President Biden has vowed to nearly double the capital gains tax 39.6%, the highest rate since Jimmy Carter in 1977. This will impose a capital gains tax rate twice as high as communist China, and it will hit Americans who have worked hard and lived modestly for decades.
For example, the Wall Street Journal interviewed Kentucky resident Paul Settle, who will get whacked with a $390,000 Biden capital gains tax hike:
Five brick apartment buildings in this horse-country town make up Paul Settle’s retirement nest egg. He purchased the complex 27 years ago and has spent almost every day since tidying the grounds, repairing garbage disposals and collecting rent checks.
Mr. Settle, 64 years old, pays himself about $75,000 a year. The idea was always to one day sell and retire off the proceeds.
But now his plans are on hold. The Biden administration’s tax proposal would increase the capital-gains taxes Mr. Settle would pay on the sale of the apartments, which he expects to fetch over $2 million. Mr. Settle’s tax adviser estimates the changes could halve his after-tax proceeds to about $400,000 after paying off the mortgage.
“I’m in limbo,” he said.
Mr. Settle used a mortgage to buy the apartments in Versailles (pronounced “Ver-sayles”) for $1.3 million in 1994, seven years after they were built. The complex sits next to a large park in a quiet residential neighborhood with single-family homes. It isn’t far from the former orphanage where his father grew up.
Settle does the repairs and cleans the apartments himself:
He visits the apartments daily, sweeping the laundry room before working on repairs and grabbing a fast-food lunch. He still cleans each unit himself when a tenant moves out.
This spring, he saw a television segment on the proposed increase in capital-gains rates. He thought it might not apply to him, but called his tax adviser to be sure. Mr. Settle, who voted for Mr. Biden, was stunned to learn the extent of the hit.
Eyeing retirement, Settle looked to sell the apartments but learned the Biden plain would cost him an additional $390,000 in taxes:
Under current rates, Mr. Settle’s tax adviser estimates that he would pay just under $500,000 in federal taxes on such a sale. That would leave him with about $800,000 after paying the mortgage, state and local taxes. Under the Biden plan, Mr. Settle would owe around $390,000 more in taxes, leaving him with about $400,000, his tax adviser estimates.
Anything close to $400,000 won’t be enough to retire on, he said, especially if he inherits his father’s longevity.
For now, Mr. Settle continues his daily rounds.
There are hard working people like Mr. Settle in every town in America who quietly work and save for decades to build up a retirement nest egg. They are the backbone of Main Street and the small business community. Biden and congressional Democrats are targeting them for a tax increase and dismissing them as something resembling Scrooge McDuck and Rich Uncle Pennybags.
Under Biden’s plan many taxpayers will pay a capital gains rate higher than 50%:
Californians will pay a top capital gains tax rate of 56.7 percent (39.6% + 3.8% NIIT + 13.3% CA state rate).
New Yorkers will pay a top capital gains rate of 52.2%
New Jersey taxpayers will pay a top capital gains tax rate of 54.14%.
Biden’s plan will wallop America just as the country is trying to dig out from the pandemic. The plan also puts the USA at a competitive disadvantage vs. our economic competitors.
When comparing Biden’s capital gains tax plan to China, the state capital gains tax burden must be included.
China’s Capital Gains Rate: 20%
United States Under Biden Plan: 48.8% (39.6% + 3.8% Obamacare tax + 5.4% state average)