Goodbye, Hello!
Goodbye to the redistribution of wealth and hello again capitalism. Who doesn’t enjoy friendly competition? For those that aren’t caught up with what a Harris/Walz administration would have meant for our economy, below I delineate the major changes with the highest potential to reshape our economy into one that we see in communist countries, and its based on a blog by CATO’s Adam N. Michel on March 9, 2023 titled The 8 Biggest Tax Increases in Bidens Budget.
In his blog, Mr. Michel goes on to say that “The budget’s new taxes and tax increases fall into three broad buckets: higher taxes on wage income, higher taxes on investment income, and higher business taxes.” In other words, if we thought double taxation for corporations was bad, well this plan assured us that we hadn’t seen anything yet because more can always be done to obliterate entrepreneurship and capital investment.
This plan would’ve taken a wrecking ball on everything we know has served to incentivize the creation of arguably the strongest economy in history and all for what? I won’t get political here because I’ve made my position clear that a certain few in power behind the closed-door-sweetheart-deals are behind the redistribution of wealth from the pockets of the taxpayers to the lining of their own pockets. But I digress, more to come on this topic.
In summary, here are the takeaways from the Biden/Harris administration to be inherited by the Harris/Walz administration:
Increase top marginal tax rate to 39.6 percent and the threshold for the top tax bracket is reduced to $400,000 for single filers ($450,000 married).
Increase corporate income tax rate to 28 percent and other changes designed to increase taxes on American businesses.
Tax capital gains and dividends at top rate of 39.6 percent from 20 percent (plus the 5 percent NIIT) for those whose income exceeds $1 million.
Expand Net Investment Income Tax (NIIT) at 5 percent rate for those with income over $400,000, to include more types of income.
Quadruple stock buyback tax from 1 percent excise tax on the total value of stock repurchases or “stock buybacks” to 4 percent.
Ends step-up in basis at death making death a taxable event and would include unrealized capital gains with a floor of $5mill.
“Billionaire” minimum tax of 25 percent would apply to the wealthy with more than $100 million that includes two entirely new tax bases—wealth and unrealized capital gains.
Carried interest as ordinary income would recharacterize this investment income, treating it as ordinary wage income.
It should be clear that the theme of this plan is to create more taxes. I don’t know very much about whether the fired administration addressed any issues that would involve changes to undo the taxing complexity of the tax code (sorry for the redundancy). There are a few expressed most concisely in an article by Robert W. Wood where he outlines the 7 Crazy Tax Laws Trump Should Change dated December 5, 2016. Some of these recommendations are geared more towards ethics issues (i.e. abuse of the EITC, nonprofits, and tax credits). This can be solved with proper leadership and I doubt that any POTUS would do away with any of these.
Other issues, like the Alternative Minimum Tax (also known as a parallel tax) are true challenges that I have to say I would rally around if another round of tax code simplification regulations like we saw with the TCJA of 2017 was on the table. Like any successful company will tell you, another way to create cost savings is by running a tight ship. If the tax code was simplified there are areas where cost effectiveness can be achieved from identifying abuse by the taxpayers to expediting the bureaucratic process.
As far as the implications on the national budget, I’m no GAO expert, but I can tell you that I am a clinical observer of human behavior. If wealthy people can’t make a return on their buck they will put it under their mattress just like if poor people can’t make a buck they start to cheat by going to the black market. This is the recipe for cyclical economical failure and not a prosperous economy. Let’s let the markets self adjust while strengthening our watchdogs, and improving our human capital infrastructure.
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