Will Joe Biden’s plan to tax the rich give the UK and Europe the confidence to do the same?

It’s logical that the rich should foot the bill for the pandemic, writes Hamish McRae. But there are big differences between the US and Europe and those differences stand in the way of replicating the US president’s plans across the pond

The US president wants to fund his American Family Plan (AP)

When America sneezes the world catches a cold – or so the adage about US economic importance goes. But when the US puts up taxes on the rich, will that lead to a similar movement on this side of the Atlantic too?

Joe Biden’s plans for higher taxation on Americans who earn more than $400,000 (£288,200) a year will be formally released this week. But we already know the broad outlines. The top rate of Federal income tax could be as high as 43.4 per cent. That would mean that in the states that have a high state income tax, such as New York and California, the top rate would be well over 50 per cent.  

However, the thing that really upset Wall Street last week was not higher income tax itself, but the plan to tax capital gains as income. That would effectively double the tax rate, though it would only kick in with gains of more than $1m (£720,000). Markets fell sharply on these reports, on the grounds that people would take profits on investments now rather than wait for the new taxes to come in.