As Zachary Evans notes, Biden has a proposal in the works that would approximately double the capital-gains tax for wealthy investors, those making more than a million dollars a year. Including an existing 3.8 percent surcharge on investment income, these folks would face a rate of about 43 percent. Add in state taxes and the rate goes even higher. A version of this idea was previously part of the president’s campaign, so it’s not shocking news, but stocks tanked in response anyway.
One point to add: The capital-gains tax has always interacted poorly with the corporate tax, which Biden also wants to hike, from 21 percent to 28 percent. Combined, the two proposals lead to downright insane tax rates.
Basically, corporate profits are taxed before they can be paid as dividends* or reinvested to grow the company, so capital-gains taxes are a second layer of taxation. If profits are taxed at 28 percent at the corporate level, and then rich investors lose 43 percent of what they earn, that works out to a 59 percent “integrated” rate. That’s one high rate, even if it applies only to rich people who invest in corporations.
See this Tax Foundation piece for some similar math, including state taxes, on Biden’s campaign plan.
* “Qualified” dividends are taxed at the capital-gains rate, and the campaign version of Biden’s plan included them in its hike of the capital-gains tax. As the New York Times notes, however, the leaked details are not explicit as to whether this is still the case.