, will likely remain largely unaffected by the increased costs that come along with a change in the tax code, thereby leveraging their financial strength to further dominate their markets.
This imbalance could exacerbate the challenges faced by small businesses, pushing them out of the competition and inadvertently fostering monopolies, decreasing competition and stifling innovation. Since both competition and innovation are crucial for a healthy economy, the downside is obvious.
Perhaps one of the most pressing concerns surrounding Biden’s new tax proposal is the potential for capital flight. Investors might look overseas for more favorable tax environments, which could lead to a significant drainage of capital from the U.S., undermining domestic investment and economic growth.
And if you think this will only impact “the rich” whom Democrats love to bash, think again.
The idea that Biden’s proposed tax hike solely targets the wealthy to ensure they pay their “fair share” is a narrative that oversimplifies the issue and overlooks broader implications. That rhetoric simply doesn’t hold up to scrutiny.
Historically, American tax policy has evolved from minimal government intervention, in the early days of the Republic, to today’s more complex, sometimes burdensome tax structures.
Initially, the intent was to support a growing nation without overburdening its citizens. However, over time, this has shifted, and these changes could potentially impact a wider section of the population than just the ultra-wealthy. When it comes to taxes, what starts with one segment of the population can always finds a way to reach the rest.
The fact remains, this proposed capital gains tax is a far cry from the vision first laid out by America’s Founders which was clear: They advocated for minimal interference in the individual’s economic freedom. This principle was pivotal in transforming a collection of coastal colonies in the late 18th century into the economic superpower the United States is today.
The current shift towards higher taxation could be seen as a departure from these foundational ideals and actually mirrors a European-style class warfare, promoting economic policies driven more by social equity considerations than by economic efficiency or growth.
Class warfare or class envy is a very European and socialist concept in its thinking and should not have a place in the American economy.
Speaking of Europe, one is reminded of the concept of “Jantelagen,” also known as the “Law of Jante.”
“Jantelagen” is a cultural concept that originated from a satirical 1933 novel, “En flykting korsar sitt spår” (“A Fugitive Crosses His Tracks“), which was written by Danish-Norwegian author Aksel Sandemose.
It illustrates the set of social norms governing Scandinavian society, emphasizing humility, egalitarianism, and conformity.
The concept discourages individuals from standing out or flaunting their achievements, promoting the idea that everyone should be equal and that one person is not better than another. Essentially, it promotes the concept that there should be equality among members of civil society at a social level.
Although it’s not an actual legal code, it is an unspoken societal rule that promotes modesty and discourages boasting or self-promotion, and has shaped the cultural mindset in countries like Sweden, Denmark, and Norway. In fact, it pushes on the theme of social equality and discourages hierarchy based on personal achievements.
That said, it has also been criticized for stifling ambition and discouraging individual expression. And while “Jantelagen” is not inherently socialist, it is often interpreted in a way that emphasizes certain values that align with socialist principles. And while it primarily emphasizes social behavior and attitudes, it indirectly affects economic behaviors and attitudes due to its focus on humility, modesty, and discouraging boastfulness.
While the U.S. is far from seeing this concept incorporated into its civil society structure, the poison of “diversity, equity and inclusion” is already well-established in government, education and even in the business world, stressing equality of outcome over the equality of opportunity.
Obviously, capitalism can co-exist with varying levels of taxation to fund government functions, but imposing a capital gains tax rate that suffocates innovation, competition and economic advancement flies in the face of the free-market economy that free men and women deserve.
Of course, it’s no secret that the president who brought us “Bidenomics” doesn’t appreciate what free markets mean to free people.
In the end, it’s not just about the taxes themselves but the implications they hold for the future of the American economy. One can only hope that common sense will prevail before we find ourselves looking for economic asylum in countries with less punitive taxation policies.
As certain segments of the nation stand at a fiscal crossroads, the debate intensifies: Is the pursuit of social equity through higher taxation worth the potential risk to economic vitality and foundational American principles?
This question remains at the heart of the discussion as policymakers and citizens grapple with the potential new realities of American economics.
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