After the vote within the Home of Representatives, greater taxes could possibly be on the best way for rich People

Wealthy people brace themselves for potentially higher taxes that could land in their bank accounts later this year, while low- and middle-income Americans could end up enjoying Uncle Sam breaks that were originally temporary.

Last week the House of Representatives passed a $ 3.5 trillion budget that could ultimately include numerous Democratic proposals to tax high-income earners and corporations, as well as expanding middle- and low-income tax credits.

The Democrats are still writing the formal laws they want to pass through the Senate reconciliation. When their tax policy – if at all – could come into effect is still unclear.

"Congress rarely makes retroactive tax changes, so everything will likely apply to the 2022 tax year," Howard Gleckman, a senior fellow at the Tax Policy Center, told Yahoo Money. “The only exception could be changes in the return on investment ratio. If they increased the rate, they would increase the effective date of that rate to the date the committees approved the law. "

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United States President Joe Biden (L) speaks with Vice President Kamala Harris about the day tens of million parents will receive their first monthly child tax withholding payments on July 15, 2021 in Washington in the South Court Auditorium in the Eisenhower Executive Office Building, DC. Most families receive up to $ 300 per child per month, a temporary increase in the child tax credit that was part of the US rescue plan. (Photo by Chip Somodevilla / Getty Images)

Increase in capital gains tax

One of President Joe Biden's key tax proposals is to get the top 0.3% investment through a similar treatment of capital gains and income. The proposal would mean wealthy individuals could pay double the current rate they pay for their investment income and dividends.

Under the proposal, the top tax rate on long-term capital gains and qualified dividends would be increased from 23.8% to 39.6% and would apply to those earning over $ 1 million.

"That will be very difficult for Congress to pass," said Gleckman. "I think there is some chance that Congress will raise the capital gains rate, but I don't think it will raise it to what Biden wants."

If passed, the capital gains change can go into effect immediately, leaving investors unable to bulk sell assets to avoid the rate hike, Gleckman said.

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A detail of a woman in a hat during the 145th run of the Kentucky Oaks on May 3, 2019 in Louisville, Kentucky. (Photo by Tom Pennington / Getty Images)

Taxation of wealth in the event of death

The Democrats also want to change the way assets are taxed when passed on to heirs.

Under current tax law, the capital gain on inherited assets is calculated on the basis of the value of the asset upon inheritance – not when the original owner acquires the asset for the first time. That means an heir usually pays much lower taxes when those assets are sold.

Under Biden's original proposal, profits over $ 1 million for single filers ($ 2.5 million for joint filers combined with existing real estate exemptions) would be taxed based on their first-time value, rather than inheritance. These profits may not be taxed if the property is donated and certain exemptions apply to family businesses and farms.

According to Gleckman, this proposal is unlikely to find enough support to be included in final legislation.

"It's going to be a pretty tough sell," he said. "You are already seeing a lot of opposition from people who are concerned about family businesses and small businesses, even though Biden has suggested significant exemptions and deferrals for them."

Higher income tax

Under Biden's original plan, the highest individual income tax rate for taxable income over $ 400,000 would revert to 39.6%. That rate is currently 37%, set by the Tax Cuts and Jobs Act of 2017, which was passed during the Trump administration.

The current rate gives a married couple with $ 2 million taxable income an annual tax cut of more than $ 36,400, according to estimates by the Center on Budget and Policy Priorities.

"I think they'll probably raise the highest single odds," said Gleckman. “It's clearly only about people with very high incomes. That is probably one of the more likely changes. "

Tax compliance

The Democrats also plan to persecute wealthy Americans by increasing tax compliance. Under Biden's original proposal, banks would have to report inflows and outflows from taxpayers' accounts to provide the IRS with additional information on business income and expenses in order to make audits more targeted.

"The IRS needs more information," Chuck Marr, senior director of federal tax policy at the Center on Budget and Policy Priorities, told Yahoo Money. "If the information is readily and easily available to banks, there is no excuse not to do it."

Rep. Maxine Waters, left, D-Los Angeles, and House Speaker Nancy Pelosi, D-San Francisco, will hold a press conference at the Ethel Bradley Early Education Center on Thursday, August 12, 2021, to highlight the importance of the Child tax credit to be discussed in Los Angeles, California. (Gary Coronado / Los Angeles Times via Getty Images)

Tax credits

All of these tax changes, targeting the rich, would also help pay for the expansion of top-tier tax credits, the vast majority of which is tucking money into the pockets of middle- and low-income Americans.

Under Biden's plan, the child tax credit and income tax credit would be extended to 2025 and made fully refundable on a permanent basis, meaning taxpayers would get a refund even if the credit exceeded their total tax bill.

While an extension is likely to be included in final legislation, Gleckman says it may be shorter than originally proposed, and credits can be fully refunded for a few years rather than forever.

"I have a feeling that they will agree to extend it, but probably not to extend it for a very long time," he said. "You won't have the money to extend it for what the Biden people would like to do."