Biden's Proposed 2025 Budget: Capital Gains Tax Increase in Focus

Significant Increase in Top Capital Gains Tax Rate

President Biden's proposed budget for fiscal year 2025 contains a significant proposal to increase the top long-term capital gains tax rate to 44.6%. This is a major departure from the current rate of 23.8%, and it has generated considerable discussion and debate.

Details of the Proposed Increase

Under the proposal, the top capital gains tax rate would apply to individuals with taxable income above $400,000 for single filers and $450,000 for joint filers. This is a significant increase from the current threshold of $445,850 for single filers and $501,600 for joint filers.

In addition, the proposed budget includes a provision that would eliminate the stepped-up basis for capital gains at death. This means that when inherited assets are sold, the capital gains will be taxed based on the original purchase price rather than the lower value at the time of the inheritance.

Rationale Behind the Proposal

The Biden administration argues that the proposed capital gains tax increase is necessary to address income inequality and make the tax system fairer. They point out that the current tax system disproportionately benefits wealthy investors, who are able to shelter large amounts of income from taxation through the use of capital gains loopholes.

Conclusion

The proposed increase in the top capital gains tax rate is a bold and controversial proposal that will likely generate significant debate in the coming months. It remains to be seen whether the proposal will ultimately be enacted into law, but it is a clear indication that the Biden administration is intent on reforming the tax system to make it more equitable.