Joe Biden wants to align the taxation of capital with that of income

Posted on Apr 25, 2021, 12:34 PM

Joe Biden connects sensitive files. His infrastructure plan has not yet been adopted when the American president has launched the idea of ​​increasing the taxation of the capital of his wealthier fellow citizens. According to several sources, he should present in the course of the week a project to almost double the taxes on capital gains, to bring them to 39.6%, against 20% currently. The measure would affect Americans whose annual incomes exceed one million dollars, or 0.32% of the population. With a surcharge intended to finance the Medicare health program, and which would be retained, the effective rate would be 43.4%.

At the same time, the marginal tax rate would be raised from 37% to 39.6%. Long-term income and capital gains would therefore be taxed at the same level, putting an end to a century-long tradition – short-term gains and stocks held for a year or less are already taxed as income. ordinary. “ We are still finalizing the final details “White House spokeswoman Jen Psaki warned.

Social measures

These measures would be used to fund the Plan for American Families, which is also due to be announced next week. This project would include investments in children’s services, free registration fees for certain universities (“community colleges”) or even the adoption of additional paid leave for employees.

Joe Biden had previously warned that taxes would likely increase for Americans earning more than $ 400,000 a year. But it should be to a lesser extent, compared to those earning over a million. The White House also wants to increase the corporate tax rate from 21% to 28%, which would finance the infrastructure plan.

370 billion over ten years

Opponents of this project, in the Republican Party and the business community, fear that it will discourage investors. “ This will reduce investments and generate unemployment “, Declared Chuck Grassley, the Republican head of the Senate Finance Committee. The White House will have to fight hard to convince Congress to adopt this project. The teams working on it do not anticipate any negative impact.

For Sébastien Galy, macro-strategist at Nordea Investment, “ cash could flow to private equity and hedge funds, where the tax treatment is different. Money can also be invested abroad to avoid taxation. The measure could also hit states where taxation is higher: the rate could climb to 52.2% in New York State and up to 56.7% in California. Rising capital taxes could bring in $ 370 billion over the next decade, according to an estimate from the Urban-Brookings Tax Policy Center.

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