Capital Gains Tax Hike Could Trigger Selling Frenzy
There has been a lot of discussion about the potential implementation of an unrealized gains tax by Kamala Harris if she is elected. However, it is unlikely that such a tax will be implemented due to the drastic overhaul it would require of the US tax system. Instead, a simpler method to cause a significant drop in value would be to increase the capital gains tax, a move that is currently causing a frenzy in the UK.
UK's Capital Gains Tax Increase Causes Panic
According to the Financial Times, fears of a capital gains tax increase by the UK government have resulted in a surge of activity by business owners, property investors, and shareholders. The new Prime Minister, Keir Starmer, has indicated that the Labour administration will raise taxes to address a £22bn deficit in public finances. This announcement has led to a significant increase in inquiries about selling assets.
Impact of Capital Gains Tax Increase
Capital gains on assets, including businesses, second homes, and shares, are currently taxed at between 10 and 28% in the UK, lower than the 20 to 45% levied on income. The potential increase in capital gains tax has led to a rush to sell assets and pay tax at the existing rates. This rush has intensified since the new government made its tax plans clear.
Kamala Harris' Proposed Capital Gains Tax Increase
In the US, Kamala Harris has proposed a 28% capital gains tax rate on people earning $1 million or more. This proposal is less than the 39.6% rate that President Joe Biden has suggested, but is still higher than the current rate of 20%. Harris has also proposed expanding tax credits for parents and offering $25,000 down-payment assistance for first-time home buyers. These tax cuts would be funded by increasing the corporate tax rate to 28% from 21%, imposing a minimum income tax on billionaires, and quadrupling a levy on stock buybacks.
Impact of Proposed Tax Changes
If implemented, these changes could have a significant impact on businesses and wealthy households. However, it is important to note that these are only proposals at this stage and would need to be passed into law to take effect. In the meantime, the uncertainty surrounding these potential changes could lead to a similar selling frenzy as seen in the UK.
Bottom Line
The potential increase in capital gains tax, both in the UK and the US, could have significant implications for investors and business owners. It could lead to a rush to sell assets and a subsequent drop in value. However, it is also important to consider the potential benefits of these tax changes, such as increased funding for public services and a more equitable tax system. What are your thoughts on these proposed changes? Do you think they will have a positive or negative impact on the economy? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.
