The middle class tax trap
Even as the Biden administration unleashes its constitutionally-questionable eviction moratorium extension to appease progressives, the other side of the rental equation – landlords – faces a different problem: taxes.
According to the Wall Street Journal, small landlords could find themselves classified alongside multi-millionaires if the Biden administration’s tax changes become law. The paper relates the story of a small landlord in Kentucky who has paid himself $75,000 a years out of the income from his holdings. The long-term plan was to sell the rental units to find retirement. But the Biden proposals would make such a plan a tax nightmare:
Democrats argue for taxing wealth like work and are seeking to equalize the top rates on capital income and labor. But the line between rich investors and middle-class earners isn’t always so clear. Some, like Mr. Settle, fall into both categories.
The Biden plan would increase the top capital-gains tax rate to 43.4% from 23.8% for those earning over $1 million. In any given year, only a sliver of taxpayers fall into this top bracket. Of taxpayers who filed Schedule D, the form for reporting capital gains and losses, only 2.7% had adjusted gross income of $1 million or more in 2018, according to a Tax Policy Center analysis of Internal Revenue Service data.
While many of the wealthiest people in the world are in this group, others more closely resemble Mr. Settle: They usually make less than $1 million, but capital gains from the sale of a property or business pushes them over that threshold for one year only. Under the Biden plan, with some exceptions, they would be taxed at the same top rate as Jeff Bezos if he were to sell Amazon.com stock.
That’s bonkers. But it’s also the sort of confiscatory taxation the administration and its allies need in order to fund some – but not all – of its spending. That’s in addition to getting the “rich” to pay some mythical fair share, even when those riches are built on the labor, savings, and dreams of the middle class.