US Biden Calls for 44.6% Capital Gains Tax Rate, Highest Capital Gains Tax Since Its Creation in 1922 - Adding this tax rate the state capital gains tax: the Biden combined federal-state rate would exceed 50% in many states

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And don’t forget to add the state capital gains tax: the Biden combined federal-state rate would exceed 50% in many states

President Biden has formally proposed the highest top capital gains tax in over 100 years.

Here is a direct quote from the Biden 2025 budget proposal: “Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.”

Yes, you read that correctly: A Biden top capital gains and dividends tax rate of 44.6%.

Under the Biden proposal, the combined federal-state capital gains tax exceeds 50% in many states. 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%.

Worse, capital gains are not indexed to inflation. So Americans already get stuck paying tax on some “gains” that are not real. It is a tax on inflation, something created by Washington and then taxed by Washington. Biden’s high inflation makes this especially painful.

Many hard working couples who started a small business at age 25 who now wish to sell the business at age 65 will face the Biden proposed 44.6% top rate, plus state capital gains taxes. And much of that “gain” isn’t real due to inflation. But they’ll owe tax on it.

Capital gains taxes are often a form of double taxation. When capital gains come from stocks, stock mutual funds, or stock ETFs, the capital gains tax is a cascaded second layer of tax on top of the current federal corporate income tax of 21%. (Biden has also proposed a corporate income tax hike to 28%).

The proposed Biden top 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 capital gains tax was created as its own tax in 1922, at a rate of 12.5%. See the chart below to see how Biden’s proposed capital gains tax for 2025 puts the United States in uncharted territory.

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Biden’s proposed capital gains tax hike will also hit many families when parents pass away. Biden has proposed adding a second Death Tax (separate from and in addition to the existing Death Tax) by taking away stepped-up basis when parents die. This would result in a mandatory capital gains tax at death — a forced realization event.

As previously reported by CNBC:

“When someone dies and the asset transfers to an heir, that transfer itself will be a taxable event, and the estate is required to pay taxes on the gains as if they sold the asset,” said Howard Gleckman, senior fellow in the Urban-Brookings Tax Policy Center.

Biden’s proposal to take away stepped-up basis has already been tried, and it failed: In 1976 congress eliminated stepped-up basis but it was so complicated and unworkable it was repealed before it took effect.

As noted in a July 3, 1979 New York Times article, it was “impossibly unworkable.”

NYT wrote:

Almost immediately, however, the new law touched off a flood of complaints as unfair and impossibly unworkable. So many, in fact, that last year Congress retroactively delayed the law’s effective date until 1980 while it struggled again with the issue.

As noted by the NYT, intense voter blowback ensued:

Not only were there protests from people who expected the tax to fall on them — family businesses and farms, in particular — bankers and estate lawyers also complained that the rule was a nightmare of paperwork.

Biden’s 2025 budget calls for about $5 trillion in tax increases over the next decade.

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Here is a direct quote from the Biden 2025 budget proposal: “Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.”
Archived the proposal being referenced here in attachments.

proposal 1.png

The quote being used in the article is on page 80.
 

Attachments

Biden’s proposed capital gains tax hike will also hit many families when parents pass away. Biden has proposed adding a second Death Tax (separate from and in addition to the existing Death Tax) by taking away stepped-up basis when parents die. This would result in a mandatory capital gains tax at death — a forced realization event.
Even the filthiest street hooker stops fucking you when you are dead.

This looks a lot like a dying star expanding out and consuming everything before collapsing.
 
Incredible he'd pull this now. Just when I thought the GOP had a lousy few days, he does this to bolster his enemies.

ETA and just like that $600 transaction crap, this is bluster to please part of their base. I'm thinking the younger people may not like all this death tax talk much either, because a lot of them are counting on wealth transfer.
 
It’s not going to happen because of all the (((interests))) that stash trillions of dollars that would be impacted but it’s one of those things Biden can whine about and blame Republicans on when it doesn’t go anywhere, no different than when Republicans whine and blame Democrats for not cracking down on immigration. It’s easy to propose wild things that are red meat for the base but have no chance of passing.
 
just like that $600 transaction crap, this is bluster to please part of their base
No, the $600 transaction cap is real.
The payment processors are required to report it, and the last I read that was cumulative and annual.
The people most impacted are the poorest people I meet.
They're forced to do small-time side-hustles to bring in that extra $600 and now get surprise tax bills at the end of the year.
 
No, the $600 transaction cap is real.
The payment processors are required to report it, and the last I read that was cumulative and annual.
The people most impacted are the poorest people I meet.
They're forced to do small-time side-hustles to bring in that extra $600 and now get surprise tax bills at the end of the year.
Last I saw is it was delayed still.


But the IRS announced late in 2022 that it would delay the new requirements until the 2024 tax filing season. And now, the tax agency says it will wait until 2025—and ease into the new changes by lowering the reporting threshold from $20,000 to $5,000 during a transitional stage.
 
The article hints at some of the details but avoids giving them, probably because it's scarier without them:

Tax capital income for high-income earners at ordinary rates Long-term capital gains and qualified dividends of taxpayers with taxable income of more than $1 million would be taxed at ordinary rates, with 37 percent generally being the highest rate (40.8 percent including the net investment income tax).18 The proposal would only apply to the extent that the taxpayer’s taxable income exceeds $1 million ($500,000 for married filing separately), indexed for inflation after 2024.

So over $1m taxable income, a new band is created that essentially removes the category of Long Term Capital Gains and treats all capital gains as ordinary income (same as short term capital gains, wages etc). The reported 44.6% rate is dependent on a separate push to raise the top bracket and NII rates:

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. Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.

Not that I'm in favor of either change, but the article is maximizing its ragebait.

I also hate this a lot, despite being about 9 zeros away from being impacted:

The proposal would impose a minimum tax of 25 percent on total income, generally inclusive of unrealized capital gains, for all taxpayers with wealth (that is, the difference obtained by subtracting liabilities from assets) greater than $100 million.

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Taxpayers with wealth greater than the threshold would be required to report to the Internal Revenue Service (IRS) on an annual basis, separately by asset class, the total basis and total estimated value (as of December 31 of the taxable year) of their assets in each specified asset class, and the total amount of their liabilities.

This seems like an absolute nightmare. The threshold for that reporting seems to be the $100m, but realistically you need to be preparing your balance sheet to that standard well in advance to prove that you shouldn't be subject to the tax/when you cross the threshold. Plus, your payments on unrealized gains are prepayments on realized gains which means which seems like another thing to track, potentially over decades. (I'm not sure if the prepayments are on an asset class basis or on the specific asset... the document made me angry so I stopped reading)

Interestingly, the Capital Gains section is the only place in the document that specifically brings race into the justification:

Preferential tax rates also disproportionately benefit White taxpayers, who receive the overwhelming majority of the benefits of the reduced rates.

Other parts of the document reference "wealth disparities, including by gender, geography, race, and ethnicity" but in Capital Gains they're more specific.
 
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This is a psychotically high rate that would do serious, potentially fatal, damage to the US investment economy.

It's a higher rate than Canada, which will have a top cap gains rate of approximately 35% as of June 12th (currently 26.6%).

I get that the Democrats are focused on the fabulously wealthy billionaires, but the US is also really great at minting millionaires and that's who will get hit by this the hardest... followed shortly by the rest of us, when the economy supercharges itself into a depression that makes us rename the one in the 1930s to "The Pretty Good Depression".
 
depression that makes us rename the one in the 1930s to "The Pretty Good Depression".
That is closer to reality than anyone thinks.

The US economy grew last quarter at the slowest pace in two years as consumer and government spending cooled amid a sharp pickup in inflation.

1.6% growth after all this talk of 3-4%. A total economic disaster going on right now.

Non-paywall https://eu.usatoday.com/story/money/2024/04/25/gdp-report-first-quarter/73437532007/
 
This will kill upward mobility in the middle class.
The super rich won't care, they'll get around it with creative accounting and the ones that do pay it have so much it doesn't really matter.

Kill irs agents, behead irs agents, stir fry irs agents in a WOK. Abort IRS agents babies.
 
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