Joe Biden unveils reversal of Trump's tax cuts for most wealthy

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WASHINGTON (BLOOMBERG) US President Joe Biden’s administration on Wednesday unveiled a US$1.8 trillion (S$2.3 trillion), 10-year plan to ramp up federal support for American families, with a major expansion in spending on child care, paid leave and education.

The “American Families Plan,” which Biden will tout in a joint address to Congress Wednesday night, is funded in part by US$1.5 trillion of tax hikes on the wealthiest Americans. The proposals still face major changes in Congress, with Republicans set against higher taxes and Democrats having their own priorities.

Ambitious as it is, Biden’s program omits some of his campaign-trail agenda items and lacks any move to address a cap on state and local tax deductions that Democrats from high-tax states want removed. Following are key elements to the plan: Income Taxes Biden is calling to raise the top personal income tax rate to 39.6 per cent for those among the highest 1 per cent of earners.

“No one making $400,000 per year or less will see their taxes go up,” the White House said in a fact sheet on the plan. Still, the document didn’t specify whether that threshold applies to both single earners as well as married couples.

Biden would increase the capital gains rate to 39.6 per cent from 20 per cent for those earning US$1 million or more – 0.3 per cent of taxpayers or roughly half a million households – equalizing that rate with the top marginal income tax rate. A 3.8 per cent Obamacare tax on investment would then be added on top, meaning the richest would pay a 43.4 per cent federal rate on realized investment returns. State taxes could put the combined tax bill north of 50 per cent.

The plan would also end a long-standing capital gains tax break on inheritances known as “step-up in basis,” which allows heirs to use the market value of assets at the time of inheritance rather than the actual purchase price as the cost basis for capital gains when the holdings are sold.

The proposal exempts the first US$1 million of gains from the end of stepped-up basis, while