The collapse of the Silicon Valley Bank has grabbed the headlines, obscuring one of the most significant events of the year: the list of President Joe Biden’s tax increases inside his “budget.”
When the president does not control both houses of congress a budget is largely a political document. It tells us what the president plans to campaign on in the next election and what he would do if he won control of both houses of Congress.
So what is on President Biden’s tax hike wish list?
The highest personal income tax rate since 1986.
Biden would hike the top income tax rate to 45% from the current 37%. Back in 1986 a bipartisan (remember that) tax reform led by Democrat Sen. Bill Bradley and House Leader Dick Gephardt along with President Ronald Reagan reduced all rates and enacted two rates: 15% and 28%.
Biden would move us back to the higher rates that even Democrats recently viewed as destructive.
The highest capital gains tax since Jimmy Carter. To a rate twice as high as Communist China.
Biden would nearly double the federal capital gains rate for investment to 39.6% from 20%. Today, the average state tax on capital gains is 5.4%. Obamacare already adds an additional 3.8% tax on capital gains. Blue states like California would see capital gains rates (state and federal) approach 60%
A corporate income tax hike to 28% from the current 21%. Higher than China’s 25%.
In 2017, the Republican congress reduced the corporate income tax from 35%, then the highest in the world — higher than China or France or all of Europe. The new rate was 21%. In 2019, the average income of a family of four increased 6.8% in one year.
This is just what was predicted to occur when the corporate income tax was reduced. The burden of the corporate income tax has always hit workers in the form of lower wages and fewer jobs. The corporate income tax also hits consumers in the form of higher prices.
Biden’s combined federal and state (average) corporate rate would be roughly 32% … back to the highest business tax in the developed world.
What will that do for American competitiveness?
One would like American workers to compete in world trade with the lowest cost of government, the least costly regulations, the lowest cost of energy. But Biden’s budget and already-enacted regulations will drive up the cost of American products with high energy costs, a higher tax burden and higher costs imposed by regulation.
Under Biden’s vision, Americans would end up with lower wages rather than a lower cost of government.
An unconstitutional wealth tax on “unrealized gains.”
This is more of a long-term threat. The U.S. Constitution does not allow the federal government to tax your life savings directly. The feds can tax only your income courtesy of the 16th Amendment. And there are tariffs and excise taxes. But it is a real hint as to what Biden’s choices for the Supreme Court will be asked before he nominates them.
The idea of a “wealth tax” on your life savings has long been pushed by Elizabeth Warren and Bernie Sanders.
Present law imposes taxes on capital gains when they are realized — as in, when they become real. Such as when you sell a house, land, collectibles or a stock.
The Biden-Sanders-Warren “wealth tax” would tax you on your unrealized gains. As in, not real. Just a temporary increase in the value on paper.
Under the progressive approach, when Elon Musk’s “wealth” drops billions in a week with a downturn in the stock market he would need to be paid by the IRS for his “loss.” And pay it back when the stock market goes up. How long before this was targeted at more and more Americans?
Quadruped Tax on Stock Buybacks: a tax on your IRA or 401K
In 2022 the Democrat Congress enacted a 1% tax on companies that reinvest in their own companies by buying stock held by others. These are buybacks, a vote of confidence in one’s own future.
Biden sold the tax as “just one percent.” The ink barely dry, now Biden wants to increase it by 400%. And in the future? What will keep this from increasing endlessly? Biden likes to promise he will not hit anyone with higher taxes who earns less than $400,000 but the 60% of Americans who own share of stock (often in retirement accounts) will see their life savings decreased by this and other taxes on “business.”
The Biden plan also increases taxes on energy by $31 billion, imposes a $24 billion tax on cryptocurrency, hikes real estate taxes and doubles the global minimum tax from 10.5% to 21%.
Trickle Down Taxation
President Biden will try to assert that some of these taxes hit only the rich or large businesses. In speeches he does not finish the sentence. If he spoke honestly, the full sentence would be, “I will tax the rich …… first. Then you.”
Biden and Democrats are imposing “trickle-down taxation.” Trickle-down taxation is the art of creating a new tax on “the rich” and year after year widening the net to catch more and more Americans.
The personal income tax was introduced in 1913 with a top rate of 7%. And you had to have an income in today’s dollars of $11 million to pay the 7%.
Now the bottom rate for the individual income tax is 10%. Higher than what multi-millionaires once paid. The Alternative Minimum Tax (AMT) was imposed to hit fewer than 200 millionaires who paid no income tax in a given year (largely due to their purchase of tax-free municipal bonds.)
The AMT grew and grew over the years and targeted tens of millions of households. Republicans repealed most of it during the George W. Bush years.
Another example: The Federal Excise tax on phones was introduced in 1898 when only a few generally wealthy Americans had phones. Within 40 years almost everyone was hit by this tax which lasted 100 years longer than the Spanish American war which the tax was established to fund.
Biden’s tax hikes will “trickle down” to hit the middle class. And promised “temporary” taxes tend to live long lives.
Grover Norquist is president of Americans for Tax Reform.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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