A Tax Proposal Driven by Greed and Envy

President Joe Biden has just proposed the biggest federal budget request in U.S. history–with the exception of his near $7 trillion spent last year. When I came to Washington in 1985, the federal budget hit $1 trillion. Now, we are in the $6 trillion to $7 trillion range, and we wonder how it is that the debt has rocketed to $30 trillion.The obvious solution—given the hundreds of billions of dollars of waste and fraud in the budget and the end of special spending needs to combat COVID—would be to put government on a strict spending diet. Not only would this lower our deficit, it would mean a lower inflation rate as well. Instead, Biden wants one of the largest tax increases in many years. All of this, he says, is aimed at millionaires and billionaires, but hopefully, voters aren’t gullible enough to fall for that gambit. That’s what they said about the original income tax (which now everyone pays), and the alternative minimum tax, which was supposed to be paid by a few hundred of the richest families but soon applied to more than a quarter of all taxpayers. Biden says the rich need to pay more because they only cough up 8 percent of their income in taxes, which is a smaller percentage than a firefighter or a secretary pay. That WOULD be an outrage, but it isn’t even in the same ZIP code as the truth. The top 1 percent of Americans in income pay 40 percent of the income tax—more than the bottom 90 percent. That’s a pretty progressive tax system. A major proposal in the Biden tax plan is to tax “unrealized capital gains.” This is the buildup in the value of stock holdings, which isn’t “income” because the stock hasn’t been sold. It’s like saying you should pay more tax because your house appreciated in value—even though you still live in and own the house. How can you pay tax on something that you haven’t gained any income on? Are shareholders—which is almost all of us—supposed to take out a loan to pay the taxes on unrealized capital gains? Biden conveniently forgets to mention that there IS a tax on corporate earnings, which is called the corporate income tax—which is 21 percent. The capital gains tax is applied AFTER that tax is paid. Think of it as the U.S. government being a one-fifth shareholder in every company. The combination of the corporate and capital gains tax brings the effective tax rate on this income of millionaires and billionaires to above 35 percent. That’s a far cry from the 8 percent that Biden complains that Daddy Warbucks is paying. We should also remember when we are talking about profits from buying and selling stocks, that stocks go up and they go down in value. Right now, if you make money on a stock you have to pay a full capital gains tax on the rise in valuation. But if the stock goes DOWN in price, you are limited in how much of those losses you can deduct. Heads, the government wins; tails, you lose. How is THAT fair? Then, there is the inflation issue which is back, front and center. Inflation is now running at 8 percent. So, if a company’s value rose by 7 percent or less last year, you LOST money if you owned the stock. But the capital gains tax is NOT (even though it should be) indexed for inflation. (That’s the main reason that the statutory capital gains tax is lower than the income tax rate.) So, under Bidenomics, you can pay a tax on the sale of a stock even if you lost money due to inflation. Your effective after-inflation tax rate isn’t 8 percent, or 23.8 percent, it’s OVER 100 percent. Does that seem fair to you? All of the Biden tax proposals seem to be driven not by putting America First, but by greed and envy. The rich have the money, so seize it from them. But the experience of the Trump tax cuts in 2017 proved yet again that lower tax rates bring capital and jobs back to the United States and make all American workers better off. Remember, the middle class and minorities saw record income gains and record low unemployment after the Trump tax cuts. The Biden plan would reverse many of those successful policies, and the people who are going to get shafted are the middle class—once again. Stephen Moore is a senior fellow at the Heritage Foundation and an economist with FreedomWorks.  He is the author of “Govzilla: How the Relentless Growth of Government Is Devouring Our Economy.” Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times. Follow Stephen Moore is a senior fellow at FreedomWorks and co-founder of the Committee to Unleash Prosperity. He served as a senior economic adviser to Donald Trump. His new book is entitled: “Govzilla: How the Relentless Growth of Government Is Impoverishing America.”

A Tax Proposal Driven by Greed and Envy

President Joe Biden has just proposed the biggest federal budget request in U.S. history–with the exception of his near $7 trillion spent last year. When I came to Washington in 1985, the federal budget hit $1 trillion. Now, we are in the $6 trillion to $7 trillion range, and we wonder how it is that the debt has rocketed to $30 trillion.

The obvious solution—given the hundreds of billions of dollars of waste and fraud in the budget and the end of special spending needs to combat COVID—would be to put government on a strict spending diet. Not only would this lower our deficit, it would mean a lower inflation rate as well.

Instead, Biden wants one of the largest tax increases in many years. All of this, he says, is aimed at millionaires and billionaires, but hopefully, voters aren’t gullible enough to fall for that gambit. That’s what they said about the original income tax (which now everyone pays), and the alternative minimum tax, which was supposed to be paid by a few hundred of the richest families but soon applied to more than a quarter of all taxpayers.

Biden says the rich need to pay more because they only cough up 8 percent of their income in taxes, which is a smaller percentage than a firefighter or a secretary pay.

That WOULD be an outrage, but it isn’t even in the same ZIP code as the truth. The top 1 percent of Americans in income pay 40 percent of the income tax—more than the bottom 90 percent. That’s a pretty progressive tax system.

A major proposal in the Biden tax plan is to tax “unrealized capital gains.” This is the buildup in the value of stock holdings, which isn’t “income” because the stock hasn’t been sold. It’s like saying you should pay more tax because your house appreciated in value—even though you still live in and own the house.

How can you pay tax on something that you haven’t gained any income on? Are shareholders—which is almost all of us—supposed to take out a loan to pay the taxes on unrealized capital gains?

Biden conveniently forgets to mention that there IS a tax on corporate earnings, which is called the corporate income tax—which is 21 percent. The capital gains tax is applied AFTER that tax is paid. Think of it as the U.S. government being a one-fifth shareholder in every company. The combination of the corporate and capital gains tax brings the effective tax rate on this income of millionaires and billionaires to above 35 percent.

That’s a far cry from the 8 percent that Biden complains that Daddy Warbucks is paying.

We should also remember when we are talking about profits from buying and selling stocks, that stocks go up and they go down in value. Right now, if you make money on a stock you have to pay a full capital gains tax on the rise in valuation. But if the stock goes DOWN in price, you are limited in how much of those losses you can deduct. Heads, the government wins; tails, you lose. How is THAT fair?

Then, there is the inflation issue which is back, front and center. Inflation is now running at 8 percent. So, if a company’s value rose by 7 percent or less last year, you LOST money if you owned the stock.

But the capital gains tax is NOT (even though it should be) indexed for inflation. (That’s the main reason that the statutory capital gains tax is lower than the income tax rate.) So, under Bidenomics, you can pay a tax on the sale of a stock even if you lost money due to inflation. Your effective after-inflation tax rate isn’t 8 percent, or 23.8 percent, it’s OVER 100 percent.

Does that seem fair to you?

All of the Biden tax proposals seem to be driven not by putting America First, but by greed and envy. The rich have the money, so seize it from them. But the experience of the Trump tax cuts in 2017 proved yet again that lower tax rates bring capital and jobs back to the United States and make all American workers better off. Remember, the middle class and minorities saw record income gains and record low unemployment after the Trump tax cuts.

The Biden plan would reverse many of those successful policies, and the people who are going to get shafted are the middle class—once again.

Stephen Moore is a senior fellow at the Heritage Foundation and an economist with FreedomWorks.  He is the author of “Govzilla: How the Relentless Growth of Government Is Devouring Our Economy.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.


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Stephen Moore is a senior fellow at FreedomWorks and co-founder of the Committee to Unleash Prosperity. He served as a senior economic adviser to Donald Trump. His new book is entitled: “Govzilla: How the Relentless Growth of Government Is Impoverishing America.”