Group Issues Major Warning on Federal Agency’s Proposed Tax Increase

The budget called for a record high 44.6 percent capital gains tax rate, which some have noted would be the highest rate proposed since the tax was created in the 1920s.

But after it was proposed, the Americans for Tax Reform, described as a conservative-leaning group that seeks lower taxes, said the plan could be disastrous for the U.S. economy, which has already been struggling with high inflation and interest rates.

Mr. Kartch warned that “under the Biden proposal, the combined federal-state capital gains tax exceeds 50 percent in many states, including California, New Jersey, Oregon, New York, and Minnesota. California, notably, would have a 59 percent capital gains tax rate when factoring in the proposed Biden tax plan, his group found.

Related Stories

“Worse, capital gains are not indexed to inflation. So Americans already get stuck paying tax on some ‘gains’ that are not real,” he warned. “It is a tax on inflation, something created by Washington and then taxed by Washington. Biden’s high inflation makes this especially painful.”

It came as President Biden this week suggested that significant portions of the Trump-era Tax Cuts and Jobs Act expire next year if he wins reelection, meaning that a number of Americans could face larger tax bills.

“Donald Trump was very proud of his $2 trillion tax cut that overwhelmingly benefited the wealthy and biggest corporations and exploded the federal debt,” the president wrote on social media Tuesday. “That tax cut is going to expire. If I’m reelected, it’s going to stay expired.”

In 2017, President Donald Trump signed the measure that dramatically overhauled the U.S. tax code, reducing the top individual income tax bracket from 39.6 percent to 37 percent. Changes under the law to the individual income tax are slated to end in 2025.

Other analysts say that if it expires in full, a large number of Americans will see their tax payments increase.

The Tax Foundation has said that a person making $30,000 each year would see their taxes rise about $253.75 on average in 2026, while a married couple with two children who make $165,000 would have to pay about $2,450.50 more.

“Though lawmakers may not address the looming expirations this year, they should prepare for the upcoming expiration by weighing the trade-offs of each change the 2017 tax law made,” Ms. York said. “Lawmakers should cement into law a tax code that promotes growth and opportunity without worsening U.S. debt.”

But White House officials said that if President Biden is reelected in November, the tax cuts would be extended for people making less than $400,000 per year. They claimed that the Trump-backed tax cuts measure would cause a raise in taxes for middle-class Americans next year.

After taking control of the House last year, Republicans introduced a measure to make the Tax Cuts and Jobs Act’s capital gains and individual provisions permanent.