“It’s going to cut down on investment and cause unemployment,” Chuck Grassley of Iowa, a top Republican on the Senate Finance Committee and former chair of that panel, said of the Biden capital-gains plan. He lauded the result of the 2017 tax cuts, and said, “If it ain’t broke, don’t fix it.”
GOP lawmakers on Thursday called for repurposing previously appropriated, unused pandemic-relief funds to help pay for their counteroffer infrastructure plan.
The group underlined opposition to tax hikes, other than a potential revamp of the levies that go toward highway funding in a way that would cover electric vehicles.
Biden will detail the American Families Plan in a joint address to Congress on April 28. It is set to include a wave of new spending on children and education, including a temporary extension of an expanded child tax credit that would give parents up to $300 a month for young children or $250 for those six and older.
Carried Interest Reform
Biden’s proposal to equalize the tax rates for wage and capital gains income for high earners would greatly curb the favorable tax treatment on so-called carried interest, which is the cut of profits on investments taken by private equity and hedge fund managers.
The plan would effectively end carried interest benefits for fund managers making more than $1 million, because they wouldn’t be able to pay lower capital gains rates on their earnings. Those earning less than $1 million may be able to still claim the tax break, unless Biden repeals the tax provision entirely.
The capital gains increase would raise $370 billion over a decade, according to an estimate from the Urban-Brookings Tax Policy Center based on Biden’s campaign platform.
For $1 million earners in high-tax states, rates on capital gains could be above 50%. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, it could be 56.7%.
Democrats have said current capital gains rates largely help top earners who get their income through investments rather than in the form of wages, resulting in lower tax rates for wealthy people than those they employ.
Capital gains taxes are paid when an asset is sold, and are applied to the amount of appreciation on the asset from when it was bought to when it is sold.
Congressional Democrats have separately proposed a series of changes to capital-gains taxation, including imposing the levies annually instead of when they are sold.
“There ought to be equal treatment for wages and wealth,” Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat who’s the chamber’s top tax-writer, told reporters in a phone briefing Thursday. “On the Finance Committee we will be ready to raise whatever sums the Senate Democratic caucus thinks are necessary.”