President Biden will make his first speech to a joint session of Congress on Wednesday night, where he is expected to lay out the next steps in his plans to rebuild the economy – which his administration insists can be paid for by taxing the wealthiest Americans.
The White House has said Biden will speak about his next spending initiative, which was announced on Wednesday and revolves around items like child care and education.
The American Families Plan calls for universal pre-k for children aged 3 and 4, as well as two years of free community college. It includes provisions for national comprehensive paid family and medical leave programs and an extension of the expanded Child Tax Credit and Earned Income Tax Credit.
To pay for the plan, which encompasses $1.8 trillion in investments and tax credits over 10 years, the president intends to raise capital gains tax rates and hike the top personal income tax rate on wealthy individuals.
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The proposal would increase the capital gains tax rate for individuals earning more than $1 million to 39.6%.
The Tax Foundation noted that this would increase the capital gains rate for affected individuals to the highest rate in decades. Including the net investment tax on income, the federal rate would rise to 43.4% -- and higher for individuals depending on their state tax rates.
Currently, short-term capital gains are taxed at the same rates as income, but long-term gains are taxed at lower rates.
Additionally, Biden wants to eliminate the stepped-up basis loophole, which allows an individual who inherits assets or property from a decedent to sell it immediately and pay no tax. That is because the cost basis has been "stepped up" from the price the deceased owner originally paid for it to its fair-market value on the date it was inherited.
The loophole would be eliminated for gains in excess of $1 million.
The president proposed raising the top income tax rate on individuals to 39.6%, from 37%, which the White House said will only affect those in the top 1%.
And Biden will also allocate more resources to the IRS for enforcement purposes.
White House Press Secretary Jen Psaki has acknowledged that it is the president’s view that the wealthy can and should pay more to help push forward his agenda.
"His view is that [paying for the proposals] should be on the backs – can be on the backs of the wealthiest Americans who can afford it," Psaki said. "And corporations and businesses who can afford it. And his view and the view of our economic team is that that won't have a negative impact. There are alternative views or there are proposals that don't exist yet on how to pay for it."
In order to help fund spending on the $2 trillion American Jobs Plan, Biden proposed raising the corporate tax rate to 28% from 21%, as well as eliminating various perceived loopholes in the corporate tax code.
The White House has maintained that taxes will not increase for individuals earning less than $400,000.