Joe Biden’s proposed capital gains tax hike would “crush” the US economy, a leading expert has warned.
The president has outlined plans to increase this the highest marginal rate on long-term capital gains and qualified dividends from 23.8 percent to 44.6 percent.
Capital gains tax is paid on investments that have increased in value in the time between purchase and sale, for example shares, property or cryptocurrencies.
Under the Biden proposal, 11 states would ultimately have to pay more than 50 percent in capital gains taxes, combined with state taxes. High-tax states such as New York, California and Hawaii will be hit harder.
Ted Jenkin, CEO of oXYGen Financial, warned that the planned increases will come into effect at the same time that crucial tax cuts introduced by Trump are also set to expire. Jenkin explained that these two factors would “crush” the economy as Americans rush to pre-sell their assets.
President Joe Biden is proposing a major overhaul of both the income tax and capital gains tax as part of his 2025 budget
Biden’s 2025 budget proposal includes the highest capital gains tax rate in US history: 44.6 percent
“If these new policies take effect when the Tax Cuts and Jobs Act (TCJA) of 2017 expires at the end of 2025, we will be staring into a barrel of millions of Americans selling their highly valued stock holdings at the current long term in 2025. capital gains over time versus paying twice in 2026,” Jenkin wrote in an op-ed Fox Business.
This means that November’s presidential election could determine how much taxes Americans will have to pay when they sell assets.
Trump’s tax cuts lowered individual income tax rates, nearly doubled the standard deduction and increased the federal estate tax exemption.
Income tax brackets will return to the higher pre-2017 levels when the current law expires on January 1, 2026, impacting most taxpayers. Biden has not yet indicated whether he will extend these pauses if he remains in power.
Massive stock selloffs, as Jenkin predicts, have caused numerous market declines in the past, including the 1929 crash that preceded the Great Depression.
About 58 percent of U.S. households owned stocks in 2022, according to the Federal Reserve’s latest survey of consumer finances. That is an increase compared to 53 percent in 2019 Wall Street Journal reported.
Share ownership has risen in recent years in part thanks to a booming market.
The Dow Jones Industrial Average and the S&P 500, two major U.S. stock indexes that track the overall market, have more than doubled in value since the initial stock market crash at the start of the COVID-19 pandemic.
Pictured: oXYGen Financial CEO Ted Jenkin said Biden’s proposed tax hikes could trigger a stock market crash if implemented in 2025
Yet stock ownership in the US is almost entirely focused on people with higher incomes.
According to Federal Reserve data, the richest 10 percent of taxpayers own 93 percent of the stock market, while the poorest 50 percent owned just 1 percent of the stock.
Not all investors will pay Biden’s ultra-high 44.6 percent capital gains when they sell a stock.
The capital gains tax brackets are progressive, just like the income tax brackets.
If a single person with an income of $47,025 or less has long-term capital gains (for example, he sold a stock after owning it for a year), he will pay an effective zero percent rate in the 2024 tax year, according to Bank rate.
The rate increases to 15 percent for those earning $47,026 to $518,900. Above that, a single tax filer can expect a rate of 20 percent.
Business owners would also be hit hard by the new Biden rules, according to Jenkin, which could cause downstream effects such as people losing their jobs.
“What you might see as a result of the proposed long-term capital gains rules is that entrepreneurs will much more aggressively sell their companies to pay less taxes,” Jenkin wrote.
He continued: ‘This could also have a significant trickle-down effect on people who lose their jobs as smaller companies consolidate into larger companies, and could also stagnate the seeding of new companies, as the upside potential to avoid financial, legal and personal risks taking may not increase. give entrepreneurs the excitement of starting businesses as they have done in the past.”
Former President Donald Trump has not yet detailed what his capital gains tax policy would be if elected in 2024, but has supported and signed tax cuts in the past
Biden’s proposed budget also revises how inherited assets would be taxed.
Under current law, transferring property after death is generally not considered a taxable gain for income tax purposes. Forbes reported.
Biden’s proposal would undo that, making the death a realized gain for the person who inherits the assets.
This specifically excludes those of $5 million or less.
To achieve all these changes, two separate proposals must be included in the final 2025 budget.
And Biden will have to win the 2024 election. Trump is up 1.1 percentage points over Biden, according to the latest RealClearPolitics polling average.
So far, Trump has not proposed any major changes to the capital gains tax system.
