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Hey business warriors welcome to the show and we have a tax video for you today. Now you may have noticed yesterday that at 1:05pm the Dow Jones suddenly dropped, this was because of news that Joe Biden wants to tax capital gains at 43.4%. Now this was leaked out to the media by people familiar with the situation. But this policy was in Biden’s original tax plan from when he was running for office so it looks like he will be trying to follow through on the proposal and tax some capital gains as income. So let’s break it down for you and show you exactly what is being proposed.

The current rates of long term capital gains are 0, 15 and 20 percent, these are lower than the regular income tax rates that go from 10% to 37% depending on income. So if you hold a stock or a piece of property for a year or more and then sell it, any profit from an increase in price will be taxed at those lower rates. The same goes for qualified dividends, as long as you have held the stock for the required holding period, which is even shorter, here is an explanation:

Common stock investors must hold the shares for more than 60 days during the 121-day period that starts 60 days before the ex-dividend date.

And this really makes sense because money invested is money that has already been taxed as income once, when you earned it in the first place.

But what Biden wants to do is tax capital gains for those earning over 1 million dollars per year at 39.6%, the old top rate from before the tax cuts and jobs act reduced it to 37% in 2017. Then in addition to this, if you earn $125,000 a year for a single person or $250,000 a year filing jointly you are subject to an additional 3.8% Net Investment Income Tax, on your investments, which takes the total to 43.4%.

When asked about this alleged policy Jen Psaki didn’t deny it and went on to say this:

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Notice what she says at the end there, they wont increase taxes on anyone making under $400k a year, which itself may be untrue, she may actually mean families making under $400k a year. But this shows you that this increased rate on investment income for those earning over $1 million per year isn’t the only tax hike coming. So even though you may not be affected from this particular increase, you may indeed be affected by other parts of the plan. One of which is Biden’s proposed 12% payroll tax on families earning over $400,000 a year and possibly individuals earning $200,000 a year.

On April 28th Biden will address congress on the American Families Plan which will probably include some of these tax provisions. So you will likely know more then. Part of that plan is that he wants to give families with young children $300 per month and families with children over 6 $250 per month. Why not just tax people $300 less a month instead?

If you want to make the system fairer, why not use the current long term capital gains rates as a new set of income tax rates, instead of increasing taxes on the wealthy, why not decrease taxes on the poor? Now you would still have a bit of payroll tax on top of that, but wouldn’t it be great for people if you taxed them at either 0, 15 or 20 percent, depending on income, that would be much lower than the current rates. Yeah, it’s not going to happen in this lifetime.

Alright guys that is my explanation of Biden’s proposed 43.4% tax, do pay attention on April 28th because we will probably know more details then. If you want two free stocks for opening and funding an account with webull, check out my link below. You can trade stocks and crypto on their platform, and they just added Dogecoin to their tradable cryptos. Please subscribe for updates and we will see you next time. Bye