ROK Group co-founder John Paul DeJoria argues if companies are overtaxed, they’ll have to cut costs somewhere.
President Biden is expected to propose almost doubling the tax rate paid by wealthy investors when they sell stocks and other assets in his next big-ticket spending bill.
Under the forthcoming proposal, dubbed the American Families Plan, the capital gains tax rate could increase to 39.6% from 20% for Americans earning more than $1 million, a source familiar with the matter told FOX Business. Coupled with an existing Medicare surcharge, federal tax rates for the wealthy could climb as high as 43.4% – bringing the levy on returns on financial assets higher than rates on ordinary income.
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Taxes on long-term capital gains – generally classified as an asset that’s held for more than one year – currently range from 0% to 20%, depending on a person’s income. Wealthier investors are also subject to an additional 3.8% tax on long- and short-term capital gains that’s used to fund ObamaCare. Short-term capital gains on assets sold within a year are typically taxed as ordinary income.
Capital gains are taxed favorably when compared to wage and salary income; under existing law, the richest Americans pay a top tax rate of 37% on ordinary income, while the top tax rate on capital gains is 23.8%.
But Biden is seeking to reverse a long-standing provision of the tax code that imposes substantially lower rates on successful investments than ordinary income. The president campaigned on equalizing the capital gains and income tax rates for rich Americans.
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His proposal would result in an average tax increase of nearly $300,000 for households in the top 1% of the country, or those with income more than $837,000, according to the Tax Policy Center. By comparison, middle-income households – with an income between $52,000 and $93,000 – would likely see their tax bill increase by just $260 per year. Almost 93% of the the tax increase would be borne by taxpayers in the top quintile of income-earners.
The top long-term capital-gains tax rate is paid by single taxpayers earning more than $445,850 this year (and $501,600 for married couples filing a joint tax return).
“The proposals would increase taxes on average on all income groups, but the highest-income households would see substantially larger increases,” the report said.
Biden is expected to unveil the newest tax and spending proposal next week before his address to a joint session of Congress on April 28. The second part of his Build Back Better agenda could cost upward of $1.5 trillion and will focus on child care, paid family leave and other domestic priorities.
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It comes just a few weeks after Biden released the American Jobs Plan, a $2.25 trillion tax and spending initiative that would make massive investments in the nation’s roads and bridges, as well as water systems, green energy, hospitals and elder care. That plan would be funded by a slew of new tax hikes on corporations, including the base rate paid by U.S. companies to 28% from 21% and imposing a higher minimum on foreign earnings.
FOX Business’ Blake Burman contributed to this report
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