- A White House official defended plans to hike capital gains tax, according to a report.
- President Joe Biden is set to propose the tax rises to 39.6% for the richest Americans.
- The official told the Financial Times that it would only affect the wealthiest 0.3% in the US.
A White House official has defended plans to propose a sharp rise in the top capital gains tax rate to 39.6%, saying the changes would only hit the richest 0.3% of Americans, according to a report.
A senior official in President Joe Biden’s White House told the Financial Times the wealthiest Americans had been growing disproportionately richer.
“Many, many of the returns at the very top are what they call above-market rates of return, rents and so on,” the official said. “Taxing the people who are doing extremely well in the economy is one way of asking somewhat more from that.”
Biden is set to propose a major increase in capital gains tax from the current 20% base level this week, according to various media outlets.
Biden’s plan would propose raising the top marginal income tax to 39.6% from 37% and bringing capital gains tax in line with that for those earning more than $1 million a year.
When combined with the 3.8% surtax on investment income put in place under Barack Obama, it would take the tax rate on the wealthiest investors to 43.4%.
Republicans and many investors have criticized the plan to dramatically raise the tax, arguing that it will reduce investment and damage the economy.
However, the Biden official told the FT: “This is consistent with what the President had said on the campaign trail, which was that we needed to fundamentally reform parts of the code that affect the very, very richest or very highest income Americans, in ways to make sure that it is fair and not rewarding wealth over work.”
Yet Democrats’ razor-thin majorities in the House and the Senate mean the top rate for capital gains tax could well only end up at around 28%, according to analysts at Goldman Sachs.
“A 28% rate looks most likely, in our view, as it is roughly halfway between the current rate and Biden’s likely proposal,” the analysts said.
“This is also the rate that President Reagan and a Democratic House settled on a few decades ago when raising the tax from 20%.”
The White House has been contacted for comment.