Hillary Clinton’s Capital Gains Tax Proposal

Brief Analyses | Taxes

No. 825
Thursday, April 14, 2016
by Pamela Villarreal

Presidential candidate Hillary Clinton has vowed to raise taxes on the wealthy if she becomes president. Taxing the wealthy is politically popular since it is assumed that few people will be affected. 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.

Hillary’s plan generally targets most of those who fall into the current top marginal income tax rate. Filers in the top income bracket — with taxable incomes of at least $415,051 (single) or $466,951 (married filing jointly) — pay a marginal income tax rate of 39.6 percent on wage income and nonqualified dividends. Qualified dividends on stock that has been held at least 60 days are currently taxed at 20 percent for high-income earners, whereas ordinary (nonqualified) dividends and interest are taxed at regular income tax rates. Furthermore:

  • An additional 0.9 percent Medicare tax applies to any wage income exceeding $200,000 (single) or $250,000 (married filing jointly).
  • A 3.8 percent surtax on unearned income — such as capital gains, dividends, rent and royalties — applies to any unearned income above the $250,000 (married filing jointly) and $200,000 (single) thresholds.
  • Capital gains on the sale of stocks held less than one year are taxed at the taxpayer’s income tax rate, while assets held more than one year are generally taxed at a lower rate, depending on income level.

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