Overtaxing "Success" Is Unamerican

bloomberg  |  Charles Myers was sitting in a first-class seat on a flight from New York to Dallas when his phone started blowing up Thursday. News had just broken that the wealthiest Americans could soon face a tax rate as high as 43.4% on gains from their investments.

The chairman of Signum Global Advisors wasn’t thrilled.

“Raising capital gains taxes hurts the capital markets,” he said in a text message. “Better to raise the personal top marginal rate and estate tax. Leave capital gains and dividends alone.”

Myers has raised funds for Joe Biden, and wasn’t shocked by the White House’s plan because it was part of the president’s campaign. But the donor doesn’t think that 43.4% rate will make it into final legislation.

As the plane descended, he added: “Over-taxing success is un-American.”

Pressure has been building to raise levies on the wealthy after decades of tax cuts that disproportionately benefited the top 1%. Politicians at the national and state levels have recently proposed or passed higher rates, but the measures were largely focused on income taxes.

The plan to target investment gains strikes at the heart of what makes the wealthiest Americans ever more wealthy.

The country’s richest 1% own more than 50% of the equity in corporations and in mutual fund shares, according to Federal Reserve data. The next 9% of the wealthiest own more than a third of equity positions. Added together, the top 10% of Americans hold more than 88% of shares.

Meanwhile, the bottom 90%’s equity exposure has been dropping for almost two decades. That meant last year’s stock market surge widened the nation’s wealth gap further, leaving the 10 richest Americans with more than $1 trillion, according to the Bloomberg Billionaires Index.

Now, Biden wants to help pay for a raft of social spending that addresses long-standing inequality by taxing investment gains more, according to people familiar with his proposal.

Billionaire venture capitalist Tim Draper isn’t persuaded. He said raising federal rates to as high as 43.4% would sound the death knell for Silicon Valley and American job creation.