Biden proposes doubling capital gain tax for the wealthy
President Joe Biden will propose doubling the capital gains tax rate for wealthy individuals to 39.6%. The amount, coupled with an existing surtax on investment income, means that federal tax rates for investors could be as high as 43.4%.
According to those familiar with the proposal, the plan would boost the capital gains rate to 39.6% for those earning $1 million or more, an increase from the current base rate of 20%. A 3.8% tax on investment income that funds Obamacare would be kept in place, which would push the tax rate on returns on financial assets higher than the top rate on wage and salary income.
Although the plan has not been made public yet, the news caused stocks to slide, with the S&P 500 Index down 0.7% as of 1:43 p.m. after climbing 0.2% earlier. The Nasdaq Composite fell 0.6% after rising as much as 0.5%.
The proposal could reverse a long-standing provision of the tax code that taxes returns on investment less than returns on labor. Biden’s campaign revolved around equalizing the capital gains and income tax rates for wealthy individuals, reflecting on the unfair system of the rich paying lower taxes than the middle-class workers.
Biden is expected to release the proposal next week as part of the tax increases to fund social spending in the forthcoming “American Families Plan.”