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The advisor said that 0.3% of US households that will be affected by the capital gain tax increase represents those who make over $1 million annually.
The White House has defended the administration’s plan to increase the capital gains tax. According to the White House, the hike will not be a burden or a barrier to business investment. Specifically, the House said the rise of the capital gains tax would only affect 0.3% of households in the US.
Last week, CNBC reported that US president Joe Biden would seek to increase taxes on capital gains by nearly 100%. Formerly, the capital gains tax was 20%. With the increase, however, capital gains tax will jump to 39.6%. As stated in the report, the hike will target Americans who earn over $1 million. CNBC said that the plan to lift taxes on capital gains is part of Biden’s plan to rebuild the US economy.
Following the news on the increase in capital gains tax, major stock indices in the US plunged. The Nasdaq Composite (INDEXNASDAQ: .IXIC) declined 0.94%, the S&P 500 (INDEXSP: .INX) fell 0.92%, and the Dow Jones Industrial Average (INDEXDJX:.DJI) dropped 0.94%.
Capital Gain Tax
Now, the National Economic Council director, Brian Deese, said that the inflation in capital gain tax would affect a small percentage of people. He said the 0.3% of US households that will be affected represents those that make over $1 million annually. He referred to the to-be-affected people as “not the top 1%” and “not even the top one-half of 1%.” Deese added that the change would not be relevant to the 997 out of 1,000 households across the US.
“For the typical Americans, most of their income comes from wages. So for people making less than $1 million a year, about 70% of their income comes from wages. But for those making more than $1 million, for the top 0.3%, it’s the opposite. About 30% of their [income] comes from wages,” explained the expert.
During the news conference, Deese was asked to discuss criticism that inflating capital gains taxes will affect investments in US business. In response, Dess noted that there is no fact to support the assertion. Deese’s response came after major stock indices plummeted.
“Across a wide body of academic and empirical evidence, there is no evidence of a significant impact of capital gains rate on the level of long-term investment in the economy,” said he.
Highlighting the reasons behind his statement, Deese said that a lot of venture capital and early-stage investments come from wealth funds, pension funds, and entities that are not affected by the tax.
At the time of writing, Nasdaq Composite is up 0.87% to 14,138.78, and the S&P 500 has gained 0.18% to 4,187.62. However, the Dow Jones Industrial Average is down 0.18% to 33,981.57.