Some new taxes proposed by President Joe Biden are coming under fire from business leaders and Republicans who believe the plan is too extreme and could destroy the economy.
The Biden administration’s budget proposal for the 2025 fiscal year could see nearly $5 trillion in new and increased taxes, including a 44.6% tax on capital gains and a 28% tax on corporate profits.
“Tax increases of that magnitude will affect all Americans through lower paychecks and higher household expenses,” said Senate Finance Committee ranking member Sen. Mike Crapo (R-Idaho) at a hearing on the budget proposal last month. “President Biden’s vision for American workers and companies is clear — higher taxes and uncompetitive rates for the majority, to support government subsidies for a few.”
According to an analysis by the Tax Foundation, a non-partisan think tank, tax changes proposed under Biden’s FY 2025 budget fall under three main categories: additional taxes on high earners, higher taxes on U.S. businesses, and increased tax credits on specific activities.
The Tax Foundation estimated that the 2025 tax plan would reduce long-run GDP by 2.2%, capital stock by 3.8%, wages by 1.6%, and employment by about 788,000 full-time jobs. The group claimed that the largest driver of these effects would be the U.S. government increasing the corporate income tax rate to its highest level in over 100 years.
According to E.J. Antoni of The Heritage Foundation, “Investment is the real driver of economic growth.”
“Investment is where you get factories and machines — it’s where businesses are able to provide their workers with tools and equipment that allow them to increase their productivity and to increase wages,” he told Fox News Digital.
“If you’re going to tax something, you get less of it. And that’s just as true for investment as it is for anything else. Taxing capital gains means less investment, it means less economic growth, and it means the rise in people’s standards of living is going to slow dramatically,” he said.
To understand this from a stock market perspective, imagine buying 100 shares of Nvidia (Nasdaq: NVDA) in early 2020 at $60 and selling them today at the current 4-to-1-split adjusted price of $870. Under Biden’s latest proposal, top-income earners would have 44.6% of those profits eaten up by taxes.
Changes to the capital gains tax would apply whether the profits were from stocks, real estate, businesses, or other investments.
The FY 2025 budget states that the top tax rate of 39.6% would be restored for single filers making more than $400,000 a year and married couples making more than $450,000 per year. The budget also proposes taxing capital gains at 39.6% for those with more than $1 million in income, up from 20% under the previous budget.