A new report says that Joe Biden is considering the first tax hike since 1993. The Hill. The report, that originated in Bloomberg, said that Biden was trying to keep his campaign promises. The hike would include increasing the corporate tax from 21% to 28%, increasing the income tax rate for people who make more than $400,000, expanding the estate tax, removing tax breaks for LLC's and setting up a higher capital gains tax on people making more than $1 million. The tax effort would raise $2.1 trillion over 10 years. It would also repeal parts of the 2017 Trump tax cuts. If passed the new higher taxes would likely come into effect in 2022.
My Comment:
A quick comment on the source of this story, it was on Bloomberg, behind a paywall and relied on anonymous sources. That's three strikes for me so I think there is a chance that this story is not entirely true. I generally don't like stories that only rely on anonymous sources as they can not be questioned by other journalists to confirm or deny the story. I always feel that is an important disclaimer to add whenever I see a story like this.
Do I think there is truth to it? I would not be surprised. America has spent a huge amount of money during the Coronavirus crisis and the question remains how it is going to be paid for. The solution so far has been to print money but that's a temporary solution at best, as it will lead to inflation or even hyperinflation at some point.
Plus raising taxes has been a Democratic priority for awhile now. Despite being incredibly unpopular they believe that the rich and corporations do not pay enough in taxes. Passing a new tax law would be a campaign promise kept for the progressive left.
Doing so will be incredibly unpopular. Even though the hike seems mostly targeted at the rich, they will effect everyone. I know that my company gave me a couple of raises due to the Trump tax cuts and though those raises won't go away they will not be joined by any new raises if they have to pay a lot more in taxes.
The estate tax is especially offensive. The idea that people should be taxed right after their parents die is offensive to me in the first place but making people pay even more is utterly disgusting. And given that inheritance is a way to transfer wealth from the older generations to the younger ones it's just another example of how Millennials, Zoomers and Generation Alpha are getting utterly screwed by the American economy.
I think the only thing that people might support is higher taxes for companies but even then when they see their paychecks or lose their jobs they won't be supportive for long. And since these tax hikes will take effect right before the 2022 midterms it's going to hurt the Democrats if this gets passed.
But will it pass? I doubt it. I think there are enough Democrats who don't want to commit suicide politically that this won't pass. It's terrible strategy to raise taxes right before an election and I also think that the Democrats have too much on their plate right now to be effective. And I am guessing that the negative reaction this story is going to get is going to change their plans. Plus, it's insane to raise taxes when the economy is just starting to recover from the Coronavirus crisis.
With all that said though, I do think something has to be done to raise funds to pay off some of the debt we have collected last year and this year. What would I do? Cut spending on nonsense, raise tariffs and pull out of our wars. Will that happen? Almost certainly not. I am guessing that the status quo will continue and that the result will be inflation...
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