Saturday, May 25, 2024
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Biden’s Punitive, Anti-Growth Tax Proposals



President Biden’s 2025 budget proposal provides a salient reminder that he is no moderate, despite his attempts to position himself as one. 

Biden’s tax proposals would effectively increase the top federal marginal tax rate on long-term capital gains to 44.6%, a record high since the tax was enacted in the 1920s. As a result, taxes paid on long-term capital gains would reach levels above 50% in some states after accounting for state capital gains taxes. Biden also proposed increasing the corporate income tax rate from 21% to 28% and presented a 25% tax on unrealized capital gains for individuals whose net worth exceeds $100 million.

These proposals present two problems. First, they showcase a disregard for the personal property, earnings, and lives of the individuals and organizations subject to the taxes. Second, these taxes would have dire consequences for economic growth and, thus, would negatively impact the living standards of everyday Americans.

Individuals have a natural right to their life, liberty, property, and pursuit of happiness. And individuals’ rights are violated and their happiness and prosperity are damaged when others steal from them – and stealing is exactly what President Biden is hoping to do with these proposals. 

In 2023, the federal deficit was $1.7 trillion. Yet, the government continues to spend on partisan activist causes, raise funding for departments that cannot pass an audit, provide new facilities for bureaucracies that harass everyday Americans, and redistribute over $1 trillion in private wealth per year through welfare programs. Rather than cut spending, President Biden is seeking to confiscate the resources of American citizens to fund exorbitant schemes.

In addition to unjustly expropriating private assets, Biden’s capital gains tax and corporate income tax proposals are only projected to raise an average of $208 billion per year, just a small dent in the yearly deficit. There is also good reason to believe that these taxes wouldn’t raise the projected amount of revenue, as taxes discourage the activity of their subject – think tariffs on foreign goods and taxes on cigarettes. Increasing capital gains taxes would discourage investment and spur wealthier individuals to, instead, consume more and avoid the taxes. 

Not only would this lead to less government revenue than anticipated, but it would also put economic growth at risk. 

Investment drives innovation, which in turn drives economic growth. But discouraging investment would reduce the fuel for growth, threatening Americans’ rising living standards. This would be most harmful for the poorest Americans, as they are in the greatest need of the better, cheaper goods and services that are created by innovation.

The proposed tax on unrealized capital gains is also unconscionable. Investors have not actually made any profit just because the value of their assets increases on paper. In the first few months of 2022, the world’s 50 richest people saw a combined $563 billion in net worth vanish as asset valuations plummeted. Under a tax on unrealized gains, they would not have been entitled to a refund on the taxes they paid when their capital assets had much higher valuations – even though they never realized profits at the assets’ peaks prior to their decline. Knowing this, individuals would be less willing to engage in risky investments that ultimately drive innovation and raise living standards.

Increasing the corporate income tax would also have a negative effect on the economy, reducing the capital companies have to pay their employees and invest in innovation. It would also place upward pressure on prices, as some corporations would try to pass on the cost of the tax to consumers.

Biden’s tax proposals aim to punish individuals and organizations for doing well financially and, if adopted, would hamstring economic growth. The biggest losers wouldn’t be the wealthy. Instead, they would be the everyday Americans who are left with suppressed living standards. 

This article was originally published by RealClearPolitics and made available via RealClearWire.