Will New Tax Proposals Affect You?

Zachary Powers

One of the most controversial topics in American politics is taxes. Should they be increased, or should they be decreased?

Generally, the Democratic Party aligns with the idea of raising taxes to fund more government-sponsored programs, while the Republican party tends to align with the idea of lowering taxes on corporations and more affluent individuals. Some Democrats support government-sponsored programs because they believe these programs offer what the capitalist free-market system cannot: a social safety net that helps the less fortunate in society.

Republicans lower taxes on corporations and individuals based on the idea that “trickle-down economics” helps those less fortunate. The theory is that lowering taxes will lower prices, which benefits the less fortunate in society, because of more affordable pricing. Changes in the tax code can trickle down benefits to all individuals, an idea championed by former President Ronald Reagan.

Democratic leadership has been proposing tax changes since their party won control of both houses of Congress this year; they also benefit from not necessarily having to work on a bipartisan basis with Republicans. Democrats have proposed the following:

  • Setting a minimum corporate tax rate
  • Taxing unrealized gains on appreciated assets like stocks for billionaires
  • Capital gains tax increase
  • Reducing estate exemption to extract more taxes
  • Higher taxes for income earners making over 400 thousand dollars a year in salary

Democrats claim this proposal will support their $1.75 trillion spending proposal not only to support social safety programs, but boost infrastructure, healthcare, education, and fight climate change.

They hope this expensive bill will pay for itself through these new tax proposal ideas. Republicans are likely to oppose this proposal for many reasons, but most notably, the large price tag on the bill and the tax increases.

The good news for regular American citizens, and for most individuals here in Worcester County, is that the new tax proposals should have a lesser effect here. Worcester County has an enormous amount of small businesses, most of which won’t be affected by the corporate tax rate proposal. The proposal sets a minimum corporate tax rate of 15 percent for corporations that consistently earn more than $1 billion a year.

The next tax change would tax unrealized gains on individuals with over $1 billion in assets, a proposal likely to affect just 700 people in the entire country, according to the financial newspaper Barron’s.

Another tax change would increase the long-term capital gains rate of 20 percent to 25 percent, which could have implications for anyone that owns assets for longer than one year.

For example, the sale of a stock that has appreciated and been sold more than one year after the initial purchase would be taxed at the new 25 percent rate. This will affect retirees and almost the entire U.S. population that owns certain assets. Locally, residents of Berlin and Ocean City are likely to be affected by this one change the most, because of the number of retirees living in this county. Democrats will encounter a tough battle with party moderates to get this proposal through as it does affect many Americans.

The Democrats also have proposed extracting more taxes from estates or trusts. This would reduce the tax exemption from $11.7 million to $6 million, almost cutting it in half. The change would only affect people with family trusts or any kind of wealth trust, as well as anyone with estates. 

In general, these proposals won’t impact everyone and would have a lesser effect on Worcester County business and people. These new changes proposed by Democrats, which target affluent Americans, would be a major policy change not seen since the Obama administration. According to the Democrats, this proposed “Build Back Better” bill in theory should help every American citizen.

Will the tax changes affect non-wealthy people too, or will the spending in the bill offset the tax changes and benefit society overall? Only time will tell.