Issue #92: Joe Biden is going after those #gainz

May 5, 2021 // ISSUE #92

Hi y’all —

Benjamin Franklin was right. In this world, nothing is certain except death and taxes… and the fact that if I’m scrolling through Netflix and I see that Noah Centineo is in a teen movie, I will immediately watch it. (Yes, even Swiped.)

But let’s go back to the taxes thing.

Last week President Joe Biden unveiled the American Families Plan, a wide-ranging proposal aimed at expanding the social safety net. Expanding the Child Tax Credit and establishing programs for universal preschool, free community college, paid family leave and more would cost an estimated $1.8 trillion. He wants to pay for it by raising taxes — specifically, by enacting "a set of measures to make sure that the wealthiest Americans pay their share," according to a White House fact sheet.

As a 29-year-old journalist, I’m certainly not one of the wealthiest Americans. However, the suggestion of higher taxes, especially in the middle of a pandemic, makes me worry.

Is Biden raising taxes? More importantly, are my taxes going up?

The American Families Plan suggests increasing the top individual tax rate from 37% to 39.6%, the level it was before former President Donald Trump signed the Tax Cuts and Jobs Act in 2017. (FYI: The lower rate would have expired anyway in 2026 unless Congress stepped in.) The idea is to "reform the tax code so that the wealthy have to play by the same rules as everyone else," according to the fact sheet.

Biden's push to increase the capital gains tax rate is a bigger, buzzier change, Mike Savage, CEO of 1-800Accountant, told me. Biden wants to make it so that households earning more than $1 million pay the same rate on profits from selling their investments, aka capital gains, as they do on wages.

Currently, the highest-earning taxpayers owe a 20% capital gains tax on assets held for over a year. Biden would increase this to 39.6% for top earners, meaning "if you're making more than $1 million, your capital gains tax is pretty much doubling," Savage says.

i don't want to do my taxes, but i DO want major biden to have nice things so...

On the campaign trail and in a November tweet, Biden vowed that "no one making under $400,000 will see their taxes go up." Ryan D. Brown, partner and attorney at financial planning firm CR Myers & Associates near Detroit, confirmed that the tweaks would likely affect a small group of affluent Americans.

The example that always comes up here is billionaire Warren Buffett, who has repeatedly said he pays a lower tax rate than his secretary due to the way the system works.

"From the Democrats' point of view, this is an attempt to level the playing field by taxing the quote-unquote wealthy and those that don't work typical 8-5 jobs like most Americans do but are getting rich off of investing," Brown says. "That's why they're doing it."

It’s worth noting that Senate Minority Leader Mitch McConnell, R-Ky., has expressed skepticism about who will end up paying higher taxes. McConnell said Biden's previously pitched infrastructure package was a Trojan horse and that Democrats wanted to raise "taxes across the board." Sen. Ted Cruz, R-Texas, has cast Biden's tax increases as part of a "radical agenda."

Even though my taxes aren’t going up, the hikes could affect me in other ways. For example, there might be a domino effect on the stock market.

Savage says that if the capital gains tax goes up, investors may hold onto their assets instead of selling as a way to avoid dealing with it. If corporations have to pay more in taxes, their earnings could fall, and their stock prices might dip.

The market could also see a big selloff as investors try to lock in lower rates before the policy goes into effect. As a result, Brown says, it's possible my 401(k) may falter.

Then again, this whole thing is far from a done deal. Brown says Biden's proposal faces an "uphill battle" in Congress, where Democrats just barely have an edge. The party had to use the complex budget reconciliation process to get the American Rescue Plan passed in March and has already seen pushback on the cost of Biden's $2.25 trillion infrastructure package.

THE BOTTOM LINE

(but please don't tell me you scrolled past all of my hard work)

If Biden’s proposal passes — and that’s a big “if” — some people’s taxes will go up. But I’m not rich enough to be included in that group. Plus, I should remember it's early days.

"There's a lot more horse trading and negotiating to go on and scenarios to play out before anything's set in stone," Savage says.

via GIPHY

RECEIPT OF THE WEEK

via Instagram

Singer Rihanna recently made a boss move — next door. She purchased a $10 million house in Beverly Hills… close to the $13.8 million mansion she bought in March. Between the two homes, Rihanna has nine bedrooms, 11.5 bathrooms, two pools, a spa, a firepit, a guest house, a built in barbecue grill and enough space to park 10 cars. Oh, and did I mention she lives in the same cul de sac as Paul McCartney? If he needs a cup of sugar, she can be over in four, five seconds.

INTERNET GOLD

five things I'm loving online right now

1	Uh, guys? I don’t want to alarm anyone, but the crazy worms are here?
2	I don’t know why the Hunger Games Twitter account is making fake CD covers with parental advisory stickers, but I’m loving it. Relatedly, I just finished The Ballad of Songbirds and Snakes, and I can’t stop reading fan theories.
3	This tale of one man’s mission to park in every spot in his grocery store’s parking lot is oddly compelling.
4	When a family in Arlington, Massachusetts, made a set of giant letters spelling out HAPPY BIRTHDAY last year, they accidentally started a phenomenon. The letters have become such a hot local trend that there's even a spreadsheet where residents can reserve them for special occasions. It’s so wholesome, and so is this quote: “It was just the latest and greatest thing that came out of a really bad year for everybody.” Amazing.
5	Stop what you’re doing and watch Harrison Ford react to a David Blaine magic trick right now.

401(K)ITTY CONTRIBUTION

send me cute pictures of your pets, please

via Brian Callahan

This is Max, who is wide-eyed because he just found out that Biden’s proposal would increase catpital gains taxes.

Time for me to check Noah Centineo’s IMDB page for updates.

See you next week.

Julia

P.S. Are you concerned about having to pay higher taxes? If you could spell out any message in huge cardboard letters on your lawn, what would it say? Who’s your favorite Harrison Ford character? Tell me why it’s Han Solo at julia.glum@money.com or tweeting @SuperJulia on Twitter.

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Issue #92: Joe Biden is going after those #gainz

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