Thoughts on Biden's Budget Proposal / Tax Hike

I have thoughts on Biden's budget/tax plan (in a surprise to nobody). I'm going to just comment on a few highlights, and not the specific details, since the plan is still in flux.

The Good

The idea of upping the capital gains tax is something I have supported in concept for a long time. I do not buy the idea that people will keep money out of the economy if capital gains taxes are high, especially with real inflation consistently around 5-10% annually (and poised to be much higher in the short to medium term, as the economy picks up and the trillions in created money flood back into it). I think it makes for better socioeconomic policy to tax passive gains at a higher rate than earned income in general.

The Marginal

I don't have a strong opinion on raising the top marginal tax rate back to the pre-Trump level, and/or the specific tax rates in general. Of course these have a huge impact on people's take-home income, but tax rates should be set based on what's acceptable for the country to take from its people, not on how that wealth confiscation impacts individual people. Ideally this would be a relatively static amount, and the government would budget expenditures from there.*

* I'm aware that the government does this the opposite way, figuring out what they are going to spend first and then figuring out what accounting gymnastics and deficit spending are needed to backstop the spending proposals. That's one of the many broken-government things I'm powerless to fix.

The Bad

Once again, we have the Democrat staple of selective taxation, with arbitrary cut-offs for income, personal status, which state you live in, whether or not you donated to Democrat political candidates, etc. (the last one is probably made-up, but not far off from reality). I detest that the tax code is not flat and fair, and applied equally to everyone across the board. I am not super wealthy, and I would not be negatively impacted by the cutoffs in this proposal in any way... but I still hate the fact that they are there. Why the heck isn't the capital gains tax flat? Make it 25%, make it 50%, I don't care... just make it the same for everyone.

I would get rid of all the kickbacks, cut-offs, credits, exclusions, special cases, brackets, etc., and make one rate for earned income and one for passive income (~15% and ~30%, given current spending amounts). Let people deduct all state and local taxes (all sources and guises) against income for federal tax purposes. Done.


Anyway, those are some high-level thoughts, for whatever they are worth.


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