The concept driving President Bidens tax proposals for individuals is that the long-term capital gains and dividends of wealthy investors should be taxed as ordinary income. If the concept becomes law, the U.S. will have hamstrung itself economically by impairing a key engine of growththe individual risk-taking needed to start companies and create jobs.
The current top rate on long-term capital gains is 23.8%: 20% plus the 3.8% investment-income surtax. Mr. Biden proposes to push the top rate to 39.6% plus the 3.8% surtax, for a total of 43.4%
In the business and financial world it is generally understood that long-term capital gains are different from ordinary income and thus should be taxed differently and at lower rates. Long-term capital gains can be heavily eroded by inflation. Lower capital-gains tax rates reward the patient capital needed to create and build business. Also, net capital losses are generally not deductible from taxable income. So if government isnt willing to share fully in the losses from risky economic investing, it shouldnt take a large part of any net gains.