President Biden is under fire in response to his effort to hike the top capital gains tax rate to its highest-ever level, a move experts say would crush the economy.
President Biden's latest proposal to hike the top capital gains tax rate to its highest level in more than a century is facing heavy criticism from experts who warn such an action could significantly harm the U.S. economy.
According to a report issued by the Treasury Department, led by Secretary Janet Yellen, the president's proposed fiscal year 2025 budget would increase the top marginal rate on long-term capital gains and qualified dividends to a staggering 44.6%. A capital gains tax hike of that magnitude would take the rate to its highest level since it was first introduced in the early 1920s.
"Investment is the real driver of economic growth," E.J. Antoni, an economist and research fellow at The Heritage Foundation, told Fox News Digital. "Investment is what gives you productivity gains. Investment is where you get factories and machines — it's where businesses are able to provide their workers with tools and equipment that allow them to increase their productivity, to increase wages, etc."
"If you're going to tax something, you get less of it," he continued. "And that's just as true for investment as it is for anything else. Taxing capital gains means less investment, it means less economic growth, and it means the rise in people's standards of living is going to slow dramatically."
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The Treasury Department's report states that the 44.6% rate is a combination of proposals, including increasing the top ordinary capital gains rate from 20% to 37%. The bulk of the tax hikes impact Americans with taxable income greater than $1 million.
But Antoni, who argued such a tax hike would have broad economic impacts, further noted that inflation impacts the price of equities, such as stocks. That means a tax on gains when equities are sold also taxes inflation.
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Increasing capital gains taxes, therefore, could create a larger incentive for lawmakers and federal policymakers to maintain high rates of inflation to guarantee larger tax revenues, according to Antoni.
"These are the really dangerous Biden proposals that a lot of people miss when it's rolled out from Treasury," Mike Palicz, director of federal tax policy at Americans for Tax Reform, told Fox News Digital. "They actually come out and say, 'we're advocating for a top capital gains rate of 44.6%.'"
"This is people's nest egg. This is them saving, them investing — it's their American dream. And here is Biden coming out with the highest proposed capital gains tax in 100 years," Palicz said.
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In a recent post, Americans for Tax Reform stated that the tax proposal outlined by the Treasury Department, when paired with high state taxes, could lead to many Americans paying rates of more than 50% on income. The group also noted the proposal could crush small business owners who will be exposed to the high rate when they seek to sell their businesses.
Biden's proposal would further create a mandatory capital gains tax on transferred assets for families when parents pass away.
Additionally, Biden's proposal would impose a 25% tax on unrealized capital gains owned by Americans whose wealth exceeds $100 million. Overall, that new tax, along with the substantial capital gains tax increase, are projected to lead to nearly $800 billion in new government revenue, according to a Peter G. Peterson Foundation analysis.
"The idea that this is somehow going to raise trillions upon trillions of dollars is once again based on the notion that people will respond by essentially not responding," Antoni said. "In other words, I won't actually change my behavior when faced with these higher tax rates."
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The Treasury Department didn't respond to a request for comment.
