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President Joe Biden's tax rate crackdown on long-term capital gains and qualified dividends is not drawing unanimous support, and many say it wrongfully targets white taxpayers.
The administration released its 2025 budget proposal last month, and the budget calls for a significant increase to the top capital gains tax rate, bringing it to 44.6 percent from 20 percent. Capital gains taxes include the money the government takes from investors after they sell assets like stocks, bonds or even real estate.
The new percentage would go into effect for all high-income earners with a taxable income of more than $1 million. Many of these high-income earners would also be facing state taxes, which could bring the tax percentage to as high as 59 percent in some states.
The people who benefit from lower rates on capital gains are disproportionately white, according to the budget's authors, and a higher capital gains tax rate could bring down the racial wealth gap.
The racial wealth gap has endured for decades despite some progress in educational attainment and diversity at the executive company level nationally.
According to the Federal Reserve Bank of St. Louis, in 2024, Black families still only owned about 24 cents for every $1 of white family wealth, on average.
However, many have come out opposing the move by Biden, alleging the taxes serve to further a specific social agenda, and they don't actually implement policies to reduce the racial wealth gap.
"It's a complete mess, and it produces anything but equality," Michael Seifert, CEO of digital marketplace PublicSquare, told The National Desk. "I think utilizing the levers of our economy in order to spawn a social agenda is a very dangerous road to go down."
Others feel that Biden's tax move could have further implications on Americans looking to build wealth, even if they're nowhere near the mark for this specific tax hike.
"The potential tax on unrealized long term capital gains is limited to taxpayers with over $100 million in assets, and while that may seem to many to be a group that can financially take on such a tax, the idea of taxing the value of asset that has yet to be sold is difficult to set and sets a shaky principle for taxation moving forward," Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek.
"When taxation targets financial gains that haven't been realized, it creates a gray area of how and when to assess the value of such an asset. It also triggers fears of taxpayers who may not have anywhere near that net worth but are worried they too could face such a tax in the future."
As Biden's budget undergoes more analysis, the capital gains taxes are pitting those for and against taxing the wealthiest Americans in a heavy debate.
Michael Ryan, another finance expert who runs michaelryanmoney.com, said the idea of having the ultra-rich pay more to level the playing field is an "understandable goal." But he questions the execution of the specific tax rates.
"Doubling the top capital gains rate to 44.6 percent could disincentivize investment and entrepreneurship," Ryan told Newsweek. "These are crucial engines for economic growth and job creation. I've seen firsthand how lower capital gains taxes motivated my clients to invest more actively in their businesses and take calculated risks."
More than 90 percent of those who benefit from lower capital gains rates are white families, so raising the rates will financially hit a demographic already benefiting disproportionately from the system, Ryan said.
"I know the racial wealth gap has roots in systemic obstacles like unequal access to quality education, career opportunities, business loans, and generational wealth transfer," Ryan said. "A blunt capital gains tax hike doesn't really tackle those underlying issues."
Those who are in favor of reducing the wealth gap have called out Biden for his across-the-board tax hikes, saying they don't actually do anything to support Black Americans or other minorities from achieving greater wealth in America.
"In a second term the Biden camp wants to tax unrealized capital gains in an effort to close the racial wealth gap," Fox Business journalist Charles Payne wrote on X, formerly Twitter, last week. "Taxing unrealized 'gains' from white folks doesn't make Black folks more prosperous—it's just a bogus and un-American excuse for confiscation."
Ryan added: "Narrowing the racial wealth divide is a noble cause. It will require targeted, multifaceted solutions, not just taxing the investments of millionaires and billionaires."
