Biden’s 44.6% capital gains tax proposal likely a ‘nothing burger’

For an average cryptocurrency investor, President Joe Biden’s plan to elevate the capital gains tax rate up to 44.6% for specific individuals – the highest in US history – is anticipated to bring little consequence.

Matthew Walrath, the creator of CryptoTaxMadeEasy shared with CryptoMoon his perspective that Biden’s recent tax proposals are unlikely to impact the majority of crypto users, should they eventually get approved as laws.

“For 99.9% of people, it’s a big, fat nothing burger because it’s essentially just a proposal.”

Despite the fact that the proposed tax rate and an extra plan to levy a 25% tax on unrealized gains have been publicly known for over a month, they have generated significant buzz and attracted widespread discussion on social media.

A commonly cited number, 44.6%, was first mentioned in a Treasury Department document from March 11. This percentage would only apply if both proposals – one raising the regular tax rate for top earners and another boosting the tax rate on investment income – received approval.

Biden’s 44.6% capital gains tax proposal likely a ‘nothing burger’

According to Walrath, the proposal in simpler terms means increasing the tax rate for long-term capital gains to 44.6% for individuals making over a million dollars annually.

“Really high-income earners could potentially — if this budget proposal goes through — face a much higher long-term capital gains tax rate. But for the most part, it’s unlikely that it’s going to affect the average crypto user.”

In agreement with Walrath’s perspective, anonymous crypto expert SqueezeTaxes explained that the criticism towards the plan was merely a “sensational headline bait” before elaborating on the implications of the suggested policies for American residents.

The core of Squeeze’s proposals revolved around raising the top federal tax rate to 39.6% and boosting the Net Investment Income Tax (NIIT) to a 5% level. Together, these changes amount to a total tax rate of 44.6%.

Biden’s 44.6% capital gains tax proposal likely a ‘nothing burger’

“People with moderate incomes won’t be impacted by these changes. Instead, Biden’s tax plans are specifically aimed at high-earners making $400,000 or above and those earning $1 million or more.”

Based on information from cryptocurrency payment company TripleA, the typical crypto investor globally earns roughly $25,000 per year. However, it’s important to note that this amount also encompasses data from countries with lower average incomes than the US.

Is Biden coming for unrealized gains?

Remarkably, the Federal Budget plan put forward by Biden featured a 25% tax on the unrealized gains of wealthy individuals with substantial net worth.

In a blog entry on the 25th of April for X, Bitcoin analyst Jason Williams labeled the suggested 25% tax as “extraordinarily absurd.” He further cautioned that this tax could potentially bring about significant economic damage all by itself.

Biden’s 44.6% capital gains tax proposal likely a ‘nothing burger’

Yet, the proposed 25% tax on unrealized gains by Biden would affect individuals possessing over $100 million in total assets according to Grant Thornton’s tax analysis.

“The proposed unrealized capital gains tax rate affects only the wealthiest individuals in the crypto community, as mentioned humorously by Walrath, and won’t significantly impact most people on Crypto Twitter.”

In the end, Walrath expressed his view that Biden’s tax plans might merely be political maneuvers aimed at winning support from low-income voters.

“It’s more of a posturing political play. The Democratic Party has kind of made an enemy out of wealthy people, and that’s one of the ways that they play to a low-income, low-education base.”

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2024-04-25 08:36