The political opposition to Biden’s latest tax plans should not be underestimated. Even Democrats in more affluent seats are queasy at the tax hikes touted to fund increased health and education outlays.
The American Families Plan has expanded in recent weeks to $1.8tr. Note, this is on top of the $2.3tr infrastructure bill.
The White House claims that only the top 0.3% will be affected by the changes in capital gains tax. According to the US Treasury, “A recent study found that the top 1% failed to report 20% of their income and failed to pay nearly $175 billion in taxes owed annually”.
That may be so. But for the Treasury market, there are significant risks. The planned tax changes may not realise targeted revenue, adding to the spiralling debt burden. The Federal government deficit hit $4.09tr in the year to March.
Fears that the dollar will be hit by a ‘twin deficit’ crisis are well-founded. Yesterday’s advanced trade report showed a big rise in the deficit for March, to $90.6bn. Imports are racing ahead, propelled higher by stimulus checks.
