Rep. Richard Neal, D-MA, chairman of the House Ways and Means Committee, and Rep. Kevin Brady, R-TX, rank member, at a committee hearing on May 24, 2017 in Washington.
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House Democrats on Monday proposed raising the top tax rate on capital gains and eligible dividends to 28.8%, one of several tax reforms aimed at helping wealthy Americans with a $ 3 budget plan. 500 billion dollars.
The maximum federal rate on long-term capital gains will be 25%, an increase from the current 20%. (Long-term capital gains occur on valuable assets sold after more than one year of ownership.) Added to the existing 3.8% surtax on net investment income and the total tax deduction would be by 28.8%.
The new rate will apply to sales of shares and other assets that take place after September 13, 2021, the day House Democrats introduced the tax portion of their legislation.
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According to a collaborator of the House Ways and Means Committee, from 2022, taxpayers will have to pay the highest federal rate if their taxable income is $ 400,000 (single), $ 425,000 (head of household) and $ 450,000. (married spouse). More … than.
This matches a commitment by the Biden administration not to raise taxes for families earning less than $ 400,000. However, this amount is lower than the current income limit on which the maximum rate is applicable.
The capital gains policy differs from an earlier policy issued by the White House, which provided for a maximum combined rate of 43.4% on those with income above $ 1 million. House Democrats appear to have abandoned a proposal by the Biden administration to tax capital gains on the death of the owner.
Democrats are largely focused on making the tax code fairer and raising trillions of dollars to extend the country’s social safety net and invest in climate change prevention. These changes are expected to cost up to $ 3.5 trillion.
Raising the maximum capital gains rate (and lowering the income threshold to which that maximum rate applies) will bring in $ 123 billion over the next decade, according to an estimate released Monday by the Joint Committee on taxation.
However, the House Democrats’ tax proposals are not a perfect deal. Democrats in the Senate can demand various reforms. Passing a law may not be an easy task, given the very slim margins of Democrats in the House and Senate and the unified Republican opposition.
In addition to increasing the capital gains tax rate, the House Democrats’ legislation will create a 3% surtax of more than $ 5 million on adjusted personal adjusted gross income starting in 2022.
The bill would increase the top marginal tax rate from 37% to 39.6%. Among other improvements, it will also speed up the reduction in the inheritance tax exemption (from $ 11.7 million currently for individuals to $ 5 million) and change the way the rich use retirement accounts. individual and 401 (k) plans. Will give
The bill would also provide the IRS with $ 78.9 billion in funding to strengthen tax enforcement for taxpayers earning more than $ 400,000 per year.