Kamala Harris Threatens Higher Taxes on Investment Income

Different candidates have different approaches to funding America’s social programs. One approach is to take more earned money from people and businesses, and evidently vice president and current presidential candidate Kamala Harris is prepared to enforce this wealth redistribution strategy.

Former president and current presidential candidate Donald Trump demonstrated his opposition to this type of policy in 2017, when he signed his tax code revisions into law. This wasn’t an executive order, but a bill that was passed into law with Congress’s support.

More recently, Trump has expressed a preference for tariffs rather than more taxes on the American people. The idea is to enforce fair trade practices with China and other nations rather than increase the tax burden on Americans.

But of course, opposing presidential candidates will have opposing views of how to fund the nation’s programs. Apparently, rather than impose tariffs on goods entering the U.S. from foreign nations, Harris would prefer to raise some of the tax rates on investment income.

For example, investors currently pay either 0%, 15%, or 20% for long-term capital gains, plus an extra 3.8% net investment income tax (NIIT) when their modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples filing together. Harris’ plan would increase the NIIT from 3.8% to 5%.

Courtesy: MarketWatch

Bear in mind, a married couple earning $250,000 in total isn’t wealthy – not even close. Many retired married couples would fit into this tax bracket in 2024, after all of the inflation that’s happened during the past few years.

The NIIT is already an unpleasant surprise for individuals and couples who earn investment income through their own smart decisions. If Harris has her way, however, the NIIT will be an even more unpleasant surprise for many Americans over the coming years.

That’s not the end of it, though. Harris also wants to impose a 28% tax on long-term capital gains (or assets owned for more than one year) for households making more than $1 million annually. Not that this is for households, not just an individual earning that much investment income.

It’s a substantial increase from the current rate of 20% for top investment income earners. But hey, at least it’s lower than lower than the 39.6% rate proposed in Joe Biden’s fiscal year 2025 budget.

Even if it’s not quite as dramatic as Biden’s proposed tax code revisions, Harris’ tax-and-spend policy would redistribute vast quantities of wealth from individuals – including many who run small businesses and hire workers – to the federal government.

Courtesy: CNBC

Harris would, in effect, toss out the tax code for U.S. investors as we know it today, shown in the chart above. More investment income, which is the reward for taking on risk with one’s capital, would be taken away from investors by force and handed over to the government.

Yet, there’s more to the story here as Harris supports Biden’s proposal to tax some investors’ unrealized capital gains. In other words, under Biden and Harris’s plan, some investors would have to pay takes on investment profits that they haven’t actually made yet.

Siri Terjesen, a professor and associate dean at Florida Atlantic University’s College of Business, warned that Biden and Harris’s proposed change targeting unrealized capital gains is “among the worst ideas in the Biden administration’s proposed budget.” Moreover, Terjesen expects that it would serve as a “kill switch” for entrepreneurship because it would end up “discouraging investment & draining capital.”

And always bear in mind, once a tax is imposed, it’s probably permanent because taxes are often added and rarely retracted. It’s a slippery slope of taxation, government spending, and wealth redistribution that’s hard to stop once it starts.