A change in tax rules – which essentially will hike taxes on the wealthiest Americans, will reportedly be proposed by the United States President Joe Biden, many reports have claimed.
According to the new tax proposal, the top marginal rate would be raised and taxes on investment gains for the rich will also be increased. According to reports, the US government wants to finance childcare and education programs but not in the healthcare sector.
The news of increased taxes resulted in a panic sell off at Wall Street as major indices dropped.
Any family earning less than $400,000 a year will not be affected by the American Family Plan, which is expected to be laid out in full by Biden sometime next week, the White House said.
“His view is that that should be on the backs… of the wealthiest Americans who can afford it and corporations and businesses who can afford it,” said White House Press Secretary Jen Psaki.
According to reports published by the New York Times and Bloomberg, the new Biden proposal includes increasing the top marginal income tax rate to 39.6 per cent from 37 per cent. If this change is implemented it would essentially reverse the income tax cut for highest income earners that was implemented by the former US president Donald Trump.
The new tax plan would also nearly double taxes on capital gains to 39.6 per cent for people earning more than $1m. That would be a dramatic increase from the current rate of 20 per cent.
The total tax bill that some investors could face might exceed 50 per cent in some states that impose their own capital gains tax.
It is widely expected that the proposal will be widely opposed by Republicans in Congress. There can also not be unanimous support for the changes even from Democrats who hold a slim majority.
The news reports however have caused havoc at the Wall Street. There was a 420 points drop in the Dow Jones Industrial Average before reigning in its losses slightly. “If it had a chance of passing, we’d be down 2,000 points,” Thomas Hayes, from Great Hill Capital told Reuters.
The tech-heavy Nasdaq index also dropped by 0.9 per cent.
(Adapted from NYTimes.com)