In March, President Biden proposed a 44.6% capital gains tax in the 2025 government budget, the highest in history. The proposal includes a 25% tax on unrealized gains for high-net-worth individuals. A quote from the March budget proposal reads “Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.”
The source of the 44.6% rate is a footnote from the General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals, and it reads in relevant part: “A separate proposal would first raise the top ordinary rate to 39.6 percent … An additional proposal would increase the net investment income tax rate by 1.2 percentage points above $400,000 … Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.” The White House looks for the proposal to raise the long-term capital gains and qualified dividends rates for taxpayers.
How Will Biden’s Proposed Capital Tax Rate Affect The Upper Class?
However, the proposed rate hike isn’t guaranteed. The 44.6% rate would only come to fruition under a separate proposal from the Biden administration’s main capital gains rate increase. Furthermore, it will only apply to those individuals with taxable income above $1 million and investment income above $400,000. Thus, high earners are the main targets for the proposal.
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The policy aims to level the playing field between high-ordinary income and investment-income earners. It aims at ensuring high earners contribute a fairer portion relative to their massive financial undertakings. While this may not appeal to the rich, it surely helps provide reassurance to the working class of the US who have already seen raised interest rates and taxes in the past year. The higher capital gains tax bill for upper-class citizens may also alleviate the bills of the lower class, something that President Biden’s administration has promised for years.