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

By Kayla Tausche, Tami Luhby and Michael Williams, CNN

Washington (CNN) — Vice President Kamala Harris proposed increasing the long-term capital gains tax rate to 28% 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%, plus an additional 3.8% 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% – for households with taxable income over $1 million. Harris, the people familiar with the matter say, believes 39.6% 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%, up from the current 21% rate set by Trump’s Tax Cuts and Jobs Act of 2017.

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

“My vision of an opportunity economy is one where everyone can compete and have a real chance to succeed – where everyone, regardless of who they are, where they start, can build wealth, including intergenerational wealth,” Harris said in New Hampshire.

She added: “I believe America’s small businesses are an essential foundation to our entire economy.”

Biden’s budget proposal also contains other tax increases on the wealthy, including raising the top marginal income tax rate to 39.6%, up from the 37% rate established by the 2017 Trump tax cuts law, and levying a 25% minimum income tax on households with more than $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 favor of quadrupling the tax on stock buybacks to 4%. 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 $25,000 credit for first-time homebuyers, a $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.

As part of the rollout of her economic policy in recent days, Harris has proposed a major, 10-fold tax deduction for small businesses – from up to $5,000 to up to $50,000 – and vowed to pursue measures that would cut red tape that would make such businesses easier to operate.

She has also pushed for a federal ban on price gouging and a permanent expansion of the child tax credit to as much as $3,600, up from $2,000.

The vice president has also vowed to end the federal income tax on tips, sparking Trump’s ire because he has made a similar campaign promise. Tips would remain subject to payroll taxes under Harris’ plan.

This story has been updated with additional reporting.

The-CNN-Wire
™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.