At what point do the wealthy start heading for the exit doors and expand their legal tax avoidance strategies? It is when government creates a tipping point of taxing them too much. This week, President Biden has proposed to double the long-term capital gains tax on Americans earning $1 million to 43.4 percent. When Biden made the announcement on Thursday, it caused the stock market to plummet.
Yet, the top 10 percent earning Americans already are paying 71 percent of the income taxes in the United States, and 50 percent of Americans are already paying 97.2 percent of the federal income taxes. Biden is creating a class war in America with his recent attacks on the wealthy who create jobs and innovation. How much a “fair share” in taxes is enough for Biden?
California venture capitalist and philanthropist Tim Draper weighed in on the issue on Twitter Friday stating, “43.4% capital gains tax might kill the golden goose that is America/Silicon Valley. People need an incentive to build long term #startups of value. In California, that would be a 56.4% tax burden. >50% Spells death to job creation.”
That includes a 20% capital-gains tax on assets held in taxable accounts for more than a year. It also includes the 3.8% surtax on net investment income, which was created by the Affordable Care Act to fund Medicare expansion.
Under current law, long-term capital gains are taxed favorably regarding wages. The wealthy pay a top 37% rate on wage income, for example. Normally, long-term capital gains taxes are lower to reward long-term investing, yet Biden seems to feel he is running out of ways to tax Americans. That tax rate would apply to returns on assets held in taxable accounts and sold after more than a year. Whether his proposal will ever turn into a bill for him to sign is yet to be seen.
Since they tax cryptocurrency as an asset according to the federal government, the capital gains tax would affect profits made in Bitcoin, for example. MicroStrategy co-founder Michael Saylor put the situation better as seen here:https://platform.twitter.com/widgets.js