Biden Plans Capital Gains Tax Hike To Help Finance $1.5 Trillion "Human Infrastructure" Package
The NYT has just published the first "official" leak detailing the outline of President Biden's "American Family Plan", the second part of his administration's signature "Build Back Better" proposal (the first part, entitled the "American Jobs Plan", was unveiled during a live press briefing in Pittsburgh earlier this month).
The second phase of Biden's sweeping "Green New Deal"-inspired program centers on what administration officials call "human infrastructure".
Should it pass in its current form, it would entail spending hundreds of billions of dollars on universal pre-kindergarten, expanded subsidies for child care, a national paid leave program for workers and free community college tuition for all.
While the overhaul will raise taxes on investors and millionaires via a proposal for a top marginal income tax rate at 39.6% (up from 37%, the level it was reduced to under Trump) a controversial increase in capital gains tax for individuals earning more than $1 million per year (raising the rate to 39.6% from 20%) was also included as part of the package described by the NYT.
Of course, any change in capital gains rates could have potentially profound implications for financial markets: if the new rate taxes effect next year, there could be serious selling pressure on stocks before year-end 2021 as investors seek to lock in gains at the lower rate.
What's more, the plan in its current form will also propose eliminating a provision of the tax code that reduces taxes for wealthy heirs who sell assets they inherit, like art or property, that have risen in value. As he discussed during the rollout of pt. 1, the package would also raise revenue by increasing enforcement at the IRS to bring in more money from wealthy Americans who evade taxes. All provisions under discussion would keep the tax rate on individuals earning $400k per year or less steady, in keeping with a promise made during the campaign. During his briefing in Pittsburgh, Biden said he would remain open to all revenue suggestions, so long as they don't violate this one rule.
Other tax provisions regarding the estate tax and capping dedications on the wealthy are also in play. While rich Democrats demand that Biden find a way to remove the cap on SALT deductions that was included in President Trump's landmark tax cuts, the NYT reports that the plan would extend through 2025 an expanded tax credit for parents (essentially a monthly payment from the government for most families) that was created on a temporary basis by the $1.9 trillion economic aid package signed into law last month.