WASHINGTON — In his first address to Congress, President Joe Biden proposed the American Families Plan. It is a massive investment in universal preschool, family childcare, and free community college.
But it comes with an enormous price tag. More than $1.8 trillion. To pay for it, the president proposed raising capital gains taxes.
It had people online searching for things like: “What is Capital Gains Taxes?”
What is President Biden’s Capital Gains Tax hike plan?
It is an increase, by almost, double, on the current Capital Gains Tax on investments for wealthy people.
The American Families Plan from the White House and Jason Fichtner, an economist from the Bipartisan Policy Center. A study on President Biden’s tax proposal from the University of Pennsylvania’s Wharton School of Business.
What We Found:
Let’s start with, what is Capital Gains Taxes? They are taxes paid on income earned outside your regular paycheck, according to Jason Fichtner. In the case of President Biden’s proposal, it is aimed at investments like stocks.
“Say you buy a stock or mutual fund for $100 and when you go to sell it, you sell it for $150, you now have a $50 capital gain,” Fichtner said.
The current rate for these Capital Gains Taxes is 20%. The Biden plan would nearly double that rate to 39.6%. However, according to President Biden’s plan, the increase would only hit people making $1 million or more.
“So it presumably it wouldn't affect you or me or your mother, it would affect a very small portion of the population,” Fichtner said.
President Biden estimates it would bring in $1 trillion. Except, Fichtner points out many of these wealthy people have legal means to avoid the taxes.
“They can avoid selling an asset and just hold on to it to avoid paying the tax until they had some losses to offset the potential tax liability,” he explained.
According to a Wharton School of Business study, that wealthy slice of taxpayers has legal means to avoid 90% of the taxes.
Instead of $1 trillion dollars in revenue, the study estimates, there would be only roughly $100 billion to pay for the president's ambitious American Families Plan.