President Joe Biden has proposed a staggering 45% tax on capital gains. This would mark the highest rate in over a century, signaling a bold step in increasing tax burdens, especially on investors and the business community.

The Biden administration, in a bid to support its expansive spending habits, has been transparent in its intent to fund government expenditure through increased taxation. Just last week, Biden put forward a budget proposal encompassing $7.3 trillion in annual spending, coupled with a projected $4.9 trillion in tax hikes over the coming years. Richard Stern, an expert from The Heritage Foundation, estimates this could translate to an additional tax load of approximately $36,000 per family.

For context, the last budget proposed by former President Donald Trump before the onset of the COVID-19 pandemic totaled $4.4 trillion, only a modest increase from his predecessor, Obama. In stark contrast, Biden's proposal suggests a 70% increase in spending. While it is acknowledged that government spending is a bipartisan issue, with both parties having histories of significant spending, the scale proposed by the current administration is raising alarms.

A recent study by the Peterson Foundation has closely examined the $4.9 trillion tax increase, revealing that the burden is likely to be felt most by corporations, high-income earners, and through capital gains. Economists warn that these costs inevitably trickle down to consumers, employees, and shareholders, including those with retirement plans like 401(k)s.

The history of income taxation in the United States serves as a cautionary tale. When the income tax was introduced in 1913, it initially targeted only the wealthiest, with those earning the equivalent of $100,000 per annum paying a mere 1% in taxes. Today, the income tax affects individuals earning minimum wage and reaches up to 37%, with additional state taxes in places like California pushing the burden higher.

The proposed taxes, by targeting investment—the economy's lifeblood—threaten to stifle growth and the replacement of depreciating physical capital. The Biden administration’s approach is likened to causing harm in the most destructive way possible, likening it to "pulling a tooth by going through the rectum."

Small businesses and investors are particularly vulnerable, facing potential tax rates exceeding 50% when selling or passing on their businesses, without accounting for inflation in their capital gains. The administration’s fiscal path is not only fanning the flames of inflation but is now poised to undercut the very foundation of economic prosperity.

The implications for American competitiveness are stark. If Biden's tax policies are implemented, the U.S. will have nearly double the capital gains tax rate of China, placing American companies at a disadvantage not just against their Asian rival, but even when compared to European counterparts.