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Another punishing action for productive folks: President Joe Biden’s planned increase in capital gains taxes might have disastrous implications for the economy.

If re-elected, Biden intends to dramatically raise the top marginal tax on qualifying dividends and long-term capital gains to 44.8 percent, which is far higher than the existing rate of 23.8 percent.

The Trump tax cuts may expire concurrently with the raise, delivering a two-pronged blow that may “destroy” the economy, according to Ted Jenkin, president of Exit Stage Left Advisors and CEO of Oxygen Financial.

In an opinion piece for Fox Business, Jenkin stated, “If these new policies go into effect when the Tax Cuts Act expires close to 2026, millions of Americans will be forced to sell off their highly appreciated stock positions at today’s long-term capital gains rates compared to paying twice in 2026.”

As if this election wasn’t enough, voters will get to decide how much tax Americans pay when selling assets.

The potential big selloff before the new rates lock-in could trigger a stock market crash. This is not a favorable scenario for an economy that is already struggling due to “Bidenomics” and a protracted period of high inflation.

Eleven states would wind up paying more than half of their state taxes in capital gains levies under the Biden plan. The Daily Mail reports that the Biden plan will particularly badly impact states with high taxes, such as California, Hawaii, and New York.

“What would cause the economy to collapse?” Jenkin queries.

The simple explanation for this is that the stock market is subject to the laws of supply and demand. The worry is that selling leads to more selling, and if long-term individual stockholders become anxious about an impending double taxation, a large number of investors may decide to sell, particularly if Congress, the U.S. Senate, and the Biden White House appear to be in the dark.

According to Jenkins, “business owners may sell their enterprises more aggressively in order to pay lower taxes as a result of the proposed long-term capital gain rate restrictions.” “This could also significantly impede the emergence of new companies, as the opportunity to assume legal, financial, and personal risks may not excite entrepreneurs to launch businesses as they did in the past. It could also have a significant trickle-down effect on people losing their jobs as smaller companies merge into larger ones.”

Author: Scott Dowdy


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