Joe Biden Eyeing Capital Gains Tax as High as 43.4% for Wealthy

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President Joe Biden will propose almost doubling the capital gains rate for wealthy individuals to 39.6%, which, including an existing surtax on investment income, means federal tax rates for investors might be as high as 43.4%, consistent with people conversant in the proposal.

The plan would boost the capital gains rate to 39.6% for those earning $1 million or more, a rise from the present interest rate of 20%, the people said on the condition of anonymity because the plan isn’t yet public. A 3.8% tax on investment income that funds Obamacare would be kept in situ , pushing the rate on returns on financial assets above the highest rate on wage and salary income, they said.

Stocks slid on news about the plan, with the S&P 500 Index down the maximum amount as 0.6% after climbing 0.2% earlier. The Nasdaq Composite fell 0.4% as of 1:15 p.m. after rising the maximum amount as 0.5%. Ten-year Treasury yields erased gains.

The proposal could reverse a long-standing provision of the tax code that taxes returns on investment less than on labor. Biden campaigned on equalizing the capital gains and tax rates for wealthy individuals, saying it’s unfair that a lot of of them pay lower rates than middle-class workers.

Read QuickTake: How Capital Gains Are Taxed and What Biden Might Do

The White House and Department of the Treasury didn’t immediately answer requests for comment. Biden is predicted to release the proposal next week as a part of the tax increases to fund social spending within the forthcoming “American Families Plan.”

For $1 million earners in high-tax states, rates on capital gains might be above 50%. for brand spanking new Yorkers, the combined state and federal capital gains rate might be as high as 52.22%. For Californians, it might be 56.7%.

Democrats have said current capital gains rates largely help top earners who get their income through investments instead of within the sort of wages, leading to lower tax rates for wealthy people than those they employ. Republicans argue that current capital gains rates encourage saving and promote the future economic processes.