Biden Moots Steep Rise in Taxes for the Wealthy; Capital Gains Rate to Hit 43%

President Joe Biden has rolled out a tax overhaul plan under which the US tax payers see a doubling of capital gains taxes, among other increased rates. The news of the proposal sent the Wall Street diving on Thursday and analysts expect a bloodbath if the proposals go through Congress.

The chief among the new tax proposals is the plan to increase capital gains to 39.6 percent from the current baseline rate of 20 percent for people earning more than $1 million. Biden also proposes more taxes on the wealthiest Americans. Under the plan he moots, the top marginal income tax rate will go up to 39.6 percent from 37 percent currently, Reuters reported, citing sources.

Biden's Flagship Welfare Agenda

The new tax plan is part of Biden's flagship agenda and he intends to use the proceeds to lay out a nearly $1 trillion funding for childcare, universal pre-kindergarten education and paid leave for workers.

The effective tax rates for the rich investors will be even higher, according to reports. When existing surcharges on tax on investment income are added, the wealthy investors will see capital gains taxes hitting 43.4 percent, Bloomberg reported.

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Highest in the World

According to Erica York, economist at the Tax Foundation, if Biden's proposals are approved by Congress the US will top the global chart in capital gains taxes.

While tax reform that targets the super rich was a key campaign plank for Biden, he had promised not to raise taxes on households earning less than $400,000.

The White House press secretary, Jen Psaki, said the Biden was determined to make the wealthy and companies pay for new welfare and social programs. "His view is that that should be on the backs ... of the wealthiest Americans who can afford it and corporations and businesses who can afford it," Psaki said.

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Joe Biden during Thursday's news conference Twitter

The US stock markets slipped as the news broke. While the S&P 500 Index was down 1 percent, 0.6 percent, its steepest drop in more than a month, the Nasdaq Composite fell 0.4 percent as of 1:15 p.m.

"If it [the new proposals] had a chance of passing, we'd be down 2,000 points," said Thomas Hayes, chairman and managing member at hedge fund Great Hill Capital LLC, according to Reuters.

To Face Congress Challenge

While more details on the new tax plan are not available, it is assumed that the finer details can change before Biden releases the plan officially next week, before his address to Congress.

However, the new tax proposals will face a stiff challenge in Congress, though the Democrats control both the houses. The Republicans will expectedly oppose tax plans that add more burden on the wealth and the investing class, while Biden and allies will have to work overtime to get all Democrats to vote on party lines.