Joe Biden is not a stupid man. He may believe crazy stuff but he certainly knows that raising taxes on the most productive members of society and their capital will choke off economic growth as the nation emerges from its self-inflicted, pandemic economic wounds.
With less growth and fewer jobs, Biden is fully aware of what his policies will do. But looking at the politics of Biden’s situation, you can see why he doesn’t feel he has a choice.
Unless Republicans shoot themselves in the foot, they are bound to win back at least one house of Congress. That telescopes Biden’s time to make good on the trillions of dollars in promises he made to every racial, ethnic, and gender identity group in America from four years to now less than two.
The more than $4 trillion he’s already sent out is just a downpayment. “Rebalancing the American economy,” as the New York Times likes to refer to Biden’s soak-the-rich plan, will cost at least double that amount in the long term. And the wrenching tax increases he needs to make it happen can only be found among the most successful Americans.
The proposal, to be announced ahead of Biden’s address to Congress next Wednesday, is an opening bid for Hill negotiations.
- “For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, it could be 56.7%,” Bloomberg News reported.
- The Dow closed down more than 300 points after the plans leaked.
Practically and politically, the White House needs buy-in from Congress to pay for social spending in the next phase of his plan to reshape the American economy, the American Families Plan.
Add to that personal and state income tax and you can see why the Dow fell so precipitously. Taxing 60 percent of someone’s wealth is not “fair” and it’s not “equitable.” It’s confiscatory and radically discriminatory. But it’s OK because the rich can “afford it.”
It’s not just capital gains that will be targeted.
Biden also is likely to raise more revenue from the wealthy by making changes to estate taxes.
Biden wants to change the so-called “stepped up basis” for accounting purposes, and value assets when they are passed on to an heir, not at their original cost.
The White House thinks that change could lead more individuals to liquidate assets before they die, allowing the IRS to tax them then instead of encouraging families to keep passing on them for more favorable tax treatment.
Those “assets” are usually the life’s work of the taxpayer. They are “passed on” in a family after the death of a small business owner. Taxing a small business out of existence is not fair or compassionate.
Once Biden’s tax plan is in place, he must hope that Kamala Harris can win in 2024 or the whole scheme could unravel. The short-term political popularity of raising taxes on the “rich” will evaporate once taxpayers realize the middle class will be next when the tax plan falls short of revenue expectations.
It’s likely that Biden and the Democrats will find a way to blame Republicans when that happens.