Joe Biden‘s 2025 budget proposal could raise the federal capital gains tax to as high as 44.6 percent for many Americans. When combined with state-level capital gains taxes, the rate could exceed 50 percent in some of America’s most populous states. Two provisions in the budget are responsible for the increase: one that raises the tax rate across the board and another that bumps the rate further on high-income earners.
A footnote in the Biden budget details the rate hike: “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.” The footnote continues: “Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.”
Americans for Tax Reform (ATR)’s analysis of Biden’s budget further notes that “California will face a combined federal-state rate of 59 [percent], New Jersey 55.3 [percent], Oregon at 54.5 [percent], Minnesota at 54.4 [percent], and New York state at 53.4 [percent].” According to the tax group, if Biden‘s budget were enacted, the effective capital gains rate would be more than double that of Communist China.
The Biden capital gains plan would result in the highest rate ever enacted in the United States, exceeding the 40 percent rate under President Jimmy Carter. Additionally, ATR notes the budget proposal would also remove “stepped-up basis” when a parent dies, effectively enacting a second Death Tax. This would result in a mandatory capital gains tax realized at death. When Congress attempted to end the “stepped-up basis” in 1976, they had to reverse the decision before the law took effect as it was completely unworkable.
Carter would go on to lose the 1980 presidential election by a landslide.
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