President Joe Biden unveiled his American Families Plan last month, marking the latest in a series of trillion-dollar domestic proposals — and one detail is drawing particular skepticism.
The president has signaled his push to nearly double the top capital gains tax rate on those earning more than $1 million annually from 23.8% to 43.4%. Now, a staggering $6 trillion proposed 2022 budget reveals that it is based on the assumption that the tax hike retroactively took effect in April, Breitbart reports.
Such an assessment likely means it is too late for impacted Americans to avoid paying it.
“That would just slow down economic activity”
The stunning attempt to retroactively impose a tax hike that has yet to even be passed appears designed to stymie investors who had hoped to sell their stocks or otherwise alter investing practices prior to facing the higher tax burden.
Biden’s proposed budget, which was first broken down in a Wall Street Journal report on Thursday, drew immediate criticism from Republicans as well as some Democrats and financial experts who cautioned of the negative impact it could have on the nation’s economy.
During congressional testimony this week, Goldman Sachs CEO David Solomon asserted: “Anything that is retroactive creates extra anxiety and extra uncertainty, and that would just slow down economic activity.”
He went on to urge officials to “be very, very cautious” about approving such a plan, adding his belief that “a chilling of investment activity through a higher capital-gains tax is something to also think through carefully.”
“You can’t change the rules”
Democratic Sens. Mark Warner of Virginia, Jon Tester of Montana, and Cindy Axne of Iowa also registered their opposition, suggesting that the capital gains tax rate should remain lower than income tax rates to avoid a detrimental impact on family-owned businesses and farms.
Sen. John Thune (R-SD) agreed, saying: “I just think retroactive tax policy is terrible policy. People have made plans and relied on current tax law and current policy and you can’t change the rules in the middle of the game.”
As Axios reported on Friday, the proposed retroactive tax increase is different from earlier characterizations put forth by White House economic policy advisers.
While some financial advisers were alarmed at the news, many had already begun formulating plans to reduce tax liability for their clients under such a scenario.
Various legal loopholes still exist that could allow many affected taxpayers to avoid the full brunt of the increase. Nevertheless, a willingness to take such a controversial step could further erode the public’s trust in the Biden administration.