A Different Type of Tax 💰

A Different Type of Tax

Since Democrats have control of Congress and the Executive Branch, increasing taxes is going to be an obvious decision. Donald Trump, in 2017, decreased taxes heavily, and it has stayed the same until now. With Democrats looking for ways to fund government initiatives such as the infrastructure bill and Joe Biden’s extension of the Affordable Care Act, taxes are a simple way to fund them. However, Biden could be exploring a different type of tax, one some of us might be very familiar with, a capital gains tax.

For those that don’t know, a capital gains tax is a fee the government taxes on the growth of an investment when sold. When you sell a positive investment, your gains are now realized, leaving them to be taxed. Only realized gains can be taxed, so if you currently have an open investment that is positive, that will not fall under the capital gains tax. However, your investments are also taxed on what type of investments they are: short-term investments and long-term investments. Any investment held over one year is considered a long-term investment, while others are considered short-term investments. This is the exact reason that day-trading is often frowned upon. Short-term gains are considered ordinary income, and taxed as such, leaving them with tax rates as high as 37 percent. On the other hand, long term gains are treated better with tax rates of 0 percent, 15 percent, or 20 percent, depending on your tax bracket. All in all, these taxes are simply used as more funding for programs.

On Thursday, it was reported that President Biden was looking to nearly double the capital gains tax percentage to 39.6 percent. More specifically, this is for the highest tax bracket, which currently has a 20 percent tax. You may be asking, why would he do this? Biden has already planned to increase corporate taxes for the infrastructure plan, so increasing them more is a terrible option. Instead, the proposed increase in taxes is to fund the American Families Plan, a program that looks to help households recover along with the economy, especially children.

The stock market’s reaction? The news sent the indices into a bloodbath, sparking a swift selloff that left the S&P 500 down nearly 1 percent. Capital gains taxes also provide a new level of risk as it could divert investment from the stock market, which is never a good thing. However, this could easily be classified as an overreaction as Biden’s plans are set to help the economy in the long run. Do you support the increase in capital gains tax?

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

Share:
More Posts
OPEC’s Decision 🛢

OPEC leaders just hosted an important late-November meeting that may signal a change in strategy.

Get your daily Invstr Crunch

Get the market news and updates you need, delivered to your inbox or available on our daily podcast.

Risk Disclosure:

Invstr is not a bank and banking services are provided by Vast Bank, N.A.

Brokerage and Banking services are currently only available to U.S. residents.

Invstr app and web services are provided by Invstr Ltd. Advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC) details of which can be obtained here. Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value.

Investing involves risk and can lead to losses. Past performance does not guarantee future results.

Invstr app and web services are provided by Invstr Ltd. Invstr+ advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC). Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value. Vast Bank N.A. a nationally chartered bank and member of the FDIC, provides the banking products, including the products and services related to digital asset accounts. As with any asset, the value of Digital assets can go up or down and there can be a substantial risk that you lose money buying or holding digital assets. You should carefully consider whether trading or holding Digital assets is suitable for you in light of your financial condition. Your digital account does not support wallet to wallet transferring of your digital assets (i.e. cryptocurrencies) outside the platform. Any Digital Assets in your digital asset account are not insured by any government entities, including but not limited to FDIC or SIPC. The Invstr Visa® Debit Card is issued by Vast Bank, N.A. pursuant to a license from Visa U.S.A Inc and may be used everywhere Visa debit cards are accepted. Invstr Ltd, Invstr Financial LLC and Invstr Securities Ltd are subsidiaries of Marketspringpad Holdings (collectively “Invstr”) and Invstr is solely responsible for the application services and website content.

Watchlists provided when users first access the service are not a recommendation to invest. Instead they are provided to help users better navigate the service. Users are free to edit and create their own watchlists. From time to time, Invstr will suggest instruments solely based on an individual’s interest and the interest levels of the Invstr community. The statistical and portfolio builder models generated by Invstr do not reflect actual investment results and are not guarantees of future results. Comments provided by Invstr leaders, influencers or members of the Invstr Community are not recommendations and should not be construed as such. Invstr does not endorse the content or the positions posted by them. Their investment approach, and that of the models provided by Invstr, may be different from yours and may not be appropriate for you.