Democratic presidential candidate Hillary Clinton on Friday took aim at some of the highest U.S. earners, proposing to nearly double the tax rate on capital gains for stocks that are bought and sold relatively quickly.
In a speech in New York City, Clinton took aim broadly at Wall Street and more narrowly at the niche category of investors – often referred to as activist investors -- who swiftly move in and out of stock positions purely for short-term profits.
Clinton, a former senator from New York and Secretary of State during President Obama’s first term, criticized what she repeatedly described as “quarterly capitalism,” or the Wall Street-inspired mentality of generating short-term profits to appease shareholders every three months during quarterly earnings.
"American business needs to break free from the tyranny of today’s earning report so they can do what they do best: innovate, invest and build tomorrow’s prosperity,” the Democratic presidential front-runner said. "It’s time to start measuring value in terms of years -- or the next decade -- not just next quarter."
Under Clinton’s proposal, investments held between one and two years would be taxed at the normal income-tax rate of 39.6%, nearly double the existing 20% capital gains rate.
Only the top 0.5% of taxpayers would be impacted by the plan, which also falls in line with Democratic calls for cracking down on the immense wealth generated by ostensibly manipulative practices on Wall Street.
Activist investors have been criticized in recent months for running destructive campaigns against companies purely in an effort to reap personal gains from stock moves prompted by their actions.
Clinton’s plan would collect revenue from top-bracket taxpayers’ stock holdings on a sliding scale, with the lowest rate applied to investments held the longest. To qualify for the existing 20% rate, investors would have to hold an investment for at least six years.
Clinton said the all-consuming effort by corporations to generate short-term profits is harming the economy because companies are focusing on quarterly earnings rather than expansion and hiring.
Clinton also spoke out in favor of a $15 an hour minimum wage, which many business leaders have argued will force layoffs rather than improve the lives of minimum wage workers.
Stock buybacks by companies also came under criticism by the Democratic hopeful, who said the money that companies use to buy back stock and reward shareholders might be better spent on research and development.
Clinton’s plan would impact taxes for the top-tier taxpayers who hold investments for anywhere between two and six years. Stocks and other investments held for two to three years would be taxed at 36%; those held three to four years would face a tax of 32%. The sliding scale ends at six years.