Investment Gains In addition, for Americans in the highest tax bracket, Clinton wants to increase the taxes due on any investment gains they realize within six years of buying an asset. Currently, such investors pay a 43.4 percent rate on any assets held less than a year. Clinton would extend that rate to assets held less than two years. After that, she’d drop the rate to 39.8 percent. Only after six years would the rate reach 23.8 percent. The plan is designed to encourage longer-term thinking among investors.
Under the current rule, someone who has realized $5 million in net long-term capital gains would owe $1.19 million in tax. Under Clinton’s plan, the bill would increase to $2.37 million. Under Sanders, it would be $2.51 million. Clinton’s plan would lead investors to postpone realizing their gains -- and would therefore reduce capital-gains tax collections by $374 billion over 10 years, according to an analysis released Tuesday by the Tax Foundation, a research group whose board of directors includes corporate executives. The group has not yet published an analysis of Sanders’s proposals.
Clinton’s tax plans, which would also cap itemized deductions that tend to benefit higher-income taxpayers, appear to raise $498 billion over 10 years, according to the foundation’s analysis. But the group’s report also said Clinton’s proposed tax increases would reduce U.S. gross domestic product by 1 percent over the long term -- resulting in actual collections of $191 billion over the next decade.
Brian Fallon, a Clinton campaign spokesman, called the analysis misleading and said it didn’t account for elements of her plan that offer tax relief, which include a tax credit on health costs of up to $5,000 for middle-class families. He also criticized the Tax Foundation’s contention that higher taxes would limit growth. The campaign cited a controversial 2012 report by the Congressional Research Service that said 65 years’ worth of data “suggests the reduction in the top tax rates have had little association with saving, investment or productivity growth.”In another area, estate taxes, Sanders would also go after the wealthiest taxpayers more aggressively than Clinton. They both want to reduce the threshold at which estates are subject to the tax -- to $3.5 million for individuals or $7 million for married couples, down from $5.45 million and $10.9 million currently.
But Clinton wants to raise the rate to 45 percent, from the current 40 percent; her campaign has estimated that the change would raise $200 billion over 10 years. Sanders proposes the same 45 percent rate on estates worth $3.5 to $10 million, but would increase the rate to 50 percent for those worth between $10 million and $50 million. Those worth more than that would be taxed at 55 percent, and his plan tacks on a surtax of 10 percent for the 550 or so American families with estates worth more than $1 billion.“There is evidence that higher estate taxes reduce wealth inequality, and Sanders’s increase is substantially more than Clinton’s," said Stanford’s Scheve.
Both proposals would face strong opposition in the House, which voted in April, 240-179, to repeal the estate tax.