![]() ![]() Economic and Revenue Impact of Raising the Top Capital Gains Rate to 39.6 Percent for Those Earning over $1 Million Gross Domestic Product (GDP)Ĭonventional 10-Year Revenue, 2022 to 2031 Using the Tax Foundation General Equilibrium Model, we find that raising the top capital gains tax rate to 39.6 percent for those earning over $1 million would reduce long-run GDP by about 0.1 percent and reduce federal revenue by about $124 billion over 10 years. Residents of Portland, Oregon would face a top capital gains rate of 57.3 percent. For example, New York City levies a local capital gains rate of 3.876 percent, which means an investor would pay an all-in rate of nearly 58.2 percent. Top combined rates in some localities would go even higher. California, New York, and New Jersey would have combined rates of more than 54 percent. Thirteen states and the District of Columbia would have a top combined capital gains tax rate north of 50 percent. ![]() If the top federal capital gains rate rises to 43.4 percent, this would raise the combined tax rate on long-term capital gains to 48.4 percent. The average top tax rate on capital gains at the state level is about 5.2 percent, for a combined average rate of 29 percent under current law. Nine states provide general exclusions or deductions for long-term capital gains. Most states levy their individual income tax rates on long-term capital gains and qualified dividends, though Hawaii levies lower tax rates. If the effect is large enough, federal revenue from capital gains income would decline because taxpayers have decided to avoid realizing gains and the higher tax rate. states due to state and local capital gains taxes, leading to a combined average rate of 48 percent compared to about 29 percent under current law.Ī high combined capital gains tax rate would influence when taxpayers decide to sell assets and realize the gain. When including the net investment income tax, the top federal rate on capital gains would be 43.4 percent. ![]() President Joe Biden’s American Families Plan will likely include a large increase in the top federal tax rate on long-term capital gains and qualified dividends, from 23.8 percent today to 39.6 percent for higher earners. ![]()
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