Capital gains nonsense, part 2
By Scott Sumner
Here’s Investor’s Business Daily:
Biden proposes raising the capital gains tax rate to 39.6%, nearly double the current top rate of 20%, for millionaires and billionaires. . . .
If enacted, the new higher cap-gains rate would impact just taxpayers with incomes over $1 million.
Well, that’s good to know! People with incomes below $1 million presumably are not “impacted” if stock prices decline. And I guess workers don’t care if the nation’s physical capital stock gets smaller.
You can argue that these effects might not be large, but it’s crazy to suggest they don’t exist at all. Stocks fell on Biden’s announcement, despite the fact that it’s unlikely the proposal goes through Congress without being watered down.
Biden’s proposal would push the top capital gains rate in the US to over 50% (including state taxes). Biden should learn from Sweden where the top rate is 30%, roughly the same as the current US top rate. Even better, emulate one of the developed economies with no capital gains tax at all (at least for passive investors).