More Taxes to Cover Irresponsible Spending

For years we have been bemoaning the federal debt; we are now sitting at over a whopping $34 trillion in debt and both sides of the legislature have contributed to it. And from the latest administration proposals, it’s clear that they have no reservations about putting the load on citizens, even though they say that they will only tax corporations and “the rich.” What’s being proposed?

Several proposals are on the table, but the most visible and controversial might be the capital gains tax:

According to a report issued by the Treasury Department, led by Secretary Janet Yellen, the president's proposed fiscal year 2025 budget would increase the top marginal rate on long-term capital gains and qualified dividends to a staggering 44.6%. A capital gains tax hike of that magnitude would take the rate to its highest level since it was first introduced in the early 1920s.

The reasons that capital gains will affect the entire country are numerous. First, the capital gains proposal is recommending that unrealized gains be taxed. If you’re unfamiliar with that term and its implications :

An unrealized gain refers to the potential profit you could make from selling your investment. In other words, if an asset is projected to make money but you don’t cash in on that profit, it’s an unrealized gain.

According to Pocketsense, in order to calculate unrealized gains and losses, first subtract the historical value of your asset from its market value. If the amount is positive, your asset has increased in value. If the amount is negative, it means that your asset has decreased in value.

In other words, the government expects people to guess about the amount of unrealized gains; if they are wrong about their guess when the gains are finally realized, it’s not clear if they can correct it in the future.

Ultimately, Americans for Tax Reform say that citizens, accounting for state taxes and the proposed federal reforms, could be paying a 50% tax rate on their income.

Although the administration is making these proposals, Congress—first the House, and then the Senate—are the only ones who can pass tax legislation, with the president approving it. We have seen a number of irresponsible Executive Actions during this administration, and we may have reason to be concerned that the administration will use EAs to enact these “rules.”

Also, enacting this legislation could encourage lawmakers and policymakers to maintain high rates of inflation in order to increase federal tax income.

These drastic proposals don’t bode well for those people who are struggling with inflation in their everyday lives. They already see how their available income has been reduced by inflation, and these policies will only increase their burden.