Kamala Harris proposes 28% capital gains tax for top earners

Vice President Kamala Harris has proposed a significant increase in the capital gains tax rate for high-income households, suggesting a 28% tax on long-term capital gains for those earning over $1 million annually. This proposal is lower than President Biden's suggested rate of 39.6% for the same income bracket in his fiscal year 2025 budget. The current capital gains tax rate for top earners stands at 20%. Financial advisors are closely monitoring these developments, advising clients to refrain from making any financial changes until the law is officially enacted. The proposed tax changes could impact not only high earners but also lower-income individuals who may experience a one-time capital gain from selling a business or property. Experts highlight that individuals in their 60s and 70s, particularly those with rental properties, may need to engage in more tax planning to navigate the potential implications of the new tax rate. For instance, a taxpayer with $1.1 million in taxable income, including $200,000 in capital gains, would face the higher rate on the portion exceeding $1 million. While Harris's tax policy aligns with Biden's in many respects, the lower proposed rate reflects a strategic approach to garner support from various stakeholders. The uncertainty surrounding future control of Congress adds to the complexity of the situation, as financial advisors recommend caution in planning until the legislative outcome is clear. Overall, the proposed capital gains tax increase is part of a broader discussion on tax reform, with implications for wealth distribution and economic policy in the United States. As the political landscape evolves, the final outcome of these proposals remains to be seen.