President Biden is expected to announce a proposal to nearly double the capital gains tax rate in order to help fund a forthcoming spending package, according to multiple reports.
The proposal would set the capital gains tax rate for individuals earning over $1 million at 39.6 percent, two people familiar with the plan told Bloomberg. When combined with an existing federal surtax on investment income, investors could pay federal taxes at a rate of as high as 43.4 percent.
In states with high taxes, rates for wealthy individuals could be even higher. New Yorkers making over $1 million would see combined federal and state capital gains tax rates of as high as 52.22 percent, while California residents in the same income bracket could see a 56.7 percent combined federal and state capital gains rate.
The White House did not immediately comment on the report, and the Treasury Department declined Bloomberg‘s request for comment.
Stocks fell sharply following news of the potential tax increase on Thursday, with the Dow Jones dropping 400 points.
The tax increase is part of a proposal to fund the Biden administration’s American Families Plan, which is expected to call for $1 trillion in new spending and about $500 billion in tax credits for family and domestic programs. That plan would allocate billions in funding for universal pre-kindergarten instruction, paid family and medical leave, and free tuition for community college nation-wide.
It is unclear if Democrats will be able to push the proposed tax increase through the Senate, where Democrats are tied with Republicans and Vice President Kamala Harris holds the tie-breaking vote. For the plan to pass, the Biden administration would need the support of all Senate Democrats.