Biden’s proposed capital gains tax hike could ‘crush’ the economy with double gut punch

President Joe Biden’s proposed hike on capital gains taxes, another punitive measure for productive citizens, could have devastating effects on the economy.

Biden plans to increase the top marginal rate on long-term capital gains and qualified dividends to a stunning 44.8 percent, drastically higher than the current rate of 23.8 percent, a change that could go into effect if he’s reelected.

The hike could coincide with the expiration of the Trump tax cuts, a double gut-punch that could “crush” the economy, in the words of Ted Jenkin, CEO of Oxygen Financial and president of Exit Stage Left Advisors.

“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 down a barrel in 2025 of millions of Americans selling off their highly appreciated stock positions at today’s long-term capital gains rates versus paying double in 2026,” Jenkin wrote in an op-ed for Fox Business.

As if there isn’t enough riding on the upcoming election, voters will also be determining the amount of taxes that Americans will have to pay when they sell assets.

The massive selloff that could occur before the new rates being locked in could potentially trigger a stock market crash, not a good prospect for an economy that is already reeling from “Bidenomics” and a prolonged period of high inflation.

“Under the Biden proposal, eleven states would end up paying over 50 percent in capital gains levies when combined with state taxes. High tax states such as New York, California and Hawaii will be harder hit,” according to the Daily Mail.

“Why would this crush the economy?” Jenkin asks.

“The simplicity of this is that the law of supply and demand holds true with the stock market. The fear is that selling begets more selling, and if investors that are long-term holders of individual stocks get nervous that double the taxation is imminent, you could see many investors head for the exits in a significant way, especially if Congress, the Senate and the White House are a sea of blue,” he wrote.

“What you could see as an outcome with the suggested long-term capital gain rate rules is business owners much more aggressively putting their companies on the market for sale to pay fewer taxes,” Jenkins predicted. “This could also have a significant trickle-down effect on people losing their jobs as smaller companies consolidate into larger ones and could also stagnate the germination of new businesses as the upside potential to take on financial, legal and personal risk may not give entrepreneurs the excitement to launch businesses like they have in the past.”

“The President’s Budget will end one of the most unfair aspects of our tax system—the fact that the tax rate the wealthy pay on capital gains and dividends is less than the tax rate that many middle-class families pay on their wages,” the White House said in a March fact sheet on making the “wealthy pay their fair share.”

Chris Donaldson


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