• 96 days Could Crypto Overtake Traditional Investment?
  • 101 days Americans Still Quitting Jobs At Record Pace
  • 102 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 106 days Is The Dollar Too Strong?
  • 106 days Big Tech Disappoints Investors on Earnings Calls
  • 107 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 108 days China Is Quietly Trying To Distance Itself From Russia
  • 109 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 113 days Crypto Investors Won Big In 2021
  • 113 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 114 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 116 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 116 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 120 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 121 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 121 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 123 days Are NFTs About To Take Over Gaming?
  • 124 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 127 days What’s Causing Inflation In The United States?
  • 128 days Intel Joins Russian Exodus as Chip Shortage Digs In
  1. Home
  2. Markets
  3. Economy

Get Ready For First Tax Hike Since 1993

Tax Hike

The $1.9-trillion COVID-19 stimulus act could prompt the first federal tax hike since 1993, with reports emerging about preparations underway for a potential increase in corporate and individual tax rates for higher earners.

According to White House aides cited by Bloomberg, the planned increases would include a corporate tax rate hike from 21% to 28% and a tax rate hike for individuals earning more than $400,000, as well as a larger estate tax and higher capital gains tax for individuals who earn $1 million or more. 

The ultimate goal is to raise around $2.1 trillion over the next 10 years to help fund not only the stimulus, but also an ambitious new infrastructure plan and ballooning debt.

Independent analysis by the Tax Foundation, cited by Bloomberg, estimated that the top 1% earners would see an approximately 11.3% reduction in their after-tax income in 2021 based on the initial Biden proposal, while the top 5% would see a 1.3% reduction. 

Trump’s 2017 tax law benefitted corporations and the wealthy, reducing the corporate tax from 35% to 21%, and Biden’s sets out to undo this to some extent.

Prior to this, the last tax hikes in the United States came in 1993, under the Clinton Administration.

"The president remains committed to his pledge from the campaign that nobody making under $400,000 a year will have their taxes increased," White House press secretary Jen Psaki Monday told reporters Monday. "His priority and focus has always been on people paying their fair share and also focusing on corporations that may not be paying their fair share either."

In other words, echoing Elizabeth Warren’s words, Pskaki said her view is that “middle-class families are paying more than their fair share and those at the top are not doing their part”. 

According to the World Inequality Database, from 1979 to 2019, the wealthiest 1% of Americans saw their share of pre-tax income jump from 11% to 19%, while their share of wealth overall rose from 23% to 35%. 

While there is no new tax package yet, and this is still early days, some fear the tax hikes could clamp down on Wall Street’s endlessly bullish outlook due to sentiments that an increase in corporate taxes would hit out at stock valuations. 

The market, however, has had plenty of time to consider what everyone has been quite sure since last year would be a tax hike under Biden. It remained bullish nonetheless. 

The DOW has gained over 7% this year, and the S&P 500 has gained 5%. 

For now, the market seems to be holding steady on news that Biden is still “undecided” on this. 

On the campaign trail, there was a lot of talk about higher corporate taxes and capital gains, but not a “wealth tax”.

By Michael Kern for Safehaven.com 

Back to homepage

Leave a comment

Leave a comment