IF BIDEN IS REELECTED, A LOT OF THOSE WHO VOTED FOR HIM WILL REGRET IT

How Biden's Capital Gains Tax hike will 'crush' the economy and what it means for your money

If Biden wins the election, the top rate for capital gains could reach 44.6 percent. His budget proposal makes taxes higher than they've ever been for stockholders

 

By James Cirrone 

 

Daily Mail

May 27, 2024

 

Joe Biden's proposed hike to capital gains tax would 'crush' the US economy, a leading expert has warned. 

The President has outlined plans to increase the top marginal rate on long-term capital gains and qualified dividends from 23.8 percent to 44.6 percent. 

Capital gains tax is paid on investments that have increased in value in the time between them being bought and sold - for example, stocks, properties or cryptocurrencies.

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. 

Ted Jenkin, CEO of oXYGen Financial, warned that the planned increases will go into effect at the same time critical tax cuts brought in by Trump will also expire. Jenkin explained those two factors would 'crush' the economy as Americans race to sell up their assets in advance.

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'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.

This means the November presidential election could determine how much taxes Americans will be required to pay when they sell assets.

Trump's tax cuts lowered individual income tax rates, almost doubled the standard deduction and raised the federal estate tax exemption.

Income tax brackets will revert to the higher pre-2017 levels when the current law expires on January 1, 2026 - affecting most taxpayers. Biden has not yet signaled whether he will extend these breaks if he remains in power.

Massive stock sell offs, like the one Jenkin is predicting, have caused numerous market tumbles in the past, including the crash in 1929 that preceded the Great Depression.

About 58 percent of US households owned stocks in 2022, according to the Federal Reserve's most recent survey of consumer finances. That's up from 53 percent in 2019, the Wall Street Journal reported. 

Stock ownership has jumped in recent years in part thanks to a booming market.

The Dow Jones Industrial Average and the S&P 500, two US major stock indices that track the overall market, have more than doubled in value since the initial stock market crash at the beginning of the COVID-19 pandemic.

Still, stock ownership in the US is almost completely skewed toward those with higher incomes.

The richest 10 percent of taxpayers own 93 percent of stock market wealth, according to Federal Reserve data, whereas the poorest 50 percent owned just 1 percent of stocks.

Not all investors will be paying Biden's ultra-high 44.6 percent capital gains rate if they sell a stock. 

The capital gains tax brackets are progressive, just like income tax brackets. 

If a single person with a $47,025 income or less has long-term capital gains - for example, they sold a stock after owning it for a year - they will pay an effective zero percent rate in the 2024 tax year, according to Bankrate.

The rate increases to 15 percent for those making $47,026 to $518,900. Above that, a single tax filer can expect to pay a 20 percent rate. 

Business owners would also be hard hit by the new Biden rules, according to Jenkin, which could cause downstream effects such as people losing their jobs.

'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,' Jenkin wrote.

He continued: '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.' 

Biden's proposed budget also revises how inherited assets would be taxed.

Under current law, when someone transfers property after death, it isn't generally considered a taxable gain for income tax purposes, Forbes reported. 

Biden's proposal would reverse that, making the death a realized gain for the person inheriting the assets.

Notably, this excludes those of $5 million or less.

For all of these changes to come to fruition, two separate proposals would need to pass in the final 2025 budget. 

And Biden will have to win the 2024 election. The latest polling average from RealClearPolitics has Trump up 1.1 percentage points on Biden.

As of now, Trump hasn't proposed any major changes to the capital gains tax system.