It Started: My Thoughts On The Joe Biden Tax Plan

"it also includes a clause for cryptocurrency by extending the taxation of unrealized gains to apply to digital assets and using some of those funds to fight the misuse of cryptocurrency"

"See initially it was thought that if you lower the corporate income tax rates more companies would move their infrastructure back to the US they'd be more likely to reinvest back into infrastructure they would hire more employees and that would be good for the economy but even though more corporate money did end up moving back to the U.S many economists argued that that extra money saved mostly Fuel stock BuyBacks which boosted up the stock prices which is good for investors but not so good necessarily for everybody else Now if the tax rate gets increased to 28 percent it's unclear whether or not that higher cost is going to get passed on to consumers in the form of higher prices or if stock BuyBacks and corporate profits will decrease which might impact the future growth of the stock market it's still too early to tell although the tax Foundation did put together a very unique analysis that I think is worth discussing they estimated that a 28 tax rate would reduce GDP by 0.7 percent or 160 billion dollars stock and wages would marginally decline in 138 000 full-time jobs would be lost thankfully they estimated the loss would be gradual but it could amount to a GDP decline of nearly 720 billion dollars over 10 years which is larger than the 694 billion of tax revenue that would be generated in its place as a result they believed that long-term a higher corporate tax rate would result in incomes dropping by one and a half to two percent"

"in this case however they want to tax the unrealized gain on those making more than a hundred million dollars who don't pay a minimum 20 tax on their income which suddenly starts to get a lot more difficult to implement see all of this begins with the narrative that billionaires pay a lower tax rate than their secretary and to a large extent that's true most billionaires don't get there by working a salary but instead their worth is tied up in the stock of their business of which a controlling interest makes them a lot of money on paper in this case if their business does well the stock goes up in price and they're able to grow a lot of wealth completely tax-free without ever needing to sell anything although in addition to that there's also the grunt criticism that the long-term capital gains tax rate is lower than that of an earned wage and as someone is pretty open-minded to All Things money I have to say it makes sense and there's a good reason behind it see as it is right now the tax code differentiates between earned income and investment income earned income from a job payroll or manual labor is subject to payroll tax Medicare tax Social Security tax and to federal income tax as high as 37 percent depending on how much money you make on the other hand investment income is taxed to the flat zero to twenty percent depending on your income bracket regardless of how much you make which kind of seems weird because income is income right well not really when you invest your money not only are you putting your Capital At Risk but you also lose purchasing power each and every year to inflation and that inflation adds up like just consider that had you made a hundred thousand dollar investment in 1922 that only increases at the same rate of inflation you would have one million six hundred and eighty eight thousand dollars in today's money of which if you sold would be subject to a twenty percent capital gains tax leaving you with less purchasing power today than what you started out with in 1922. that's why the government wants to incentivize people to invest long term with money that gets redeployed back into businesses that leads to more economic growth with of course a lower tax rate not to mention unlike a job investment income is not guaranteed and there's a chance you might also lose money so in a way taxes have to be lowered to compensate for that but let's just assume this passes in capital gains or taxed regardless of whether or not you sold what would happen one it sets the precedent that unrealized capital gains could be taxed which some argue is unconstant institutional for example the Constitution denies Congress the power to Levy a direct tax unless it's apportioned among the several States in proportion to the population not to mention in 1920 the U.S Supreme Court concluded that under the 16th Amendment there must be some actual transfer of Rights before Congress get tax appreciation as income so from the very get-go this would be highly unlikely to pass two it would force business owners who might not have the cash liquidity to pay the tax bill to sell off a portion of their ownership and potentially lose control of their company or sending the stock price falling as more shares enter the market just consider the case where someone builds up their company to 500 million dollars takes absolutely no money for themselves for the sake of growth but has to sell a hundred million dollars of their stock to satisfy a tax bill of which they had no intention of ever selling that could lead to Market instability price swings throughout thinly traded companies and new ownership if the stock price suddenly Rises too high and three it sets a dangerous precedent that unrealized capital gains can be taxed that threshold could become an arbitrary number that changes over time after all who's to say they won't eventually lower it to 50 million dollars 10 million dollars one million dollars and then eventually everyone pays some sort of unrealized capital gains tax depending on how well they do but realistically regardless of what you think of this proposal the chance of this actually passing is pretty much not going to happen"

"although there are other points in this bill which do have a good chance of passing including a top individual tax rate of 39.6 percent so that would mean a tax increase of 2 600 for every one hundred thousand dollars earned above that amount of course there are other tax increases within this as well from repealing the 1031 exchange if you have more than five hundred thousand dollars in profit getting rid of oil and drilling tax deductions considering coal royalties to be income versus a capital gain modifying a state and gift rules and about 30 other increases throughout 120 pages of text that takes way too long to read through"

"second what most people don't know is that the tax cuts and jobs Act is already set to expire at the end of 2025. so in three more years if nothing else is done we'll eventually return back to higher corporate income tax rates higher tax brackets and lower deductions anyway Now realistically by by the time that happens it'll either be extended or something else will be put in its place but the current tax code is not meant to last indefinitely and it will change in one way or another the third I'm not against paying higher taxes if the money is put to a good purpose for example it's no surprise that the IRS needs more funding and the fact that only three percent of calls get answered is a huge problem I've had numerous instances where documents are lost information gets too long to be updated in their system or refunds take months to process versus days or weeks obviously I get it they're understaffed and there's no way to service everybody but that's where the money should be prioritized because what's the point of paying higher taxes if there's no one at the IRS to help the people who have questions"

"second what most people don't know is that the tax cuts and jobs Act is already set to expire at the end of 2025. so in three more years if nothing else is done we'll eventually return back to higher corporate income tax rates higher tax brackets and lower deductions anyway Now realistically by by the time that happens it'll either be extended or something else will be put in its place but the current tax code is not meant to last indefinitely and it will change in one way or another"