Joe Biden is preparing to announce a series of tax increases for wealthy Americans, including a near-doubling of capital gains levies for people earning more than $ 1 million, to pay for a massive increase in funding for the child care and education.
The White House economic package, which is worth more than $ 1 billion, could be announced as early as next week, according to people familiar with the matter, when Biden is due to address a joint session of Congress for the first time since quitting. ‘he became US President.
The tax increases would reverse some of the tax cuts adopted in 2017 by former President Donald Trump and should follow Biden’s campaign proposals, which targeted people earning more than $ 400,000 a year.
Among them is an increase in the top tax rate from 37 percent to 39.6 percent and the application of ordinary tax rates on capital gains and dividend payments for Americans earning over $ 1 million per year.
Coupled with a surtax on investment income for the rich introduced during Barack Obama’s health care reform, this would bring the total capital gains tax rate for the richest Americans to 43.4%. . Biden also considered taxing unrealized capital gains passed on to heirs on death and increasing payroll taxes for wealthier Americans.
The proposals sparked a sell-off in equity markets, with the blue-chip S&P 500 index falling 1.3% within an hour of news of potential tax hikes being released before rebounding slightly. Nasdaq Composite technology initially fell around 1.7%, before also recovering.
Shana Sissel, chief investment officer at Spotlight Asset Group, said markets will continue to sell if tax code changes – which are expected to go into effect next year – are approved by Congress, as investors try to crystallize gains before a rate hike.
“We’ll see a lot more sales at the end of the year as people try to get ahead of this,” Sissel said.
The US President plans to use the proceeds from tax increases to fund what the White House should call the “US Family Plan,” which will extend more generous child support until 2025 and provide funding additional for universal preschool education. and community colleges.
The White House declined to comment on specific details of the plan.
The American Families Plan is said to be the third massive economic package proposed by the US president since taking office just over three months ago. In March, he promulgated a $ 1.9 billion fiscal stimulus plan, and then proposed a $ 2 billion infrastructure bill who faces an uncertain fate on Capitol Hill.
While Biden has said additional spending on children and families is needed to strengthen America’s middle class, the proposals threaten to open a new front in the administration’s conflict with Wall Street. American companies are already lobbying against the Corporation tax increases proposed to finance infrastructure spending.
The U.S. plan for families was originally expected to be bundled with the infrastructure package, but White House officials decided to separate them, believing it would make it easier to get approval. of a deeply divided Congress.
As he moves forward with the new tax and spending proposal for child care and education, Biden is struggling to gain momentum on Capitol Hill for his infrastructure plan.
Senate Republicans came up with their own $ 568 billion plan Thursday – well below the spending levels sought by the White House. The Republican offer is heavily skewed towards traditional infrastructure projects, with $ 299 billion spent on roads and bridges, $ 65 billion on broadband, $ 61 billion on public transport and $ 44 billion on airports .
On the other hand, the Plan of the White House Seeking broader investments in research and development, manufacturing subsidies and building renovations, while devoting significantly more federal funds to tackling climate change – a priority for many Democrats.
The Republican plan – led by West Virginia senator Shelley Moore Capito – does not include any of the corporate tax increases proposed by the White House, instead suggesting that the cost of the proposal should be covered by fees higher usage.
“It’s a serious attempt to offer. . . the most robust plan we have ever proposed as Republicans, ”Capito told reporters on Thursday. “And I think the Americans want to see us work together.”