Joe Biden is expected to roll out a proposal to raise taxes on millionaire investors as part of his administration’s sweeping domestic policy agenda to combat poverty and fund childcare and education programs.
Under his American Family Plan, the president will reportedly propose raising the capital gains tax rate from its current 20 per cent to 39.6 per cent for Americans earning $1m a year from investment income.
An additional 3.8 per cent tax on investment income to fund the Affordable Care Act would be kept in place, raising the total increase for some wealthy Americans to as high as 43.4 per cent, as first reported in Bloomberg.
Wealthy investors currently pay a 23.8 per cent top rate on long-term capital gains.
The proposed rates would impact less than 1 per cent of American households. Roughly 0.3 per cent of American taxpayers reported an adjusted gross income of more than $1m with capital gains or losses on their returns, according to a 2018 report from the Internal Revenue Service.
Mr Biden campaigned on bringing the capital gains tax rate more in line with the marginal rate on wages and salaries, which is currently at 37 per cent, effectively treating those earnings as income.
The US president aims to bridge that gap to reduce inequities among working families who essentially end up paying a higher tax rate than investors.
Tax increases for the American Family Plan would reportedly be used to support paid family leave and childcare costs and make prekindergarten and community college free for all Americans.
It would also include an extension of the expanded child tax credit that would give parents with young children up to $300 a month or $250 for children age six and older.
Mr Biden and White House officials have repeatedly said that the administration does not intend to raise taxes on anyone earning less than $400,000 a year – and a capital gains tax plan kicking in at $1m is part of that pledge.
People earning more than $1m in high-tax states could see higher rates – in New York, combined state and federal capital gains rates would top 52 per cent, or more than 56 per cent in California.
The proposal would not touch the tax rates or incomes for most Americans, and would instead address funding gaps across federal and local agencies for programs critical to Biden’s agenda.
“The president’s bottom line is people making 400k should not, will not have their taxes go up,” White House press secretary Jen Psaki told reporters on Friday.
Mr Biden’s pitch is a third in the administration’s three-pronged $4 trillion plan, along with the American Rescue Plan signed into law, to combat the economic fallout from the coronavirus pandemic, and the infrastructure-focused American Jobs Plan, which Congress is still drafting.
The proposed $2.3 trillion infrastructure package would be funded by a corporate tax rate increase to 28 per cent.
In March, the president signed into law the $1.9 trillion Covid-19 relief bill after it was passed by Democratic lawmakers in Congress.
White House officials say that the meat of his pitch for the American Family Plan will be included in his joint address to Congress set for 29 April.
The speech will discuss “expanding and increasing access to healthcare” through the Affordable Care Act and in subsidies in the American Rescue Plan, Ms Psaki said.
“The president is still making final decisions” about the contents of the Family Plan, she said, adding that individual announcements and plan outlines “will not represent the totality of everything” on his agenda.
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