The Capitalist Investor - Episode 78 Part one of how President Biden plans to tax "the rich" and the "not-so-rich." All these taxes keep dipping into the middle class. As the president proposes a six trillion-dollar budget he plans to pay for much of this by raising taxes. Who will be affected? How will these tax increases affect you? What you need to pay attention to as these tax increases are passed?Outline of This Episode[3:35] President Biden's six trillion-dollar budget proposal[5:00] Deficit spending to get out of a hole[7:40] How the Ultimate Warrior is similar to the stimulus checks (greatest analogy ever)[12:20] Number One: Increase the top income tax rate[18:00] Number Two: Raising the capital gains taxPresident Biden’s six trillion-dollar budget proposalBiden plans to tax the “rich” and the “not-so-rich.” All of these tax rules seem to be dipping lower and lower into the middle class. Biden’s $6 trillion budget proposal looks like $4.6 trillion of that $6 trillion is going to be covered, via higher taxes. On corporations, capital gains, high earners, etc., with a $1.4 trillion deficit.Deficit spending to get out of a holeWe have stimulus checks flowing, excessive unemployment benefits that are causing people to sit on their couch rather than go to work or make the argument that they can’t work for the same amount. Suddenly, there’s higher standards.The U.S. federal budget deficit was projected to reach $2.3 trillion in 2021. It would have been the second-highest deficit since 1945; the 2020 deficit of $3.1 trillion as a result of the COVID-19 pandemic would have taken the top spot. However, after the passage of the American Rescue Plan in March 2021, the federal budget deficit is estimated to grow to $3.4 trillion in 2021. This makes it the highest deficit in history.The Congressional Budget Office (CBO) projected in February 2021 that the year’s deficit would be 10.3% of U.S. GDP. After the American Rescue plan, that percentage has increased to 15.6%. Before the pandemic, the deficit for 2021 was projected to be $966 billion, at 8.6% of GDP.How the Ultimate Warrior is similar to the stimulus checks (greatest analogy ever)What’s going to happen to the economy? Hear how we compare it to the Ultimate Warrior! Power struggles and politics inside the wrestler that leads us on a WWE tangent. The Professional Wrestlers life choices, use of growth hormones and steroids, demands of more money, and his deflated return, It’s a great analogy to what we potentially see happening in the economy. Pumping it up, only to deflate it later. This will be the second biggest fiscal cliff in the history of the United States and we don’t think a lot of people are seeing it coming. Number One: Increase the top income tax rateThe 2017 tax reform law signed by former President Trump lowered the highest federal personal income tax rate from 39.6% to 37%. According to the White House, this rate reduction gave a married couple with $2 million of taxable income a tax cut of more than $36,400. President Biden wants to reverse the rate change and bring the top rate back up to 39.6%.Number Two: Raising the capital gains taxCurrently, gains from the sale of stocks, mutual funds, and other capital assets that are held for at least one year (i.e., long-term capital gains) are taxed at either a 0%, 15%, or 20% rate. The highest rate (20%) is paid by wealthier taxpayers – i.e., single filers with taxable income over $445,850, head-of-household filers with taxable income over $473,750, and married couples filing a joint return with taxable income over $501,600.Gains from the sale of capital assets held for less than one year (i.e., short-term capital gains) are taxed at the ordinary income tax rates. Under the Biden plan, anyone making more than $1 million per year would have to pay a 39.6% tax on long-term capital gains – which is almost double the current top rate. As noted above, that’s also the proposed top tax rate for ordinary income (e.g., wages). So, in effect, millionaires would completely lose the tax benefits of holding capital assets for more than one year. Plus, there’s the existing 3.8% surtax on net investment income, which would bump the overall tax rate up to 43.4% for people with income exceeding $1 million.Connect with Derek GabrielsenTwitter: @DerekGabrielsenFollow Derek on LinkedInSend Derek a message hereCheck out Derek’s YouTube channel!Connect With Mark TepperTwitter: @MarkTepperSWPFollow Mark on LinkedInSend Mark a message hereThe SWP Connect YouTube ChannelSend your questions and comments to us at info@SWPConnect.comSubscribe to The Capitalist Investor
