Clinton pushes new tax rates for capital gains

Hillary Clinton, the front-runner for the Democratic presidential nomination, is proposing a sliding scale for capital gains tax rates, in an attempt to battle short-term thinking on Wall Street. 

Clinton’s proposal would triple the number of capital gains rates for the highest earners, from two to six, adding new complexity to a tax system that many policymakers want to simplify. The former secretary of State plans to outline her plan, first detailed by The Wall Street Journal, at a speech in New York on Friday.

{mosads}Under the plan, the top 39.6 percent rate for capital gains — the same top rate as for regular income — would be in place for assets held for up to two years. Currently, that short-term rate for capital gains ends after one year.

The current long-term rate for capital gains, 20 percent, would be available after an asset is held for six years. Besides the current two rates, investment income for higher earners is also hit with a 3.8 percent surtax to help pay for President Obama’s healthcare law.

Clinton’s sliding scale would affect investments held between two and six years, installing a 36 percent rate on those held between two and three years, a 32 percent rate on those held three to four years, a 28 percent rate on those held four to five years and a 24 percent rate on those held five to six years.

The proposed changes would only affect taxpayers in the top bracket, both of which start at roughly $413,000 for individuals. 

Clinton has cast her plan as a chance to spur more long-term thinking on Wall Street, by putting less of an emphasis on quarterly reports. Clinton’s supporters say that sort of idea could get support from both the business community and liberal activists still angry about Wall Street’s role in the 2008 fiscal crisis. 

Still, the plan doesn’t go as far as placing a small tax on every financial transaction, an idea that has gained traction in some parts of the left and in Europe.

The current top rate for capital gains increased from 15 percent to 20 percent in the fiscal cliff deal signed early in 2013. 

The 1986 tax overhaul, signed by former President Reagan, had raised the top capital gains rate to 28 percent. Former Presidents Clinton and George W. Bush both reduced the capital gains rate, with Bush taking it down to the 15 percent level.