President’s plan could generate $1 trillion in the next decade, but only $100 billion of that is likely to be paid.
Wealthy Americans will avoid paying 90% of the estimated $1 trillion i ncrease in investment taxes that President Joe Biden is proposing this week, according to new study from the University of Pennsylvania’s Wharton Business School. The Wharton researchers concluded that tax avoidance, much of it legal, would cut nearly $900 billion of what the proposed increase on capital gains taxes could raise for the government. « We don’t think that the proposal has a lot of teeth, » said John Ricco, director of policy analysis at the Penn Wharton Budget Model, a non-partisan fiscal policy research group at the business school. « There are a lot of games you can play to avoid paying this tax. » Mr. Biden in his on Wednesday is expected to propose a roughly $1.5 trillion package called the « American Family Plan » that would fund free prekindergarten education and community college tuition. It would also extend the child tax credit and create a national paid leave program. A key piece of paying for that: A near doubling of the tax that the very wealthy pay on the gains they make when they sell stocks and other investments. Right now that income, which is called capital gains, is taxed at 20% for most Americans. That’s lower than the rate that many Americans pay on the income they get from their job, and far less than the 37% that top earning Americans pay on their wages. Mr. Biden’s is to eliminate the difference between the tax paid on wages and the tax paid on investment gains for those earning more than $1 million in any one year. The president is also expected to propose upping the top income tax rate to 39.6% from the current rate of 37%. That means equalizing the capital gains tax with the income tax would effectively double the tax rate on investment earnings to 39.
