Kamala Harris softens Biden’s capital gains tax increase proposal

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Kamala Harris has proposed to increase the top capital gains tax rate for the wealthiest Americans to 28 per cent, softening a centrepiece of US President Joe Biden’s fiscal proposals as she offers an olive branch to Wall Street.

The move comes as Harris fleshes out her economic proposals in a dash to defeat Donald Trump in the presidential election two months from now.

The vice-president emerged as the Democratic nominee for the White House after Biden dropped his re-election bid in July, forcing her to present distinctive policies to voters as she accelerates her campaign.

The economy and taxes are expected to be flashpoints during the televised presidential debate pitting Harris against Trump in Pennsylvania next Tuesday.

“We will tax capital gains at a rate that rewards investment in America’s innovators, vendors and small businesses,” she said at a campaign rally in New Hampshire on Wednesday. “We know that when the government encourages investment, it leads to broad based economic growth, and it creates jobs, which makes our economy stronger.”

The US tax rate on capital gains is set at 20 per cent, but it rises to 23.8 per cent for the wealthiest earners because of a surtax on investment income.

A person familiar with the vice-president’s thinking said Harris was taking a more moderate approach on capital gains tax than Biden in a bid to boost access to capital for small businesses.

But she also wants to balance out other big tax increases she is proposing on corporate America and high-income households, which remain aligned with Biden’s plans. Harris has promised to raise the corporate tax rate, quadruple tax on stock buybacks and introduce a minimum tax rate for billionaires.

Changes to US fiscal policy would need to pass Congress to become law, meaning unless Democrats won majorities in the House and Senate in November, Republicans could block Harris’s tax increases.

Harris sought on Wednesday to contrast her stance on taxes with Trump’s proposals. “He plans to give billionaires massive tax cuts and to cut corporate taxes by over a trillion dollars, even as they pull in record profits,” she said.

Biden tried and failed to raise the nominal capital gains tax rate to 39.6 per cent, effectively treating it as ordinary income. He has also aimed to increase the surtax so capital gains would be taxed at 44.6 per cent for the highest earners — and proposed to tax unrealised gains for multimillionaires, drawing a backlash from top financiers.

Harris did not address how she would tax unrealised income during her speech in New Hampshire.