Shark Tank investor Kevin O’Leary has criticized President Biden’s proposal to increase the top capital gains tax rate, calling it potentially damaging to the US economy. The proposed fiscal year 2025 budget would see the highest level of this tax since its introduction in the early 1920s at a staggering 44.6%. According to a report by the Treasury Department led by Secretary Janet Yellen, the bulk of these hikes will impact individuals with annual income over $1 million.
However, economist Art Laffer has warned that such high tax rates could lead to less investment and economic growth as people tend to invest less when faced with higher taxes on capital gains. He also argued that inflation impacts equity prices like stocks, meaning a tax hike would essentially be penalizing citizens who manage to counter the negative impact of rampant inflation – by inflating stock values themselves.
The proposal could potentially lead to many Americans paying rates exceeding 50% when paired with high state taxes, according to Americans for Tax Reform’s recent post. The group also highlighted that small business owners would be exposed to the tax hike as they seek to sell their businesses, causing them severe harm financially and professionally alike.
In addition to these increases, Biden proposes mandatory capital gains taxation on inherited assets for families when parents pass away. These proposals are projected by a Peter G. Peterson Foundation analysis to earn the federal government roughly $800bn in revenue between 2031-2045. However, Laffer has expressed skepticism that these high tax rates would truly result in vastly increased income for governments given their probable adverse economic impact on investment and growth.
The Treasury Department did not respond to a request for comment regarding this matter.
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