Biden Will Impose Highest Capital Gains Tax Rate Since Jimmy Carter in 1977

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Posted by John Kartch on Wednesday, July 15th, 2020, 4:35 PM PERMALINK


Joe Biden wants to impose the highest capital gains tax rate since the Jimmy Carter era known for its economic stagnation.

Biden wants to take the current capital gains tax rate of 20 percent and double it to 39.6 percent. That's the highest rate since 1977, when the highest possible capital gains rate was 39.875 percent.

Here is the documentation of Biden's threatened capital gains tax hike:

On Oct. 23, 2019 Biden said: “So every single solitary person, their capital gains are going to be treated like real income and they are going to pay 40 percent on their capital gains tax."

On Sept. 27, 2019 Biden said: “I’m gonna double the capital gains rate to 40 percent."

On Oct. 15, 2019 Biden said"I would raise the capital gains tax to the highest rate of 39.5 percent, I would double it."

On Aug. 21, 2019 Biden said“The capital gains tax should be at what the highest minimum tax should be, we should raise the tax back to 39.6 percent instead of 20 percent."

On Dec. 9, 2019 Biden said the capital gains tax rate "could go higher" than 40%

Video documentation of the above statements can be found here: How High Will Biden Raise Your Capital Gains Taxes?

During his decades in Washington, Biden repeatedly voted against capital gains tax cuts.

In 2003, Biden voted against the reduction in the capital gains rate from 20 percent to 15 percent.

In 2005 and 2006, Biden voted against the successful extension of the 15 percent rate.

In 2012, Vice President Biden and President Obama succeeded in their push to let the capital gains tax rate rise to 20 percent.

Biden and Obama then piled on another 3.8 percent capital gains tax hike -- the Net Investment Income Tax -- one of the many tax increases in Obamacare. The 3.8 percent tax hike took effect Jan. 1, 2013, purposefully timed to kick in *after* the 2012 election.

Some taxpayers under Biden will face a capital gains tax rate over 50 percent, when combined with state capital gains taxes. California's 13.3 percent state capital gains rate means Golden State taxpayers will face a rate of 56.7 percent (39.6 + 3.8 + 13.3 = 56.7%).

So what ever happened to the high capital gains rate under President Carter? In 1978 he wanted to raise the rate even higher. But there was a backlash from middle class households around the country, from Democrats and Republicans alike. It was so fierce, Carter was forced to relent and ended up signing a capital gains tax cut.

As recounted by Mark Bloomfield in the Wall Street Journal:

But the year was 1978, the push for a tax hike came from President Jimmy Carter, and the tax in question was on capital gains. Mr. Carter wanted to tax capital gains at the same rate as ordinary income -- effectively doubling the rate for many taxpayers.

He didn't get his tax hike, but he did spark a pro-growth insurgency that reframed the tax debate.

The chief insurgent was Republican Rep. Bill Steiger of Wisconsin, who called for cutting the top capital gains tax rate almost in half. From its inception, the 1978 "Steiger amendment" won bipartisan support. In the Senate, Democrat Russell Long (then chairman of the tax-writing committee), Alan Cranston (the second-ranking Democrat) and Republican Clifford Hansen signed up 59 Democrats and Republicans to co-sponsor legislation to cut capital gains taxes.

Within weeks, political and popular support turned in favor of the tax cuts as more people acknowledged that lowering the rates would reward the middle class for saving and investing, not just "fill the pockets of fat cats."

What prompted this unexpectedly strong support for lower taxes on capital gains? The tax on capital gains may have been seen as a tax on the rich by some in Washington, but most Americans saw it differently. People believe in the American Dream, the old-fashioned Horatio Alger rags-to-riches story. A tax on capital gains is a tax on the hard work and risk-taking people undertake to build their own wealth.

Mainstream economists know that lower capital gains taxes result in lower capital costs, more saving and investment, and a stronger economy. And ordinary citizens understand that low taxes on capital gains can make it possible for them to buy a new lathe or the newest software, which will give them the chance to compete effectively in today's global economy. Retirement security is also at stake. Low taxes on capital gains allow Americans to build up larger nest eggs.

Capital gains tax hikes are just one of the many tax hikes threatened by Biden. He has endorsed income tax hikes, small business tax hikes, corporate tax hikes, a carbon tax, a more burdensome payroll tax, and he will even re-impose the much-hated Obamacare individual mandate tax, which broke his 2008 middle class tax pledge not to raise a single penny of tax on any American making less than $250,000 per year. Biden wants to bring back this $695 - $2,085 tax which primarily hits households making less than $50,000 per year.

What would Tax Day look like under President Biden? This video of Biden's own words is a clear warning to taxpayers.

Learn more about Biden's many tax hikes at ATR.org/HighTaxJoe

 

Photo Credit: Gage Skidmore/Flickr

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