home Latest News 2020 Democrats push tax hike on wealthy investors | TheHill – The Hill

2020 Democrats push tax hike on wealthy investors | TheHill – The Hill

This post was originally published on this site

Democratic presidential candidates are calling for increasing taxes on capital gains, a move they argue would make the tax code more fair and help to reduce income inequality.

Many of the candidates have suggested they might raise tax rates on investment gains and end breaks that allow people to minimize their capital gains tax bills.

People pay capital gains taxes when they sell investments. Currently, the top tax rate on long-term capital gains is 20 percent, plus a 3.8 net investment tax for high earners. By contrast, the top rate on individuals’ ordinary income, such as wages, is 37 percent, plus 3.8 percent in Medicare taxes. Analysts have estimated that most of the benefits of the lower capital gains rates go to high-income taxpayers.

Former Vice President Joe BidenJoe BidenPhiladelphia mayor posts photo of Rapinoe atop City Hall: ‘Equal pay now!’ Ocasio-Cortez’s racism charge shows Pelosi at risk of being devoured by the revolution Racial politics roil Democratic Party MORE, currently leading in many polls, has repeatedly said at campaign events that he thinks capital gains taxes are too low, though he has not specified what he thinks the ideal tax rate should be.

ADVERTISEMENT

“We need to get rid of these capital gains cuts and loopholes for the super-wealthy,” Biden, one of the more centrist candidates in the 2020 Democratic field, said at a rally in Iowa in April.

Biden has focused many his comments on eliminating a tax preference often called “step-up in basis,” saying that doing so would raise revenue to cut college costs and reduce the deficit. 

Under step-up in basis, people can transfer investments to their heirs without the investments being taxed at the time of their death. When their heirs sell the investments, they don’t have to pay capital gains taxes on the value that the investment appreciated before they received it.

Sen. Bernie SandersBernie SandersOcasio-Cortez’s racism charge shows Pelosi at risk of being devoured by the revolution House Democrat on O’Rourke: ‘I wouldn’t count him out yet’ Overnight Energy: EPA expands use of pesticide it considers ‘highly toxic’ to bees | House passes defense bill with measure targeting ‘forever chemicals’ | Five things to watch as Barry barrels through the Gulf MORE (I-Vt.), who is known for his progressive views, supports taxing capital gains and dividends the same as income from work, according to his campaign.

During his 2016 presidential campaign, Sanders proposed taxing the capital gains and dividends of high-income taxpayers at the same rates as ordinary income, and taxing capital gains at death and when a gift is made.

Sen. Cory BookerCory Anthony BookerRacial politics roil Democratic Party The Hill’s Campaign Report: Democratic infighting threatens 2020 unity Poll: Biden leads 2020 Democratic field in South Carolina by 21 points MORE (D-N.J.) and former Rep. John DelaneyJohn Kevin DelaneyDemocratic strategist: ‘Very short-sighted’ to ditch ObamaCare in favor of ‘Medicare for All’ 2020 Democrats call for Labor Secretary Acosta’s resignation after Epstein arrest Poll: Plurality backs criminal prosecutions for illegal border crossings MORE (D-Md.) have both said that they want to tax investment gains and wage income the same and use the revenue raised from the change to help offset the cost of expanding the earned income tax credit — a refundable tax credit that benefits low- and middle-income workers.

“By pairing [an expansion of the credit] with the capital gains increase, I’m making it very clear to the world where my priorities are, which is we should use the tax code to benefit workers,” Delaney said in an interview with The Hill.

Rep. Seth MoultonSeth Wilbur MoultonMoulton: Trump voters ‘know that he’s an a–hole’ 3 reasons billionaire activist Tom Steyer is running for president Presidential candidates hear challengers’ footsteps at home MORE (D-Mass.) recently released a tax plan that included equalizing tax rates for capital gains and ordinary income and ending step-up in basis.

“People rightly view the tax system right now as unfair,” Moulton told The Hill. 

“It’s not fair that Warren Buffett pays lower taxes than his secretary,” he added, referencing the billionaire Berkshire Hathaway CEO.

Former Rep. Beto O’Rourke (D-Texas), former Colorado Gov. John HickenlooperJohn Wright HickenlooperHickenlooper to pedal part of cross-state bike ride in Iowa The Hill’s 12:30 Report: Pelosi looks to squash fight with progressives Andrew Yang raises .8 million in second quarter MORE (D) and Sen. Amy KlobucharAmy Jean KlobucharThe Hill’s Campaign Report: Democratic infighting threatens 2020 unity Klobuchar unveils plan to help Alzheimer’s patients, caregivers Dem senators demand GOP judicial group discloses donors MORE (D-Minn.), are also among the 2020 candidates who want to tax capital gains and ordinary income at the same rates. O’Rourke and Hickenlooper have also called for ending stepped-up basis, and Hickenlooper wants long-term capital gains to be indexed to inflation while taxed at ordinary income rates. That change would reduce the amount of gains subject to taxes compared to if the gains weren’t indexed.

A Democratic president who wants to increase capital gains taxes would have support from a key ally in Congress. Sen. Ron WydenRonald (Ron) Lee WydenHillicon Valley: FTC reportedly settles with Facebook for B fine | Trump calls to regulate Facebook’s crypto project | Court rules Pentagon can award B ‘war cloud’ contract | Study shows automation will hit rural areas hardest IRS announces contractor reviewing ‘Free File’ program Border Patrol chief was member of secret Facebook group for agents: report MORE (D-Ore.), the top Democrat on the tax-writing Senate Finance Committee, is working on a proposal to tax wealthy people’s investment gains annually — instead of just when investments are sold — at the same rates as wage income.

“To ensure wealthy Americans pay their fair share of taxes, we need to close capital gains loopholes and equalize the tax treatment of wages and wealth,” Wyden said in a statement to The Hill. 

Tax experts say that 2020 Democrats are taking a more full-throated approach to calling for higher capital gains taxes than they typically have in the past. 

Former President Obama proposed raising capital gains rates for high earners to 28 percent, still short of the top ordinary income tax rate. During the 2016 presidential campaign, Democratic nominee Hillary ClintonHillary Diane Rodham ClintonPhiladelphia mayor posts photo of Rapinoe atop City Hall: ‘Equal pay now!’ Second Republican announces plans to challenge Ocasio-Cortez in New York The Hill’s Campaign Report: Democratic infighting threatens 2020 unity MORE proposed increasing capital gains rates for investments held in the medium term but proposed keeping the top long-term rate the same. And Democrats in the past have also focused much of their talk about capital gains narrowly on ending capital gains tax breaks for the carried interest earned by investment-fund managers.

“This time around, people are willing to take on the much bigger issue,” said Steve Wamhoff, director of federal tax policy for the left-leaning Institute on Taxation and Economic Policy.

Advocates of higher taxes on the rich see the growing consensus from Democratic candidates on capital gains as positive news.

“I’m excited by this development,” said Frank Clemente, executive director of Americans for Tax Fairness Action Fund. “Democratic candidates are recognizing how unfair it is that the richest Americans can pay a tax rate that’s half of what they should be paying.”

The interest from some Democratic presidential candidates in higher capital gains taxes is one of several ideas candidates have proposed to increase taxes on the wealthy. For example, several candidates have proposed increasing the estate tax, and Sen. Elizabeth WarrenElizabeth Ann WarrenOcasio-Cortez’s racism charge shows Pelosi at risk of being devoured by the revolution House Democrat on O’Rourke: ‘I wouldn’t count him out yet’ Overnight Energy: EPA expands use of pesticide it considers ‘highly toxic’ to bees | House passes defense bill with measure targeting ‘forever chemicals’ | Five things to watch as Barry barrels through the Gulf MORE (D-Mass.) has floated a wealth tax.

The exact amount of revenue that can be raised from increasing capital gains taxes depends on proposals’ details, tax experts said.

Supporters of taxing capital gains more said that increasing rates alone won’t raise the kind of revenue that Democrats are seeking, since people will hold onto their investments for longer if rates are higher. Experts said that candidates should also call for other changes in addition to higher rates, such as ending step-up in basis and requiring investment gains to be taxed annually.

Democrats’ approach is vastly different from the stance of Republicans, who generally think that capital gains taxes should be cut in order to increase incentives for investment and saving.

President TrumpDonald John TrumpIn 1710 the Brits impeached an orange-haired populist — It did not go well Philadelphia mayor posts photo of Rapinoe atop City Hall: ‘Equal pay now!’ Social media summit highlights partisan approaches on tech MORE’s campaign blasted Democrats for proposing tax increases, saying Democrats will need to impose tax hikes to pay for plans such as government-run health care and a Green New Deal.

“Americans are enjoying what may be the strongest economy in history, and raising taxes is the surest way to derail it,” Trump campaign communications director Tim Murtaugh said in a statement. 

Ryan Ellis, president of the conservative Center for a Free Economy, said that if Democrats’ position on capital gains is discussed along with their position on Medicare for All and the Green New Deal, “it becomes part of the argument that they are too radical to be elected.”

Trump has said he’s considering taking executive action to reduce capital gains taxes by indexing capital gains to inflation.

Democrats in Congress fiercely oppose such a move, saying it would increase the deficit and largely benefit the wealthy. They also argue that the administration doesn’t have the authority to index capital gains on its own.

But conservatives back indexing capital gains and are optimistic that the administration will take action before the 2020 election. They argue that indexing capital gains will lead to a surge in sales of investments that will boost the economy and that indexing can benefit family farmers and people selling their homes.

“I think it’s going to be very helpful,” said Americans for Tax Reform President Grover Norquist.