President Biden is set to announce tax increases on the wealthy Americans-Tax the rich

 President Biden is set to announce tax increases on the wealthy as soon as next week to pay for an increase in funding for childcare and education. The proposal, called the "American Families Plan," would reverse some of former President Trump's tax cuts from 2017, while the capital gains tax for Americans making over $1M per year could nearly double to 39.6%. Coupled with an added 3.8% tax linked to the Affordable Care Act, that's a potential 43.4% levy. The new package would also include an increase in the top income tax rate, building on a recent infrastructure proposal to raise the corporate tax rate to 28%.



The news knocked sentiment on Wall Street yesterday, which turned south towards the end of what had been a positive session (unemployment claims hit a pandemic low). All of the major stock indexes ended the day down 1%, though the sentiment didn't carry into the overnight session, with futures inching up about 0.2%. "It is more of a short-term, knee-jerk reaction," declared Paul Nolte, portfolio manager at Kingsview Investment Management. Others say the upcoming proposal would be hard to pass in Congress.


Quote: "We're still finalizing what the pay floors look like," White House Press Secretary Jen Psaki told reporters, in response to questions about deterring long-term investing. "The president's calculation is that there is a need to modernize our infrastructure, invest in childcare and early childhood education, and he should propose a way to pay for it."


"His view is that can be on the backs of the wealthiest Americans, as well as corporations and businesses, who can afford it, and that won't have a negative impact," she added. "There are alternative views, and there are proposals that don't exist yet on how to pay for it. That will be part of the discussion."


Go deeper: Biden's proposals on capital gains would only affect the federal rate. Wealthy individuals who live in California and New York, which tax capital gains as regular income at 13.3% and 11.85% (plus 3.88% in NYC), would see total capital gains duties of nearly 60%. Could the changes shake up markets? While the top 1% have always controlled 70% to 80% of stock market value in the U.S., according to the Federal Reserve, the top 10% of households by net worth owned 87.2% of American equities in 2020, the highest level of ownership ever.

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