Think Biden’s Tax Hikes Wouldn’t Negatively Affect You? Then You Are Very Wrong

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(Zerohedge) – Authored by Mike Shedlock via MishTalk.com,

What would happen if Biden got the tax hikes he seeks? A big set of questions and answers follows.

Net Capital Gains Tax Would Approach a Whopping 60%

As I noted on April 23, under Biden’s proposal Net Capital Gains Tax Would Approach a Whopping 60% .

Four Comments By Shortsighted Readers

I’ll complain when I’m the one being taxed.

Mish, tell me if it impacts someone with $60K in annual income and $12K in short-term capital gains. If it doesn’t, go screw yourself!

Great if the plan is passed! Party time for the Top .3% is over!

Why should investment be advantaged over labor?

The first two comments above remind me of (fill in your own blanks: They came for the ______ and I did not speak up. Then they came for the _____ and I did not speak up. Then they came for me and _____.

Let’s Play Tax Q&A

Q: Put a 60% tax on capital investments and what happens to investment? A: Investment in new businesses will plunge.

Q: Put huge taxes at the state level and what do people do? A: They move.

Q: What happens to neighborhoods, even states, when the wealthy flee? A: Think Illinois

It is not the poor who invest in new businesses. And at a 60% tax rate it will not be the wealthy either!

Investment Decisions

Bonus Question: Who said this?

‘ The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital from static to more dynamic situations, the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth of the economy .’

If you guessed Ronald Reagan, try again. In fact, if you did not know the answer, I doubt it would be one of your top 5 guesses.

Bonus Answer: ‘Public Papers of the Presidents of the United States, John F. Kennedy, 1963 ‘.

Would a 60% Rate Raise Money?

The WSJ addresses that question in The Dumbest Tax Increase .

As former Federal Reserve Governor Larry Lindsey explains nearby, a 43.4% federal rate will cost the government money.

The Congressional Budget Office says the revenue-maximizing rate for capital gains is about 28%. Other economists say it’s lower, and many think the ideal rate is zero. No one outside the fever swamps thinks it is more than 40%, much less the 55% or more that would apply in high-tax states if the Biden proposal becomes law.

As rates rise, Americans tend to hold on to their assets longer, reducing realizations. CBO has found that for each 1% increase in the capital-gains rate, there is a 1.2% reduction in realizations. Raise the tax as much as Mr. Biden wants, and realizations will fall significantly. The higher rate will cost the government revenue.

Why Do Something So Stupid?

The WSJ quotes Lindsey ‘ punishment for its own sake .’

This is what happens when you turn your economic policy over to Bernie Sanders and Elizabeth Warren. Envy is in the political saddle, and Joe Biden is going along for the ride .

More Reader Comments

One of my economically literate readers accurately noted the envy angle. Others noted capital flight.

Another commented that Biden added trillions in debt in just a few months commenting ‘ Even 100% capital gains tax won’t pay for all this .’

As discussed above it would not pay for anything but would negatively impact investment and therefor jobs.

Spook the Stock Market

In addition to the above, a hike of that proportion could and in my estimation likely would spook the markets.

It certainly would make future investments in the US stock markets less attractive than foreign markets.

Looney Ideas and Fearless Fools

And if the proposed legislation did pass, it would be a clear indication that the looney wing of the Democratic party lead by Elizabeth Warren was in full command.

To fund their crazy ideas, tax hikes would not stop with the wealthy. Either that or inflation would soar, perhaps both.

The fearless fool who said, ‘ I’ll complain when I’m the one being taxed ,’ would then complain about tax hikes on him, how his neighborhood went to hell, or how the stock market decline hurt his investments.

Tax Reform Needed

I am totally in favor of tax reform and will post some ideas on what’s needed in a bit, but Biden’s proposals are hugely foolish from many standpoints.

www.zerohedge.com/political/think-bidens-tax-hikes-wouldnt-negatively-affect-you-then-you-are-very-wrong