On Friday, May 28th, 2021, President Biden’s administration announced its proposed fiscal year 2022 budget proposals that include up to, more than $6 trillion dollars in new federal government spending. Currently, the US federal debt clock reports the US owes more than $30 trillion dollars in debt with an additional $4 trillion included from new government spending since January of 2021. The additional spending surrounds infrastructure – highways, bridges, and the like, as well as new clean “green energy”, research and development, and other proposals that will directly affect both individuals and businesses especially corporations.
All these tax proposals set out to increase taxes on wealthy Americans making gross and/or adjusted gross income for tax purposes over $500k as well as over $1 million as it concerns capital gains rates. Within the American Families Plan, the proposed budget would make changes to the taxation of high-income individuals in the following ways:
- Increasing the top marginal income tax rate for high earners from 37% to 39.6% for taxpayers with taxable income over $509,300 for married taxpayers filing jointly and over $452,700 for single filers;
- Taxing capital gains of high-income individuals (with adjusted gross income over $1 million) at a 37.6% rate;
- Imposing capital gain tax on property transferred by gift and on property owned at death;
- Rationalizing the net investment income and Self-Employment Contributions Act (“SECA”) taxes so that all pass through, business income of high-income individuals is subject to either the net investment income tax or SECA tax.
- Limiting the deferral of gain from like-kind exchanges to $500,000 per taxpayer ($1 million for married taxpayers filing jointly) per year.
- Making permanent the Sec. 461(l) excess business loss limitation for non-corporate taxpayers.
- This proposal also includes increased the budget of the Internal Revenue Service to improve compliance – hire more Agents; and improve IRS computer infrastructures.
In regards to businesses and/or corporation under the American Jobs Plan previously outlined by the Biden administration, the following changes have been proposed, in part:
- Raising the corporate income tax rate to 28% from its current 21%;
- Revising the global minimum tax regime, disallowing deductions attributable to exempt income, and limiting inversions;
- Repealing the global intangible low-taxed income (“GILTI”) exemption for foreign oil and gas extraction income;
- Imposing a 15% minimum tax on book earnings of large corporations; and
- Providing a 10% tax credit as an incentive for locating jobs and business activity in the United States and removing tax deductions for expenses incurred in connection with moving jobs overseas.
Additional provisions are proposed under housing and infrastructure as well as new clean (green) energy with the expansion of low-income housing taxation credits for housing and eliminating various fossil fuel tax preferences and extending various renewable energy (tax) incentives.
In all of this – here comes the op(inion) ed(itorial) – all Americans will pay more in taxes to the federal government than they ever have before unless you make less than $40-50k a year. If you do make around that amount or less, you will be subsidized by the federal government in the form of unemployment compensation, child tax credits if you have children, and so on. However, to my point, all Americans will have to pay more taxes to the federal government in the form of indirect taxes. How so you say? Let’s start again where we have explored prior.
Gas prices. Why have gas prices gone up so expediently since January 2021? Anyone? Supply? Nope – supply is consistent. Demand? Nope – demand hasn’t increased at all. The reason is the Biden administration signaled to the gas and energy companies in the Spring of 2021, as well as during the campaign they were going to substantially increase taxes on the gas and oil companies to then fund the new clean, green energy spending proposal outlined above. That is an indirect tax! That’s the simple and subtle lift in the game of three-cup shuffle most Americans will never know or even realize until it’s too late.
Moreover, related to the increased gas prices due to the expected increase in corporate energy tax rates as confirmed by today’s Biden administration proposals, we are also seeing food costs go up substantially. It’s simple, the more gas costs for trucks that deliver your food, groceries, etc. to Wal-Mart, Kroger, Sam’s, Costco, etc. the more those increased gas costs are being rolled into your food costs. These corporations are not going to allow an additional increase in tax of 7% be taken out of their bottom line; and, therefore, are more than willing to pass those increased costs for food from the increased gas costs to us, the consumers, and they don’t mind for a second nor do they likely care what your taxable or gross income is or was or how much money you make per year.
Correspondingly, lumber costs have skyrocketed recently in four months as well and on top the new spending proposals outlined by the Biden Administration today, the administration also increased tariffs on lumber from Canada in a response to increased tariffs implemented on American cheese shipped into Canada from the US by Mr. Trudeau, Canada’s Prime Minister. This will ultimately drive up the costs of lumber even more and effectively, directly drive up home building costs as well. The more lumber costs the more your new home build will cost.
Lastly, to be fully transparent, I want you to know that the new trillion-dollar spending proposals are purposeful in attempt to have the federal government eventually take over the private US economy. One (more) question – have you ever heard the saying “history repeats itself”? I’m sure you have. In 1935, President Franklin D. Roosevelt, FDR for short, proposed an astronomical (at the time) federal spending budget in attempt to take over the private economy and was simultaneously slapped down by the US Supreme Court whom sided with a coalition of private business owners who organized and sued the FDR administration because they could not freely conduct commerce. This is happening again today with the proposal of the Biden administration’s fiscal year 2022 federal budget and, I believe, will simultaneously be sued by conservative state AG and, in my opinion, is likely to be upheld if it goes to the US Supremes’.
I sincerely pray this does not happen, because it does not have to happen. Should each American pay their fair share in tax? Absolutely, yes; however, in the most recent Department of Treasury study released, only half of Americans pay taxes into the federal apparatus. That fact is not likely to change anytime soon or in the future. With this new, substantial increase in federal spending, its inevitable inflation and/or hyper-inflation will occur and leave most if not all Americans savings and retirement funds worth substantially less to worthless. And, sadly, at this point I don’t see how anyone who doesn’t want that to happen can change it. This progressive, economic strategy has been planned for many years and the birth pangs of these progressive economic strategies for the ultimate purpose outlined above are coming to life before our eyes and will cause substantial economic disaster. I just pray it’s not too late.