News is leaking that President Joe Biden may propose increasing CGT for some taxpayers by almost 100% to 39.6%.
When added to the existing surtax on investment income, the new top level rate for wealthy individuals would be as high as 43.4% according to Bloomberg reports.
As news breaks the Dow has reversed direction and fallen sharply.
The new plan would turn a long-standing tax strategy that rewarded investors on its head – returns on capital assets could now be higher than taxes on personal income.
The White House is expected to release more details next week as part of the tax increases that are meant to fund Biden’s ‘American Families Plan’.
Neither the White House or the Treasury Department have given any detail, so it is uncertain what knock-on effects that this plan would have on anyone selling the family insurance business.
White House press secretary Jen Psaki said: “His view is that it [infrastructure and childcare investment] can be on the backs of the wealthiest Americans who can afford it, and corporations and businesses who can afford it. And his view, and the view of our economic team, is that that won’t have a negative impact.”
In many countries, investors are incentivized to invest in real estate – this plan could have the reverse effect – which could also be a deliberate move to reduce heat in the housing market.
The ‘American Families Plan’ is predicted to cost around $1 trillion, and it follows the $2.25 trillion ‘American Jobs Plan’ and the $1.9 trillion coronavirus relief bill that was passed last month.
Estimates from the Urban-Brookings Tax Policy Center put the amount that would be raised at $370 billion over ten years.
The tax hike would apply to American taxpayers who earn over $1 million annually – and in some states like California, that could mean paying more than half your income in taxes.
43.4% capital gains tax might kill the golden goose that is America/Silicon Valley. People need an incentive to build long term #startups of value. In California, that would be a 56.4% tax burden. >50% Spells death to job creation.— Tim Draper (@TimDraper) April 22, 2021
The current long term (more than one year) CGT rates are: income of up to $40,000 (0%), income of $40,000 to $441,450 (15%), and income over $441,451 (20%).