Economist Steve Moore said President Biden “really failed” in promising to let the Trump tax cuts lapse on “The Bottom Line.”
If you are one of the millions of Americans Struggling to save for retirement Today, we need to prepare for more hardship if President Biden has his way: He is proposing higher taxes on savings, which would make inflation-adjusted returns negative for many people.
As part of a multi-trillion-dollar tax hike, Biden has proposed a 45% tax on capital gains, portraying it as a tax on “greedy” billionaires, when in reality 12.5 million Americans, mostly middle class, are paying this tax on their retirement savings.
That’s why every American should be terrified that Biden is planning to raise this tax rate to its highest in 111 years — a move that would severely impede people’s ability to save for retirement and stifle economic growth.
President Biden spoke about his “Bidennomics” plan on August 15, 2023, in Milwaukee, Wisconsin. (Scott Olson/Getty Images)
This is especially true in the high inflation environment created by Biden economics, which is important when planning for retirement because the falling value of the dollar means you have to be prepared to pay much more in the future as the cost of living becomes increasingly more expensive.
High inflation is changing how Americans retire
As a result, people are forced to put their savings into higher-yielding investments, a phenomenon known as the ‘chasing for yield.’ If someone buys a bond that yields 3% but inflation is 4%, then that person’s real (inflation-adjusted) yield becomes negative because a larger dollar amount has much less purchasing power.
Of course, you will still have to pay capital gains tax on any book profits, even if you actually made a loss.
Luke Lloyd, investment strategist at Strategic Wealth Partners, explains on “Varney & Co.” how Biden’s new corporate tax plan will affect the stock market.
A 45% tax gives a 3% bondholder a nominal investment return of 1.65% but a real return of -2.35%.The twin blows of inflation and capital gains make saving a thing for fools.
The result of such punitive taxes is that people save less, which means they invest less, eliminating a key driver of economic growth. Investment is where an economy gets its capital resources, enabling productivity growth, higher wages, medical advances and other technological innovations, and rising standards of living.
Most Baby Boomers Heading into Retirement Have Little Savings: Survey
Progress in all these efforts has halted, Investment is hindered Higher taxes will stop the pie from growing. If they discourage investment enough, people’s quality of life will decline.
Rep. Greg Stube (R-FL), chairman of the House Ways and Means Committee, appeared on “The Evening Edit” to discuss the major obstacles facing small businesses as President Biden threatens to double small business taxes.
If huge tax increases on investments are harmful to individuals and the economy as a whole alike, why would Biden propose such a disastrous policy? Simply put, because he and the rest of Washington, DC, depend on the spending.
Just a few weeks ago, the White House proposed a staggering $7.3 trillion federal budget (a level not even reached during the COVID pandemic) and $4.9 trillion in future tax increases, which our Heritage Foundation colleague Richard Stern calculates would amount to an additional $36,000 in taxes per American household.
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These taxes would be paid by families cutting back on spending and reducing savings, such as by cutting back on retirement contributions, to cover necessities like food, rent and transportation.
Tax Foundation President Emeritus Scott Hodge responds on “Kudlow” to the G20’s push for a global wealth tax on billionaires.
Many of the investment tax increases proposed by the White House would be under the radar, but would still impede attempts to save and retire. Of course, Biden’s proposed corporate tax increases would be passed on: customers would pay higher prices, workers would receive lower wages, and investors (saver) would see lower rates of return.
That means you’ll end up paying a higher price without a corresponding increase in your income, meaning you’ll have less money saved at the end of the month. And even worse, less money to put away in your retirement accounts.
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Steve Forbes and John Carney responded to President Biden’s attack on former President Trump’s tax cuts on “Kudlow” and his criticism of Americans paying more taxes under the Biden administration.
This may sound grossly unfair, but it’s simple math: Someone has to pay for trillions of dollars of government spending, and because the rich hire good accountants and the poor don’t pay taxes, it’s going to be the American middle class that pays.
Whether it’s capital gains tax, corporation tax or a hidden inflation tax, the government will pay the cost – in this case £7.3 trillion. Biden is turning Americans’ retirement dreams into a nightmare.
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Peter St. Onge is a visiting fellow at the Heritage Foundation.
