Only the wealthiest Americans would pay higher capital gains taxes under Democratic presidential candidate Kamala Harris’ proposal, as well as the Biden administration’s budget plan that Harris has endorsed, contrary to misleading narratives about capital gains taxes shared on social media.
The posts falsely suggest that, should Harris win in the Nov. 5 election, both a capital gains tax hike and a new system taxing the unrealized capital gains from unsold assets would be imposed on all taxpayers, regardless of their income level or the value of their assets.
Harris’ tax policies would “drain your savings and tax you out of your home!” some versions of the post say, followed by: “DO A LOT OF THINKING BEFORE YOU VOTE.”
Harris’ Republican rival Donald Trump also mentioned one of these narratives at a Las Vegas event on Aug. 23 (timestamp 04:40:21): “She's even pushing a tax on unrealized capital gains. In other words, the appraisers are going to make a lot of money, which will soon be applied to small business owners, and you will be forced to sell your restaurant immediately.”
The relevant proposed tax policies have been misquoted, however, and they would only apply to high-income and high-net-worth taxpayers if implemented.
Harris has not released a comprehensive platform, but she has committed to increasing the corporate tax rate, tax incentives for the middle class, new parents, and new small businesses, as well as President Joe Biden’s proposal not to raise taxes on people with an annual income of $400,000 or less.
The tax policies featured in the misleading narratives can be traced back to the Biden administration’s most recent budget for fiscal year 2025, which the Harris campaign said the vice president would support.
The Treasury Department’s explainer on how the budget, released in March 2024, will expand revenue, says in a footnote on page 80 that the proposed top marginal tax rate on long-term capital gains and qualified dividends for some taxpayers would be as high as 44.6%, up from the current 23.8%.
The proposal suggested lifting the top capital gains tax rate, which applies to taxpayers with $1 million or more in taxable income, to 39.6%, and a new 1.2 percentage-point increase in tax on net investment income that applies to the portion of income above $400,000.
Harris has since proposed a lower top tax rate of 28% on capital gains instead of the 39.6% in Biden’s fiscal 2025 budget. As in the budget plan, this proposal only affects those with an annual income of $1 million or more. The all-in top rate, including the proposed investment income tax hike, will be 33% under Harris’ plan as opposed to the 44.6% in Biden’s proposal.
Separately, the budget also proposed a minimum 25% tax on the total income, including unrealized capital gains, of taxpayers with a net worth over $100 million. The Treasury Department explained on page 83 that the measure targets “high-wealth” taxpayers, who are subject to a “lower effective tax rate” because they hold onto assets to avoid capital gains tax rather than reinvesting them in “more economically productive investments.”
The proposed tax policies would only become effective if the budget proposal passes the House and Senate and becomes law. Lawmakers will return on Sept. 9 after summer recess and have about three weeks to approve the budget plan before the new fiscal year begins on Oct. 1 to avoid a government shutdown.
Another future event that may shape Harris’ tax plan is the 2025 expiration of the Trump administration’s 2017 Tax Cuts and Jobs Act (TCJA), which slashed corporate and individual tax rates and increased family tax credits.
The next president can either let the 2017 law lapse or extend it, and Trump indicated he plans to extend the TCJA if he returns to office. As the vice presidential candidate in 2019, Harris called for the repeal of the TCJA but some of her new tax commitments may mean she would have to extend some elements of the tax law, The Wall Street Journal reported.
In response to a request for comment, a Harris campaign spokesperson referred to an Aug. 18 statement made to pool reporters that Harris “supports the revenue raisers in the FY25 Biden-Harris budget that ensure billionaires and big corporations pay their fair share.”
VERDICT
Misleading. Both the proposed 44.6% top tax rate on capital gains and investment income as well as the new 25% proposed minimum tax on unrealized capital gains and other income would only apply, respectively, to Americans with $1 million or more in taxable income or net worth in excess of $100 million.
This article was produced by the Reuters Fact Check team. Read more about our fact-checking work.
