Tax and Spend Democrats

By Mississippi Sounder

Biden, looking as frail as ever, emphasized in his speech that all he wants is for all Americans, especially the rich, to pay their fair share.

Fake Republicans join Democrats in a mini Green New Deal vote.

Joe Biden detailed his $1.8 trillion American Families Plan during a joint session of Congress April 28, 2021. The plan, which is the second part of Biden’s so-called infrastructure bill, concentrates on students and workers and includes the following

  • Universal prekindergarten
  • Federal paid leave program
  • Money to make childcare more affordable
  • Free community college
  • Aid for students at historically nonwhite communities
  • Expand subsidies under Obamacare
  • Extending federal efforts to fight poverty

The Democrats claim free preschool and free community college will cost $200 billion over 10 years. The Biden administration wants to add four more years of free schooling for all Americans, two on the youngest end in the form of universal prekindergarten for three- and four-year-old’s, and two after high school in the form of tuition-free community college. Never mind the fact that students in Mississippi and in other states already receive free community college tuition by simply meeting residency requirements and minimal admission requirements. Additionally, many universities offer tuition guarantee to students after they complete their community college degree with only minimal requirements. These tuition guarantees have nothing to do with income either. Nevertheless, the Democrats want more specifically in the form of pell grants.   

The proposed preschool program would apply to families of all income levels and would cost $200 billion over 10 years, though according to the administration it would “prioritize high-need areas.” The plan promises teacher training, wages of at least $15 an hour for all employees, and compensation similar to that of kindergarten teachers for educators with comparable qualifications. Then $109 billion goes towards community college. Biden wants to increase Pell Grants $1,400 from $6,495. Pell Grants are awarded to a student who has an exceptional need for financial aid. Of course, the expansion of preschool will necessarily trigger the need for more buildings, and if not already covered in the plan, someone, the government, will need to transport the little ones. Sounder can easily think of numerous other provisions that taxpayers will need to fund when it comes to the proposed preschool expansion. 

The Democrats want to enforce a paid leave program which assumingely also applies to the private sector. Biden’s paid leave program would take a decade or so to fully implement and would cost $225 billion. The implementation starts slowly by ensuring workers get three days of bereavement leave a year. By the 10th year of the program, it will have scaled up to guarantee 12 weeks of paid parental, family and personal illness leave. Sounder assumes, somewhat sarcastically but in all seriousness, the paid leave will also cover mental health days, or safe place days, as part of personal illness leave. It will pay workers up to $4,000 a month, with a minimum of two-thirds of average weekly wages replaced. For low-wage workers that could be closer to 80% of their wages. How is paying people to sit at home working for us now? How will small businesses afford to this?

Biden, looking as frail as ever, emphasized in his speech that all he wants is for all Americans, especially the rich, to pay their fair share. A few questions come to mind when thinking about millionaires and billionaires paying their fair share. Since when is a person making $453,600 a year a millionaire? Since when does that equal $400,000, the number he touted for months when explaining the tax increase threshold? Since when is a couple making a combined income of $509,000 a millionaire couple? Sounder has repeatably pointed out examples of Democrats changing definitions to fit their narrative, and numbers are no exception to the rule. According to the proposed increase, these people are in the top tax rate, which will go up to 39.6% from 37%.

The Democrats, who are worth millions, apply their hatred of millionaires when it comes to tax rates on dividends and long-term capital gains. Dividends are the “payments a company makes to share profits with its stockholders.” Sounder’s valued readers are most likely familiar with dividends and capital gains since most have experience with 401K’s or other retirement plans. It is worth noting that millions upon millions of Americans, not millionaires, participate in the stock market and would suffer the consequences of the proposed plan.

Here is a summary of the Democrats want: Long-term capital gains are assets held for more than a year. Short-term capital gains are the assets held for less than a year. They would increase more sharply for households making more than $1 million, from today’s 23.8% to 43.4%, including a 3.8% tax on investment income. According to the administration, that would affect 0.3% of households, where investment income is concentrated. Currently, there is a 3.8% tax on investment income and an equivalent set of taxes on wages and self-employment income. The administration, citing holes in the law, says it would apply those taxes consistently to income over $400,000. The results could mean applying a 3.8% tax to the active income earned in businesses such as S corporations and partnerships. Never mind the fact that Mr. Biden used a common technique involving S corporations to avoid the 3.8% tax on much of his speech and book income after he left the vice presidency not that he would know that.

Currently, people who own appreciated assets owe capital-gains taxes when they sell. If they die, that entire gain goes untouched by the income tax. Their heirs then pay capital-gains taxes only if and when they sell and only on the gain since the original owner’s death. By contrast, the Biden plan would treat a bequest other than a charitable donation as a sale for tax purposes. Therefore, an individual who bought a business for $2 million and dies when it is worth $9 million would have a $7 million capital gain on his final tax return. The Biden plan would offer a $1 million per-person exemption to reduce that taxable gain to $6 million.

The existing exclusions of up to $500,000 for the principal residence of a married couple would also remain. God forbid people use the tax code to help their gains escape the income tax. That change would prevent some gains from escaping the income tax entirely, and without that change, the rate increase on capital gains would actually lose money. That’s because with a higher capital-gains rate—likely anything above 28%—asset holders would become more likely to hold on to their unrealized gains and wait to pass them to heirs rather than sell them.

The potential tax at death would change that calculation because there would be no significant tax benefit from holding assets until death. The estate tax, which Mr. Biden proposed to increase during his 2020 campaign, would not change under the plan. That’s based on someone’s total net worth, not the value of their unrealized gains alone.

Lawmakers have not yet released legislative text based on Biden’s proposals, and it’s possible that some Democratic lawmakers could have concerns with the president’s proposed bracket. Republicans have already voiced concern for the plan. President Trump weighed in the morning after Biden’s joint address and warned that the economy is booming because of the policies he left and that increasing taxes will not only slow the growth but reverse it too.  

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