What do you guys think about Biden’s 2025 tax proposal? Without being too political, I was sure no government wants to discourage trading, so this came as a bit surprising. It’s going to disincentivize people from investing as much but to what lengths? Not to mention, even if the direct blow goes to the high earners whose investment income is more than $400,000 annually, the overall impact it could have on the economy should concern everyone.
Calling it the biggest capital gains tax in 100 years feels like an understatement. However, those calling it a ‘nothing burger’ should also be wary. If this law is passed, the combined tax in some states like California and New York can go upwards of 50%. The hike in interest rates will inadvertently join inflation (since capital gains do not fall under inflation), raising the actual figure for those with more than $100 million in net assets well above the numbers shown in the proposal.
Crypto Investors
Crypto investors have also started raising questions. This proposal pulls a clever move on the subsidized environment where crypto investors could sell assets at a loss, claim tax benefits on those losses, then shortly buy those assets back. This is only scratching the surface imo as there is much to be talked about here. Some are even saying that this might push the US into recession. Is that true and how so?
I believe the crux of this proposal is to raise the capital gains tax on the ultra-wealthy and pave the way for introducing an upper limit on accumulated assets. How healthy that is going to be for our economy and society is yet to be seen, but if this proposal passes, expect big changes. While proponents are arguing that this move is aimed at pushing the US economy over 5 trillion USD over the next decade, I’m more interested in how this will change the current trading avenues.
Stabilizing the economy
It’s without a doubt that this proposal has sent shockwaves throughout businesses and garnered pushback from Biden’s opposition. If you ask me, it’s going to level the ground for high income earners and investment income earners, but something tells me more sympathy will be directed toward mom and pop shops than billionaires. This again makes me think it isn’t as bad as if it were a blanket capital gains tax.
According to sources, the wealthiest pay an average of 8.2% tax. They are mainly able to shield their income through investments that are taxed at lower rates. If by taxing the wealthy we are able to shore up medicare, it doesn’t seem like the bad idea some are painting it to be.
Whichever side of the argument you lie on, I want to hear your thoughts. If this calls for a strategy shift, how are you planning on tackling it? If you are a tech investor, this might concern you more than others.
Will it pass though? Correct me if I'm wrong, but this all seems just like a proposal right now. A lot of it sounds like talk leading up to an election year