President Biden will propose a hike in the capital gains tax to 43.4 percent for top earners, nearly twice the current rate, Bloomberg News reported Thursday.
U.S. stocks turned lower on the report, with the S&P giving up all its gains for the day and declining by 0.5 percent. Nine out of eleven sectors in the S&P fell, with health care and real estate barely hanging on to positive territory.
The new rate of 39.6 percent would apply to wealthy taxpayers with incomes over one million dollars. The 3.8 percent investment income tax that funds part of Obamacare would also apply, bringing to top rate to 43.4 percent.
Biden has also indicated that he favors raising the top marginal tax bracket to 39.6 percent for those making more than $400,000 a year. The top rate was reduced to 37 percent in Trump’s Tax Cuts and Jobs Act. Prior to that, it had been 39.6 percent since 2013, when it was raised from 35 percent. Biden has said that he wants to tax capital on par with labor.
Capital gains rates apply when an asset—such as a house, shares of stock, a business—that has been held over a year are sold for a gain. The current capital gains tax rates are 0 percent for a married couple earning less than $80,000, 15 percent for couples earning more than $80,000 and less than $496,000, or 20 percent for wealthier households.
In addition, a married couple filing jointly must pay the investment income tax of 3.8 percent if their combined income crosses the $250,000 threshold.
The tax hike would hit particularly hard in high-tax blue states that already impose stiff capital gains taxes of their own. For wealthy New Yorkers, the combined state and federal capital gains rate could be as high as 52.22 percent. For Californians with incomes over $1 million, the rate could be 56.7 percent.