Harris vows to hike federal capital gains tax to 33% — much higher than China’s 20% and Europe’s average of 18%
Kamala Harris wants to raise the top federal capital gains tax rate to 33%.
As noted by Wall Street Journal tax reporter Richard Rubin, “the all-in top capital-gains rate would be the highest since 1978.” This is the Jimmy Carter era famous for its economic stagnation.
China has a 20% capital gains tax. The European average capital gains tax is 17.9%.
Under the Harris proposal, the combined federal-state capital gains tax rate will exceed 40% in many states.
Capital gains are not indexed to inflation, so Americans are stuck paying tax on some “gains” that are nothing more than inflation — something created by Washington and then taxed by Washington. The Biden-Harris high inflation makes this especially painful.
Many hard working couples who started a small business at age 25 who now wish to sell the business at age 65 will have to give 33% of the “gains” to Washington.
Capital gains taxes are often a form of double taxation. When capital gains come from stocks, stock mutual funds, or stock ETFs, the capital gains tax is a cascaded second layer of tax on top of the federal corporate income tax of 21%. (Harris has also proposed a federal corporate income tax hike to 28%).
The Harris capital gains tax hike will also hit many families when parents pass away. Harris has endorsed a second Death Tax (separate from and in addition to the existing Death Tax) by taking away stepped-up basis when parents die.
This would result in a mandatory capital gains tax at death — a forced realization event.
As previously reported by CNBC:
“When someone dies and the asset transfers to an heir, that transfer itself will be a taxable event, and the estate is required to pay taxes on the gains as if they sold the asset,” said Howard Gleckman, senior fellow in the Urban-Brookings Tax Policy Center.
The Harris proposal to take away stepped-up basis has already been tried, and it failed: In 1976 congress eliminated stepped-up basis but it was so complicated and unworkable it was repealed before it took effect.
As noted in a July 3, 1979 New York Times article, it was “impossibly unworkable.”
NYT wrote:
“Almost immediately, however, the new law touched off a flood of complaints as unfair and impossibly unworkable. So many, in fact, that last year Congress retroactively delayed the law’s effective date until 1980 while it struggled again with the issue.“
As noted by the NYT, intense voter blowback ensued:
“Not only were there protests from people who expected the tax to fall on them — family businesses and farms, in particular — bankers and estate lawyers also complained that the rule was a nightmare of paperwork.“
Harris is calling for about $5 trillion in tax increases over the next decade.
Stay tuned for updates at ATR’s special website Kamalanomics.org