The Biden administration's budget plan is stuffed to the gills with new taxes intended to help pay for (some) of the new spending the president wants. While Mr. Biden's budget is going nowhere, fast, it offers a teaching moment on how the current tax code taxes your money two or three times.
The Tax Foundation's William McBride writes the president's proposals would make an already deeply unfair, and economically suspect, tax code even worse. Among the offending ideas:
- Raising the top individual income tax rate to 39.6 percent, adding another 1.2 percent to the Medicare tax on wages, and expanding the base of the NIIT to include all pass-through income while raising the rate to 5 percent, effectively resulting in a federal top income rate of about 44 percent (when combined with state income taxes, many taxpayers would face top rates over 50 percent)
- Doubling the top capital gains tax rate to 39.6 percent, which combined with the NIIT yields a top rate of 44.6 percent—the highest rate in several decades and the highest in the OECD
- Taxing unrealized capital gains with a 25 percent minimum tax, an untried and impractical policy that taxes phantom income and has many potential downsides
There's a lot more analysis at the link.
While the Biden tax proposals will not get far, we should also remember that the taxes already on the books are full of problems, pitfalls and perils. Of course, government needs revenue. But the existing code isn't the sensible, understandable and fair way to do it.
The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.
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