The middle class is collateral damage in Biden’s war on wealth

The Biden administration’s hackneyed argument that “the rich pay their fair share” sounds tempting at first. Who could be against justice?

But a political agenda that punishes the middle class and lowers the standard of living for everyone – rich and poor alike – is not fair.

In his proposed 2025 budget, President Joe Biden plans not only to raise income tax rates across the board, but also to radically change the rules governing high-balance retirement accounts. What is being sold as a way to exploit the wealthy will severely impact the ability of average Americans to save for retirement.

Wealthy individuals with large retirement accounts will be forced to withdraw any savings that exceed government-imposed limits. To make matters worse, these withdrawals will be taxed at a punitive rate.

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This discourages investing in financial assets like stocks. The result will be less money flowing into these traditional investments – which are ubiquitous in middle-class retirement accounts.

But Biden’s proposed changes would effectively force those with large savings accounts to liquidate their holdings and prohibit those savers from replenishing their depleted balances, meaning a significant decline in demand for stocks and other financial instruments.

This drop in demand also means lower prices. The retirement savings of the American middle class will therefore not grow as quickly. But things are about to get worse for these people.

Instead of owning things like stocks held in a retirement account, the wealthy must use other forms of investment, such as real estate. The basic mechanics work the same whether a person invests in stocks or real estate: They buy an asset today with the expectation of selling it at a higher price in the future.

The problem for the middle class is that increased housing demand from the wealthy will drive up demand for housing and put upward pressure on prices, exacerbating the home affordability crisis already affecting millions of Americans.

In addition, as wealthy investors receive additional incentives to buy real estate, homes for sale will be taken off the market and replaced with rentals. This will force many Americans to rent forever and forego what is often the greatest asset for middle-class families: a home.

Another damaging effect of Biden’s proposed pension reform will be slower economic growth. When you tax or otherwise penalize something, you get less of it. By discouraging those with the most resources from saving and investing, Biden’s war on wealth will reduce the country’s overall investment in the economy.

Because factories, machines, artificial intelligence, and other productivity gains come from private investment, less investment means less growth, which in turn leads to a lower standard of living for all Americans, regardless of their income level.

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The middle class is merely collateral damage in Biden’s war on prosperity. His attack on top earners, innovators, and other targets of political demagoguery will exact far greater financial casualties among average Americans – the very group Biden claims to be defending.

His insistence on killing Trump’s tax reform is a perfect example of this phenomenon. By allowing his predecessor’s tax reform to expire, Biden will raise taxes on virtually all Americans, including the middle class. However, one notable group will pay much less in taxes.

In high-tax states governed exclusively by Democrats, super-earners can benefit from special deductions that have been restricted by Trump’s tax reform over the past six years. Millionaires in New York City can expect to see their federal income tax bill reduced by about 9%, even though their tax rate is increasing on paper.

By pledging to end Trump’s tax reform, Biden is promising to give a handout to big political donors at the expense of the middle class. That’s the difference between rhetoric and reality.