- President Biden’s proposed tax plan includes doubling long-term capital gains taxes to 39.6%.
- However, the proposed tax hike will only apply to those earning $1 million per year or more.
- Only about 0.4% of Americans earn $1 million per year or more, according to IRS data.
President Biden’s proposed tax plan could raise taxes on the wealthiest Americans — but only about a third of the top 1% will see the effects.
The Biden tax plan, which he’s expected to announce during an address to Congress on Wednesday, includes nearly doubling the capital gains tax on long-term investments — from 20% to 39.6% — and raising the highest income tax bracket from a 37% tax rate to 39.6%.
Relatively few Americans will actually see a change
The Biden tax plan’s most dramatic hike is on long-term capital gains taxes. These taxes are on investment and income from the sale of assets, like a home. The amount you pay in capital gains taxes is based on how long you kept the asset sold, and your total income for the year.
That said, the tax plan will actually impact relatively few Americans. Insider looked at tax data from the IRS for the 2018 tax year — the most recent available — to find out how many people will be impacted by the plan.
If only those earning over $1 million see any changes, that’s only about 0.4% of American taxpayers impacted. Those in the income categories highlighted below in yellow are the only people expected to be impacted based on the current plan’s iteration.
|Annual income level||Total number of returns per bracket||Percentage of total taxpayers||Average total income tax paid|
|$10 million or more||22,112||0.001%||$7,386,572|
|$5 million to $10 million||34,788||0.002%||$1,872,196|
|$2 million to $5 million||142,011||0.10%||$816,360|
|$1.5 million to $2 million||98,583||0.10%||$464,253|
|$1 million to $1.5 million||241,713||0.20%||$313,160|
|$500,000 to $1 million||1,108,430||0.70%||$156,431|
|$200,000 to $500,000||6,905,670||4.50%||$47,559|
|$100,000 to $200,000||21,146,537||13.80%||$15,277|
|$75,000 to $100,000||13,685,409||8.90%||$7,390|
|$50,000 to $75,000||21,460,676||14%||$4,688|
|$40,000 to $50,000||12,017,312||7.80%||$2,859|
|$30,000 to $40,000||15,510,580||10.10%||$2,057|
|$25,000 to $30,000||8,984,412||5.80%||$1,369|
|$20,000 to $25,000||9,610,628||6.20%||$994|
|$15,000 to $20,000||10,187,149||6.60%||$491|
|$10,000 to $15,000||11,454,274||7.40%||$153|
|$5,000 to $10,000||10,014,109||6.50%||$237|
|$1 to $5,000||9,187,650||6%||$134|
|No adjusted gross income||1,962,253||1.30%||$44,220|
The biggest capital gains tax changes will be for long-term capital gains
Long-term gains are are taxed by income, and apply to any assets or investments kept for one full year or longer. Currently, only those earning more than $445,850 or more filing individually, or $501,600 filing jointly, pay taxes on long-term capital gains in the highest 20% category. Biden’s tax plan would nearly double that for those earning over $1 million per year, to 39.6%.
Short-term investment gains could also change under this tax plan. Gains on assets and investments kept for less than a year are taxed at the same rate as income, and the plan includes a hike for the highest tax bracket’s income tax rate from 37% to 39.6%.
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