Joe Biden's projected victory over President Trump in the election could mean that estates of wealthy Americans are hit with a tax rate as high as 67%, according to a new analysis published by the Tax Foundation.
Fox News projected on Saturday that, four days after the election, Biden had defeated incumbent President Trump following victories in the key battleground states of Nevada and Pennsylvania.
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"America, I’m honored that you have chosen me to lead our great country," Biden tweeted. "The work ahead of us will be hard, but I promise you this: I will be a President for all Americans — whether you voted for me or not. I will keep the faith that you have placed in me."
The former vice president's plan to increase the capital gains and estate levies for individuals who earned more than $1 million annually before death is one prong in a strategy of raising taxes on higher-income households and businesses to fund government initiatives.
Still, the Constitution gives Congress the power to set tax policy, so Biden's economic agenda may hinge on whether Democrats control both chambers on Congress. While they appear poised to maintain a slim majority in the House, control of the Senate hinges on Georgia, where the state's close election has pushed both races to a Jan. 5 runoff.
Under Biden's proposal, unrealized capital gains would be taxed at 43.4% at death -- a rate that includes taxing those gains at ordinary income tax rates, which he's vowed to raise to 39.6%. It also includes a 3.8% net investment income tax.
The president-elect has also promised to raise the estate tax rate to 45% and lower the exemption to $3.5 million. (The exemption is currently at about $11.5 million for individuals, and the tax rate is 40%).
Under that structure, a $100 million estate comprised solely of capital gains would be hit with an immediate $43.4 million tax at the time of death. The remaining part of the fortune would then be subject to the estate tax, or roughly $23 million.
That's nearly double the effective rate that an asset of that size would face under existing rules, according to the Tax Foundation, a nonpartisan think tank based in Washington.
The proposal would raise more than $280 billion over the next decade and shrink the size of the economy by about 0.15%.
"While this might seem a small impact on economic growth, it is outsized compared to the amount of revenue raised and the number of estates affected," the analysis said. "Indeed, in a $30 trillion economy, for example, 0.15 percent amounts to $46 billion in reduced economic activity, nearly double what Biden’s estate tax plan is expected to collect annually."
Biden has pledged that his multitrillion-dollar agenda would be funded largely by higher levies on households earning more than $400,000 annually and corporations. The plan includes higher income tax rates, an expansion of the payroll tax for Social Security, new tax credits and fewer deductions.
“I will raise taxes for anybody making over $400,000,” Biden said during a recent interview with ABC's David Muir. “It’s about time they start paying a fair share of the economic responsibility we have. The very wealthy should pay a fair share – corporations should pay a fair share.”
Almost 80% of the tax increases backed by Biden would land on the top 1% of earners in the U.S., according to a projection from the Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania's Wharton School.