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The United States is experiencing a severe crisis of values and ignorance of its own history. The nation’s identity seems to have been disfigured in recent years with attacks on the individual and economic freedoms of its citizens. To make things worse, President Joe Biden has proposed the largest tax hike in history in terms of dollars, with which the state seeks to have tighter control over the country’s economy.
Biden wants to enact a new bill that would target a minimum tax of 20% on unrealized capital gains for households with wealth over $100 million. This means that the president aims to have large fortunes confiscated at least 20% of the increase in value of their stock or generalized gains, even if they have not been liquidated. According to this, if such a person has stock in, say, Tesla, and that stock appreciates in value, the IRS will tax them on the increase in value of that stock, even if it has not been liquidated. This would create a serious economic distortion, not only for the tax system but for the taxpayers themselves.
The reason why such a tax has never materialized is that it is truly irrational. Company shares, assets, and so on, are governed by the values that the market assigns to them. Today, a stock could rise from $50 to $100, which would consolidate a profit for the owner of that stock, but the next day it could fall to a value of $5 per share. If the individual never sold it, not only would he be losing a great deal of money, but he would also have to pay for money he never received.
In the particular case of the capital gains tax, Democratic Senator Joe Manchin said, “You can’t tax something that’s not earned. Earned income is what we’re based on.”
Biden aimed to raise $360 billion in revenue through the 20% minimum tax. In addition, he proposed raising the corporate tax rate from 21% to 28%. However, the real problem of the American economy is not the lack of money or taxes, but precisely the excess of public spending.
Biden Seeks To Raise More Money From The Private Sector, Despite an Unlegislated Inflation Tax
As President Biden seeks new ways to fuel the size and power of the state with higher taxes and private capital raising, he punishes American citizens with the highest inflation in the last 40 years.
Currently, inflation stands at 7.9%. Prices of real estate, second-hand cars, gasoline, and food, have skyrocketed, hitting mainly the poorest Americans, who lose the purchasing power of their money, as the federal government prints inorganic money that depreciates the value of their working hours.
This is not a new phenomenon, but it has worsened markedly during the last administration. As you can see in the graph above, since the 1970s (at which time the value of the dollar is no longer anchored to gold), the productivity of American employees has been steadily increasing, while pay has basically slowed. This means that Americans are producing more, but earning less, making it increasingly difficult for families to buy a house or pay all their bills. If the state continues to actively intervene in the economy, the situation could worsen for decades to come.
U.S. Economic freedoms in decline
According to Heritage’s annual index of economic freedom, the United States has one of the worst records in its history in this area, ranking 25th in the world. Only four years ago it was in 18th place, and in 2010, it was in 8th position.
To put in context, currently, a country like Chile, which has just elected Gabriel Boric as president (who comes from the communist youth of his nation) is ranked 20th in the same ranking. Other countries like Cyprus, Czech Republic, and Latvia are above the United States, a nation that was founded on free-market principles and led in all areas of trade for decades.
Today, not only have economic and individual freedoms been increasingly crushed by an ever-growing government, but members of the Democratic Party are attempting to further stifle private action so that the state and politicians are the sole owners of capital.
Recently, Democratic Senator Bernie Sanders proposed taxing some profits of the largest corporations at up to 95% in a new bill that would seek to raise more revenue for the state from companies like JPMorgan Chase & Co. or Chevron Corp. Sanders’ radical proposal basically states that businessmen should work and then give virtually all their profits to the government, a move that evidently seeks to destroy private initiatives and centralize economic tasks in the hands of the state.
Obviously, it is difficult, if not impossible, for a proposal as radical as Sanders’ to be approved at the present time, but the Overton window is moving further to the left in the United States. The debate then shifts from whether we should lower the current tax burden to whether we should raise it to 95% as Sanders calls for, making Biden’s also radical tax policies appear “moderate.”
If state intervention in the economy continues to grow in the coming years, we will have a progressively destroyed currency, more miserable wages, more poor families hit, and a country immersed in a severe economic crisis.
Emmanuel Rincón is a lawyer, writer, novelist and essayist. He has won several international literary awards. He is Editor-at-large at El American // Emmanuel Rincón es abogado, escritor, novelista y ensayista. Ganador de diversos premios literarios internacionales. Es editor-at-large en El American