The Biden administration proposed increasing the capital gains tax to 44.6%.
The percentage is the highest rate in over a century.
“For example, a taxpayer with $1,100,000 in taxable income of which $200,000 is preferential capital income would have $100,000 of capital income taxed at the preferential rate and $100,000 taxed at ordinary rates,” the proposal reads.
The proposal, when accounting for state capital gains tax, could exceed 50% in many states.
A footnote in the document explains how the 44.6% is reached.
“A separate proposal would first raise the top ordinary rate to 39.6 percent (43.4 percent including the net investment income tax). An additional proposal would increase the net investment income tax rate by 1.2 percentage points above $400,000, bringing the marginal net investment income tax rate to 5 percent for investment income above the $400,000 threshold,” it says. “Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.”
Americans for Tax Reform (ATR) released an analysis of the proposal, writing, “California will face a combined federal-state rate of 59%, New Jersey 55.3%, Oregon at 54.5%, Minnesota at 54.4%, and New York state at 53.4%.”
The proposed capital gains tax rate is “more than twice as high as China’s rate.”
“China’s capital gains tax rate is 20%. Is it wise to have higher taxes than China? And with Biden’s combined federal-state capital gains rate of 59% in California, residents will face a rate nearly three times as high as China,” the analysis noted.
