• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

Capital gains

One major area of contention is the fact that Biden’s budget calls for a 44.6% federal rate on investment income and other earnings for those making more than $1 million.

This income, known as capital gains, includes any profits from selling an asset, such as stocks, cryptocurrencies and real estate. Any gains in the asset’s valuation are subject to tax, just like any other income. But keep in mind that only gains that come from the sale of an asset are subject to this tax.

As it stands, Biden’s budget proposal would essentially increase the capital gains tax to match the standard taxation of wage and investment income.

To break this down further, that would mean long-term capital gains for those earning at least $1 million would be taxed at a whopping rate of 39.6% — a significant increase from 20%.

And the wealthiest Americans will also be asked to step up their contributions to the Medicare tax by increasing their rate to 5% (from 3.8%) in an effort to buttress the program’s trust fund. Along with the capital gains rate, this brings the wealthiest taxpayers’ liability up to a 44.6% federal rate on investment income and other earnings.

The Biden administration claims this would reduce deficits as a share of the economy over the next decade. However, critics worry these higher taxes lead to decreased economic output and growth, reduce U.S. competitiveness and further complicate the tax code.

Don't miss

A second death tax

The plan also proposes taxing assets when an owner dies, ending a benefit that currently allows unrealized appreciation to go untaxed when transferred to an heir.

In essence, death taxes are imposed on a person’s estate upon their passing. These taxes are the responsibility of the beneficiary who receives the property via the deceased’s will or estate.

These taxes are also referred to as estate taxes, death duties and inheritance taxes, and generally apply to estates and inheritances over a specific value.

The Biden administration’s federal budget plan for fiscal 2025 calls for taxing unrealized capital gains at death above a $5 million exemption ($10 million for joint filers), resulting in mandatory capital gains at death, in addition to the current death tax.

Where does it go from here?

Biden’s budget proposal has been flipped to Congress, which is in charge of writing the federal budget. The draft prepared by the White House is viewed as the starting point for negotiations between the president’s administration and lawmakers moving forward.

However, Biden’s proposal is likely to undergo a major facelift as the Republican-controlled House is now in the process of preparing its own draft of the 2025 budget. And Republican lawmakers are unlikely to go along with many, if not most, of the recommendations, specifically those that raise taxes on the wealthy.

What to read next

Laura Grande Associate Editor

Laura Grande is an editor and SEO content migration specialist at Moneywise with more than a decade of industry experience. Throughout her career she's written about (and edited) a variety of topics, from careers and health to pop culture and fashion. Her work has appeared on HGTV Canada, Food Network Canada, Today's Parent, Zoomer Magazine and SLICE, among others.


The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.