Biden Adviser: Capital Gains Tax Hike Applies to Taxpayers Earning $1M-Plus

By Susan Jones | April 27, 2021 | 5:56am EDT
President Joe Biden will announce a tax-and-spending plan estimated at .8 trillion in a speech on Wednesday night. (Photo by ANDREW HARNIK/POOL/AFP via Getty Images)
President Joe Biden will announce a tax-and-spending plan estimated at .8 trillion in a speech on Wednesday night. (Photo by ANDREW HARNIK/POOL/AFP via Getty Images)

( - Brian Deese, director of the National Economic Council, told a White House press briefing on Monday that President Joe Biden is "excited" to "lay out his plan to invest in American families," which Biden will do Wednesday night before a joint – but attendance-limited -- session of Congress.

Biden also will announce tax hikes to pay for his $1.8 trillion American Families Plan.

According to Deese, Biden will make "reforms to our tax code that reward work and not just wealth. And one element of this reform will be to change how we tax capital gains."

"This change will affect taxpayers making more than $1 million a year," Deese said.

Capital gains taxes apply to the sale of stocks and other assets that have risen in value during the period the investor held them. The capital gains tax rate on investments is usually lower than that for ordinary income.

Deese said for the wealthiest Americans, capital gains and ordinary income should be taxed at the same rate.

"This change will only apply to three tenths of a percent of taxpayers, which is not the top 1 percent," Deese said. "It's not even the top one half of 1 percent. We're talking about three tenths of a percent. That's about 500,000 households in the country that we're talking about.

"So for the other 997 out of 1000 households in the country, or the other 150 million households in the country, this is not a change that will be relevant. It won't change their--the tax treatment of capital gains at all, and this makes sense because for the typical Americans, most of their income comes from wages.

"So for people making less than...$1 million a year, about 70 percent of their income comes from wages. But for those making more than $1 million, for the top three tenths of a percent, it's the opposite. About 30 percent of their wages come from wages."

Deese said the "wealthiest" Americans -- the 1,400 tax filers making more than $60 million a year -- have paid only about 20 percent of their reported income in taxes (which the tax code allows them to do).

"So their tax rate, which probably is overstated, again, because this is the category that often doesn't report or under-reports income--their tax rate is lower than many middle-class families' tax rate. This is the dynamic that led Warren Buffett to famously explain that he paid a lower tax rate than his secretary, and it's the--it is the dynamic that has led the president and others to argue that we need to do something about equalizing the taxation of work and wealth in this country."

Deese assured the briefing that the tax hikes President Biden will announce on Wednesday "are focused on this top sliver of people" (i.e., hedge fund managers) -- who will have capitals gains treated the same as ordinary income.

The plan smacks of wealth redistribution:

"And importantly, the revenue from this provision invest directly in our kids and our families and our future economic competitiveness and put us in a position where we can drive greater economic growth."

Deese rejected a suggestion that raising the capital gains tax rate will discourage investments that help the economy grow:

"Certainly our view and reading of the evidence is that there is not a...correlation that would significantly affect investment for these highest income individuals, number one. And number two, we can use those resources to invest in areas that we know, where there is convincing academic evidence, empirical evidence, that investments, for example, in early childhood and in our children return enormous dividends in terms of their own academic success, reduced costs and healthcare system productivity and growth in the future."

Deese said Biden will issue a call to Congress "to consider these investments and the potential that they would provide for the country and engage in a serious conversation about both whether these investments are needed and, if we can agree that there needed, how we're going to offset their cost. He's starting the conversation where he believes it's a responsible place to start by putting a plan on the table and will take the conversation from there."

Biden's American Families Plan -- social infrastructure -- is the second half of his American Jobs/infrastructure plan.

He wants to boost spending on child care, paid leave for workers, and free community college. He's also expected to discuss other policy goals, including policing/racial justice, climate change, and access to healthcare in his Wednesday night speech.

White House spokeswoman Jen Psaki told the briefing, once again, that Biden is "not going to raise taxes on people making less than $400,000 a year, and he believes that the burden should be on the backs of corporations and highest level income people who can afford to pay more."

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