On Monday, a top economic adviser to President Joe Biden, Brian Deese said that the White House is planning to raise capital gains taxes for Americans earning more than $1 million. The director of the National Economic Council, Brian Deese confirmed during a White House press briefing. He said President Biden’s proposed tax hike will apply to more than 500,000 Americans earning more than $1 million, or about the top 0.3% of US households. However, the White House press secretary Jen Psaki rejected to clarify. Deese informed reporters and said, “We’re talking about a tax change that would affect the three-tenths of one percent, the top sliver of households. The principle here is to equalize the treatment of ordinary income and capital gain”. President Biden is expected to release details of the forthcoming spending and tax measure on Wednesday.
President Biden is reportedly expected to propose raising the capital gains tax rate to 39.6% from 20% for millionaires. The US federal tax rates for the wealthy could climb as high as 43.4% coupled with an existing Medicare surcharge. It brought the levy on returns on financial assets higher than rates on ordinary income. Taxes on long-term capital gains generally classified as an asset that’s held for more than one year, currently range from 0% to 20%, depending on a person’s income. Wealthier investors are also subject to an additional 3.8% tax on long- and short-term capital gains. Short-term capital gains on assets sold within a year are typically taxed as ordinary income. Capital gains are taxed favorably when compared to wage and salary income; under existing law, the richest Americans pay a top tax rate of 37% on ordinary income, while the top tax rate on capital gains is 23.8%.
Deese also said, “For the very highest-income Americans, we should tax at the same level ordinary income and capital gains”. The Tax Policy Center has indicated that President Biden’s proposal would result in an average tax increase of nearly $300,000 for households in the top 1% of the country, or those with income more than $837,000. So, middle-income households with an income between $52,000 and $93,000 would likely see their tax bill increase by just $260 per year. At least 93% of the tax increase would be borne by taxpayers in the top quintile of income-earners. The top long-term capital gains tax rate is paid by single taxpayers earning more than $445,850 this year, and $501,600 for married couples filing a joint tax return. Point to be noted that the forthcoming proposal came just a few weeks after Biden released the American Jobs Plan.