US President Joe Biden has put forth a bold proposal in the Fiscal Year 2025 Budget of the United States Government, aiming to raise capital gains rates to a staggering 44.6%. If implemented, this would mark the highest formal federal capital gains rate since its inception in 1922.
The 44.6% rate is derived from multiple components outlined in the General Explanations of the Administration’s FY 2025 Revenue Proposals. One crucial aspect is a plan to elevate the top ordinary rate to 39.6%. Another proposal suggests increasing the net investment income tax rate by 1.2% for individuals earning above $400,000.
“Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent,” the proposal read.
Yet, it’s essential to note that this rate would apply exclusively to taxpayers with taxable income surpassing $1 million and investment income exceeding $400,000.
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Alongside, Biden is also reportedly proposing a 25% tax on unrealized gains for high-net-worth individuals.
The proposal signifies an incremental shift rather than a revolutionary overhaul. Its primary objective appears to be leveling the playing field between high ordinary income and investment income earners. By ensuring that high earners contribute proportionally to their substantial financial activities, the policy seeks to address disparities in the tax system.
The proposal underscores the disparity in tax rates paid by different income groups, with American billionaires reportedly paying an average individual income tax rate of just 8.2%.
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