Last Updated: January 18, 2022
A $3.5 trillion budget plan has been passed in Senate that will promote tax fairness for high-income individuals, CNBC reports.
With the new budget plan that was passed on Wednesday, wealthy Americans and large corporations will pay higher taxes, while individuals whose total annual income is under $400,000, as well as small businesses (e.g. family farms) will be spared from additional taxation. The goal of this $3.5 trillion blueprint is to raise money for extra spending on education, paid leave, health care, and climate initiatives. These measures go hand in hand with the recent changes to crypto taxes.
What Will the New Taxes Look Like?
Many experts consider the Democrats’ plan to raise the top marginal income-tax rate to 39.6% from 37% a way to increase taxes on the rich. Ryan Abraham, a Principal at Ernst & Young says: “I think Democrats would say, ‘That’s where we were before the [2017 Tax Cuts and Jobs Act] that we didn’t vote for. That’s not asking too much. ’” This plan will only accelerate the long-term effect of the Tax Cuts and Jobs Act, according to which the top marginal rate was about to reach 39.6% after 2025 anyway.
The US will also experience the highest tax rates on long-term capital gains that will further affect the rich. The tax on capital gains will be the same as the marginal income-tax rate – 39%, while the average tax combined with all federal taxes is most likely to go up to almost 49% for the wealthiest. This category involves cryptoholders sitting on long-term gains.
Households that earn more than $400,000 annually are another proposed source of revenue under the new plan. According to a Treasury Department report, underreported income on tax returns, especially among high-earners, contributes most to the so-called tax gap.