Harris breaks with Biden on capital gains tax, proposing a smaller increase

U.S. Vice-President Kamala Harris gives remarks alongside President Joe Biden at Prince George's Community College in Largo, Md., on Aug. 15, 2024.

WASHINGTON -

U.S. Vice-President Kamala Harris proposed increasing the long-term capital gains tax rate to 28 per cent for wealthy Americans during an economic speech in New Hampshire on Wednesday, breaking with the policy laid out by President Joe Biden in his 2025 budget by suggesting a lower rate.

The current long-term capital gains tax rate – 20 per cent, plus an additional 3.8 per cent tax on higher earners – is paid when an investment is sold, or gains are realized. The Biden budget proposes raising that rate to the top rate he wants to levy on ordinary income – 39.6 per cent – for households with taxable income over US$1 million. Harris, the people familiar with the matter say, believes 39.6 per cent is too high.

While Harris still supports taxing the wealthiest individuals and corporations at higher rates – as Biden’s budget also calls for – she believes that a lower capital gains rate would incentivize investors to put more money into startups and small businesses. She has also proposed increasing the corporate tax rate to 28 per cent, up from the current 21 per cent rate set by Trump’s Tax Cuts and Jobs Act of 2017.

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Advisers said Harris supports allowing many Trump-era tax cuts for the wealthy and big corporations to lapse in favour of funding more targeted programs for families and small businesses.

Biden’s budget proposal also contains other tax increases on the wealthy, including raising the top marginal income tax rate to 39.6 per cent, up from the 37 per cent rate established by the 2017 Trump tax cuts law, and levying a 25 per cent minimum income tax on households with more than US$100 million in net worth.

Harris said Wednesday that she also supports the latter measure – known as the Billionaire Minimum Income Tax – though various efforts to levy such taxes have failed to make it through Congress. Under Biden’s budget proposal, unrealized gains on assets would also be subject to the minimum tax, unlike current law.

Plus, she is in favour of quadrupling the tax on stock buybacks to four per cent. That levy was created by the Inflation Reduction Act, which the Democrats pushed through Congress in 2022.

The move comes as Harris attempts to establish herself as more moderate in some areas of economic policy while still embracing some elements of a more populist platform, like a US$25,000 credit for first-time homebuyers, a US$6,000 child tax credit for newborns and federal investigations into retail grocery pricing.

During a truncated sprint toward Election Day, Harris has embraced the policies of the Biden administration, which ushered trillions of government spending into the American economy, which also grappled with inflation at its highest in decades. Her remarks on Wednesday, part of a policy rollout that came after criticisms of the lack of policy from her campaign since Biden dropped from the race in July, represented the first time Harris has publicly diverged from Biden administration policy.

Democratic strategist James Carville wrote in The New York Times that, in order to brand herself as a forward-looking candidate, Harris would need to establish some distance between Biden’s policies and her own.