Biden’s Tax Plan Is a Middle-Class Death Tax Dressed as a Capital Gains Tax on the Rich
The federal government’s insatiable appetite for spending has left politicians casting about for untapped revenue sources. Enter President Biden’s tax plan, which contains a death tax on the middle class dressed up as a capital gains tax on the rich. Having squeezed from the rich about as much as they are likely to get, politicians are now gunning for the rest of us.
Bernie Sanders and Elizabeth Warren get good headlines when they call for taxing billionaires’ wealth. But, even if a wealth tax were constitutional (it isn’t), and even if politicians taxed 100% of US billionaires’ wealth (they won’t), and even if the billionaires could sell trillions of dollars in assets for full market value (they can’t), politicians still wouldn’t collect enough to fund their profligate spending. US billionaires’ combined $4.2 trillion wealth would fund the federal government’s 2021 budget for less than eight months. And at the end of that eight months, there’d be no more US billionaires.
What politicians know, but won’t say, is that the middle classes are the great untapped revenue source. What the middle classes lack in income, they more than make up for in numbers. Before taxes and transfers, the average household in the middle income quintile earned $77,000 and the average household in the upper middle quintile earned $117,000. Combined, those households earned $4.8 trillion in 2018. That’s twice what the top 1% earned. Meanwhile, the top 1% paid an average effective federal tax rate of 30.2 percent, versus 12.8 percent for middle income and 16.7 percent for upper middle income households.
The President emphasizes that his plan closes an arcane loophole, “stepped-up basis,” that has allowed billionaires to get away with paying less taxes. He and his supporters keep saying “capital gains,” and “billionaires,” but the fact is that the proposal for closing that loophole will hit middle class homes, farms, and businesses.
Under long-established law, an heir owes capital gains taxes when the heir sells, not inherits, assets. So, a family home, farm, or business, passed down from generation to generation, only creates a tax liability when the heir at the end of the line finally sells it. Even then, the heir pays tax on the increase in value from when the heir inherited the asset to when it was sold. This is “stepped-up basis,” and it partially compensates for the fact that capital gains taxes don’t adjust for inflation. For example, under current law, a home purchased for $50,000 in 1980 and sold for $150,000 in 2021 could be subject to more than $20,000 in capital gains taxes even though, adjusted for inflation, the home was sold at a loss. Stepped-up basis attempts to eliminate this inflation bias by resetting the clock on the asset’s value at inheritance.
Biden’s plan would remove the stepped-up basis, meaning that heirs would pay tax on the increase in value from when the ancestor purchased the asset to when the heir sold the asset. For businesses passed down through multiple generations, this can significantly magnify the tax bill. And in a one-two punch, Biden’s plan also requires that heirs pay the tax when they inherit assets, not when they sell them. So rather than the family home, farm, or business being taxed when the last heir finally sells it, it would be taxed each time it moved from one generation to the next. [And it’s justified by dollar losing value ergo the property ]
The President insists on calling this a “capital gains tax,” but the combination of these two pieces – removal of stepped-up basis and pay-at-inheritance – causes the tax to behave exactly like a death tax. It is a death tax aimed squarely at the middle classes.
To mollify farmers, the President has said that heirs can delay paying the tax provided they continue to work the farm. This is scant help as the heirs will still be subject to the increased tax. The plan merely allows them to pay later. To throw a bone to family businesses and people who have lived frugally to save for their children, Biden’s plan offers a $1 million exemption.
But passing this new tax plan will be much harder than ratcheting that $1 million exemption down after the law is passed. [Also the way new dollars are being created more and more properties will be passing that mark.] Once the new plan is in place, expect that $1 million exemption to start shrinking until the new tax hits everyone. For evidence, look at the history of the federal income tax, which politicians at the time promised would apply only to “the rich.” Once instituted, it took less than a decade for politicians to extend the federal income tax all the way down to the poor.
The President’s tax plan is a death tax on the working class dressed up as a capital gains tax on the rich. Say what they will about using the tax code to reduce income inequality, the fact is that multi-trillion dollar deficits have made politicians desperate for new sources of tax revenue. And, having eaten the rich, they’re now turning their eyes to the middle class.
Everything government touches turns to crap. – Ringo Starr
all they need to do is a financial transaction tax of 0,05% nobody of us would ever feel it as we do not send so much money around the globe and from on bank to an other….but the wallstreet gambles with their highspeed trading would fill the holes…but as the government is from Wallstreet for Wallstreet its shit….the US is failing and can just fail with financial capitalism neoliberalism idology that is hiding behind reps and dems and distracting American citizens….you need to return to industrial capitalism building and constructing and sell it….this creates jobs, real wealth and is social to all…people would still become rich…but they would have to work for it and to build things…
The Federal Reserve prints billions every year that the US populace doesn’t know about – a graduated flat tax would throw the 10,000 page IRS tax schedule in the dumpster and we could fire tens of thousands of USG tax mercenaries. So much could be done to make things half way normal , but most Gov. employees are in on the take over.
fake data—medium income 34,000$ gross in US…actual income and wealth unable to be tracked—estimated that 90% of US wealth owned by 10%
I would feel much safer and more free and be more well off if there weren’t a government
Relax, anarchy is coming.
This is Neo Liberalism at its “finest”. Since Reagan, the US Government has been waging a War on the Middle Class. That is what Neo Liberal Economics REALLY is. Looting the Government for the enrichment of the Private Sector, which in turn creates Billionaires like Bill Gates and Jeff Bezos. A more accurate name for Neo Liberal economics is: Destroy the Middle Class economics, but the Neo Liberals are smart enough not to call their “Economic Dogmas by that name.