U.S. President Joe Biden plans to propose a measure to double the capital gains tax rate for wealthy individuals to 39.6%. This means that, alongside an existing additional tax on investment income, federal tax rates for investors could reach 43.4%, according to informed sources. The plan would raise the tax rate to 39.6% for those earning one million dollars or more, up from the current basic rate of 20%, as per sources who requested anonymity for privacy reasons.
The 3.8% tax on investment income, which funds the "Obamacare" healthcare program, will remain in effect, resulting in a tax rate on returns from financial assets that exceeds the tax on income from wages and salaries. The proposed measure could contribute to the repeal of a long-standing provision in law that imposes lower taxes on investment returns compared to those imposed on labor income.
Biden has campaigned for equalizing capital gains with income tax rates for wealthy individuals, stating that it is unfair for many of them to pay lower rates than middle-class workers. The White House and the Treasury Department did not immediately respond to requests for comment. Biden is expected to issue the proposal next week as part of tax increases to fund social spending in the upcoming "American Families Plan."
For individuals with an income of one million dollars in high-tax states, the capital gains tax could exceed 50%. This means that wealthy residents in New York could face a tax rate of 52.22%, while in California it could reach 56.7%. Democrats argue that current tax rates on capital gains disproportionately benefit high-income earners who derive their income from investments rather than wages, leading to lower tax rates for the wealthy compared to those who employ them. Republicans contend that current rates encourage savings and foster economic growth in the future.
