President Biden will propose doubling the top capital gains tax rate on investments like stocks and real estate, according to a new report.
Bloomberg News reported Thursday that the new top capital gains rate would increase from 20 percent to 39.6 percent on income over $1 million. That, coupled with an existing surtax on investment income, means that federal rates for investors could be as high as 43.4 percent, people familiar with the proposal told the outlet.
For $1 million earners in high-tax states, rates on capital gains could wind up higher than 50 percent. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22 percent. For Californians, it could be 56.7 percent.
The plan prompted investors to unload stocks Thursday with the Dow Jones Industrial Average losing nearly 1 percent of its value by mid-afternoon.
The idea may be included in Biden’s more than $2 trillion infrastructure bill, but the White House has not confirmed the details.
The infrastructure plan was expected to include capital gains tax hikes — so that they roughly match tax rates for ordinary income — but the details were not included in initial White House blueprints for the sprawling package.
Conservative advocates previously argued for capital gains taxes to be lowered by pegging gains in value to inflation, saying that doing so could unleash a real estate boom by lessening the cost of large financial transactions. Former President Donald Trump rejected the idea because it would disproportionately benefit the wealthy.
White House Press Secretary Jen Psaki on Thursday declined to confirm the report on capital gains rates.
“We’re still finalizing what the pay-fors look like, but I will say that the president’s calculation is that there’s a need to modernize our infrastructure, there’s a need to invest in childcare, there’s a need to invest in early childhood education and making our kids and the workers of the next generation more competitive. And he should propose a way to pay for it,” Psaki said at her daily press briefing.
“His view is … that can be on the backs of the wealthiest Americans who can afford it, and corporations and businesses who can afford it. And his view and the view of our economic team is that that won’t have a negative impact. There are alternative views or there are proposals that don’t exist yet on how to pay for it. That will be a part of the discussion. But he stays firm to his commitment to not raise taxes on Americans making under $400,000 a year, and he’ll have a range of proposals on how to pay for his plans to invest in education and childcare.”
Democrats may force Biden’s infrastructure bill through Congress with a bare majority in the Senate — and no Republican support — under special budget reconciliation rules that avoid the usual 60-vote threshold for passage in the Senate.
Biden proposed paying for the massive bill — which would set aside $400 billion for home health care and nearly $200 billion for electric vehicle subsidies — with sweeping tax increases on higher-income people and businesses.
One Biden-proposed tax increase would boost the corporate tax rate from 21 percent to 28 percent, partially repealing a steep drop in taxes on companies adopted in 2017 by Trump and the then-Republican-led Congress. He also proposes raising taxes on people earning more than $400,000 per year — though the White House has clarified that hikes also would apply to a two-income family earning a combined $400,000.
Republicans made their initial counter offer Thursday, a $586 billion plan.