Biden's Proposed Capital Gains Tax Increase

Proposed Increases

President Biden has proposed increasing the long-term capital gains tax rate from 20% to 39.6%. This increase would apply to individuals with taxable incomes over $1 million, or $500,000 for married couples filing jointly. Biden's budget proposal also includes a provision that would eliminate the stepped-up basis for inherited assets. Under current law, the basis of an inherited asset is increased to its fair market value at the time of the owner's death. This means that when the asset is sold, no capital gains tax is owed on the appreciation that occurred before the original owner's death.

Context

The proposal to raise the capital gains tax rate is part of a larger effort by the Biden administration to increase taxes on wealthy Americans. The administration has also proposed increasing the top income tax rate from 37% to 39.6% and imposing a new tax on unrealized capital gains for individuals with more than $1 billion in assets.

Conclusion

The proposed increase in the capital gains tax rate would have a significant impact on investors and savers. The increase would reduce the after-tax return on investments, which could discourage savings and investment. The elimination of the stepped-up basis for inherited assets would also increase taxes on inheritances, which could make it more difficult for families to pass on wealth to future generations.