According to various media reports, Democrats in the U.S. House of Representatives’ Ways & Means Committee have promulgated a series of tax increases to fund the expansion of social safety net programs and fight climate change, as part of President Biden’s $3.5 trillion spending plan. Among the many proposed items is an increase in the corporate tax rate to 26.5% (up from 21%), a 3 percentage point surtax on top earners and a capital-gains tax increase.
The WSJ says the basic capital-gains rate would rise to 25% (up from 20%), however when combined with an existing 3.8% investment-income tax and the surtax, the new top rate on capital gains could be as high as 31.8%. CNBC says The plan calls for top corporate and individual tax rates of 26.5% and 39.6%, respectively, according to a summary released by the tax-writing Ways and Means Committee. This is a developing story…Stay tuned.
Commenting on the proposal, Charles Tassell, Chief Operating Officer of National REIA, said “The Ways & Means tax proposal has definite winners and losers. While journalists win with new tax credits, Joe six-pack can expect new audits from an IRS augmented with $80 billion dollars worth of new staff. Additionally, the lack of transition time on some taxes, or minimal allowance in other cases, is a bad policy practice that will harm businesses, especially small businesses that have been struggling for the past 2 years.”
In addition, Tassell said “Mom and pop real estate investors will definitely be impacted by the increase in capital gains starting in 2021(!). Furthermore, business startups will be hampered by the removal of the business loss tax credits, which could have a long-term stagnating effect on small businesses across the country.”