Inflation is a pressing problem for all American citizens, but retirees are likely to suffer the most. If Joe Biden’s tax hike proposal gets the green light, the financial struggle for citizens, especially retirees, could intensify. Here’s a look at how Biden’s proposed tax increases could affect your savings.
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It’s no secret that saving for retirement is a lot harder these days, thanks to inflation and the rising cost of living. The Schroders 2024 US Retirement Survey found that less than half of Americans (44%) believed they have saved enough for retirement, and 32% believe they have not saved enough. According to the survey, the biggest concern among American retirees is the impact of inflation on the value of their assets. The survey found that 89% of retirees were concerned about this, and if Biden gets his way, this number will rise and potentially turn the American retirement dream into a nightmare.
Biden’s proposed tax for fiscal year 2024 includes an increase in tax rates on corporate, individual and capital gains income, which could lead to negative returns thanks to inflation. These ambitious tax increases will raise taxes to the highest rate the country has seen in 111 years, especially his proposal to increase capital gains to 45%. Current capital gains are taxed at rates of 0%, 15% and 20%, making Biden’s proposed tax increase more than double and a real cause for concern. According to Biden, this proposed increase is supposedly intended to target “greedy billionaires,” but in reality this tax is what 12.5 million middle-class Americans pay on their retirement savings. The problem with inflation and capital gains taxes is that you are taxed on the paper profits, when in reality you have lost money because the dollar has lost its purchase of money.
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What do these tax increases look like in practice? The Heritage Foundation did some calculations based on the White House’s proposed federal budget, which included a whopping $4.9 trillion in future tax increases, and concluded that these tax increases would add an additional $36,000 in taxes per family would mean. This will impact many families’ ability to set aside money for retirement and build an emergency savings fund, while paying monthly expenses on top of the rising cost of living. Personal income tax is also not exempt from the proposal to increase the highest income tax bracket to 39.6% compared to the current 37%.
Biden’s proposal to raise the corporate tax rate to 28%, currently at a low 21% due to the Tax Cuts and Jobs Act (TCJA), will also impact the average American’s efforts to save and retire. According to the Heritage Foundation, higher corporate taxes will result in lower wages, higher prices for things like groceries and lower returns on savings.
In addition to negative returns in May, Biden’s proposed tax increases could lead to the loss of thousands of jobs. According to the Tax Foundation’s findings, these tax increases could have serious consequences for the U.S. economy. The data shows that economic output would decline by 2.2%, about 788,000 full-time jobs would disappear and wages would fall by 1.6%. The report said Biden’s policies would “make the tax code more complicated, unstable, and anti-growth, while also expanding the amount of spending in the tax code for a variety of policy goals unrelated to revenue collection.”
It’s not all doom and gloom for now, as the proposal will need to increase support from members of Congress and with a Republican majority in the House of Representatives, this tax policy has a high chance of rejection.
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This article Biden’s Tax Hike Threatens Retirements – Negative Returns After Inflation Looms in May originally appeared on Benzinga.com
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