Biden Weighs Raising Capital Gains Rate to Over 40 Percent

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President Biden speaks at the White House in Washington, D.C., April 20, 2021. (Tom Brenner/Reuters)

President Biden is expected to announce a proposal to nearly double the capital gains tax rate in order to help fund a forthcoming spending package, according to multiple reports.

The proposal would set the capital gains tax rate for individuals earning over $1 million at 39.6 percent, two people familiar with the plan told Bloomberg. When combined with an existing federal surtax on investment income, investors could pay federal taxes at a rate of as high as 43.4 percent.

In states with high taxes, rates for wealthy individuals could be even higher. New Yorkers making over $1 million would see combined federal and state capital gains tax rates of as high as 52.22 percent, while California residents in the same income bracket could see a 56.7 percent combined federal and state capital gains rate.

The White House did not immediately comment on the report, and the Treasury Department declined Bloomberg‘s request for comment.

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Stocks fell sharply following news of the potential tax increase on Thursday, with the Dow Jones dropping 400 points.

The tax increase is part of a proposal to fund the Biden administration’s American Families Plan, which is expected to call for $1 trillion in new spending and about $500 billion in tax credits for family and domestic programs. That plan would allocate billions in funding for universal pre-kindergarten instruction, paid family and medical leave, and free tuition for community college nation-wide.

It is unclear if Democrats will be able to push the proposed tax increase through the Senate, where Democrats are tied with Republicans and Vice President Kamala Harris holds the tie-breaking vote. For the plan to pass, the Biden administration would need the support of all Senate Democrats.

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