Brian Deese, the director of the National Economic Council, confirmed during a White House press briefing that Biden's proposed tax hike will apply to about 500,000 Americans earning more than $1 million, or about the top 0.3% of U.S. households. It's unclear whether that threshold will affect both married couples and individual filers. White House press secretary Jen Psaki declined to clarify.
"We're talking about a tax change that would affect the three-tenths of one percent, the top sliver of households," Deese told reporters. "The principle here is to equalize the treatment of ordinary income and capital gain."
Biden will release details of the forthcoming spending and tax measure, dubbed the American Families Plan, ahead of his address to a joint session of Congress on Wednesday. The president is expected to propose raising the capital gains tax rate to 39.6% from 20% for millionaires, a source familiar with the matter told FOX Business.
Coupled with an existing Medicare surcharge, federal tax rates for the wealthy could climb as high as 43.4% – bringing the levy on returns on financial assets higher than rates on ordinary income.
Taxes on long-term capital gains – generally classified as an asset that's held for more than one year – currently range from 0% to 20%, depending on a person's income. Wealthier investors are also subject to an additional 3.8% tax on long- and short-term capital gains that's used to fund ObamaCare. Short-term capital gains on assets sold within a year are typically taxed as ordinary income.
Capital gains are taxed favorably when compared to wage and salary income; under existing law, the richest Americans pay a top tax rate of 37% on ordinary income, while the top tax rate on capital gains is 23.8%.
"For the very highest-income Americans, we should tax at the same level ordinary income and capital gains," Deese said.
Biden's proposal would result in an average tax increase of nearly $300,000 for households in the top 1% of the country, or those with income more than $837,000, according to the Tax Policy Center. By comparison, middle-income households – with an income between $52,000 and $93,000 – would likely see their tax bill increase by just $260 per year. Almost 93% of the the tax increase would be borne by taxpayers in the top quintile of income-earners.
The top long-term capital-gains tax rate is paid by single taxpayers earning more than $445,850 this year (and $501,600 for married couples filing a joint tax return).
The forthcoming proposal comes just a few weeks after Biden released the American Jobs Plan, a $2.25 trillion tax and spending initiative that would make massive investments in the nation's roads and bridges, as well as water systems, green energy, hospitals and elder care. That plan would be funded by a slew of new tax hikes on corporations, including the base rate paid by U.S. companies to 28% from 21% and imposing a higher minimum on foreign earnings.