Income made through the sale of assets held for over a year are generally considered long-term capital gains, and are taxed at a different rate than ordinary income. (Short-term capital gains, such as buying a stock and selling it in less than a year, are taxed as ordinary income.) Presently, the highest rate for capital gains tax—applied to couples making at least half a million dollars—is 20%.
Sources close to the Biden administration report that he is considering announcing a new long-term capital gain tax bracket of 39.6% for those earning $1 million or more, as well as keeping a 3.8% tax on investment income designed to fund Obamacare.
The new tax is projected to bring in $370 billion over a decade.
While this would move towards the goal of taxing all income equally (rather than taxing wages and salaries of those with moderate incomes at a higher rate than the capital gains of millionaires), it would have a surprisingly small impact on the world’s richest individuals.
This is because only a small portion of the annual increase of wealth of people like Jeff Bezos appears as “income” in any form. A wealth tax on billionaires (like a property tax, but for financial property) could tax a percentage of an extremely wealthy person’s total holdings, not just his or her income.
But the most important thing is where the tax money goes. What is it spent on? Taxing the rich does not in itself create wealth, if the taxes are wasted on military adventures, worse-than-useless investments into ineffective power sources such as windmills and solar cells, or moderators for Great Proletarian Cultural Revolution-style struggle sessions.
While the soaring fortunes of the super-rich shock the conscience, those financial gains go hand-in-hand with the declining physical economic potential of most trans-Atlantic economies. Invest in growth! Nuclear power, high-speed rail, water-treatment systems, fusion research, hospitals, parks, education, and urban transit provide a positive return on investment — as opposed to taxing the rich to pay for windmills.
