Clinton’s Capital Gains Tax Bad at All Brackets

Proposed Tax Rates Would Hurt Earners of All Income Levels: NCPA

Source: NCPA

Ahead of tonight’s Democratic debate, a new analysis of Hillary Clinton’s proposed multi-tiered capital gains tax rates from the NCPA's Tax Analysis Center found the plan would reduce investment in capital and impact earners of all income levels.

“Taxing the wealthy is politically popular, since it is assumed that few people will be affected,” says NCPA Senior Fellow Pam Villarreal, author of the report. “However, many people who are deemed ‘wealthy’ are actually small business owners or self-employed professionals whose business income is taxed at personal income tax rates.”

Clinton’s proposed rates would reduce investment returns for households earning $500,000 a year or more. Consider a $100,000 investment paying a 3 percent annual dividend and an 8 percent capital gain.

  • If the asset were sold after four years, it would yield a 7.49 percent after-tax rate of return, 12 percent less than under current law.
  • After three years, it would yield a 7.09 percent after-tax return, 19 percent less.
  • After two years, it would yield a 6.7 percent after-tax return, 27 percent less.
  • Finally, if the asset were sold after one year, it would yield a 6.12 percent after-tax rate of return, 38 percent less than under current law.

“Hillary’s intent may be to encourage long-term investing, but the arbitrary nature of the tiered tax system reduces the efficiency of the capital market,” says Villarreal. “Moreover, the lower rates of return, higher taxes and the arbitrary holding period may discourage people from investing in the first place.”

The NCPA's Tax Analysis Center has reported on the tax plans of other presidential candidates, including Ted Cruz and Donald Trump.

Villarreal is available for media inquiries and interviews, and more of her tax research can be found at:

For live analysis during the debate, follow the NCPA on Twitter at @NCPA and on Facebook at @NationalCenterforPolicyAnalysis.

Hillary Clinton’s Capital Gains Tax Proposal: