Everyone loves taxes, right? Tax season is one of the times that Americans dread the most, and for good reason too. The amount of documents you need to pull up, along with bringing tax statements from your brokerage, creates a headache for many. It’s gotten easier now with applications like Intuit TurboTax where you can connect everything in a streamlined way, but the process is still very complicated, and you never want to be late on your taxes. For some Americans, the next tax season will create an even worse headache.
Recently, the Democrats released further details on their tax increase proposal. First, the corporate tax rate will increase to 26.5 percent from 21 percent, while also placing a 3 percent surtax on people making over 5 million dollars. For those unfamiliar with a surtax, it’s essentially an additional tax on taxed money, so this is an extra push to tax the rich. Looking at the individual level, the marginal tax rate for the highest tax bracket would jump to 39.6 percent from 37 percent, which mainly affects the people who make over 400,000 dollars. This is something that Biden has addressed many times, and it also holds true when it comes to the capital gains tax rate for the wealthy, with the number rising to 25 percent from 20 percent. The goal of these tax increases is to increase the social safety net and fund climate change initiatives, which goes back to the bill we talked about a couple of days ago. All that needs to happen is to send this through the legislative process, but we’ll see how many adjustments and delays occur. What do you think about these tax increases?
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.