Money has a way of making people talk past each other, especially when it's mixed with high-stakes politics. Lately, the buzz around Kamala Harris capital gains proposals has reached a fever pitch. You’ve probably seen the headlines. Some claim she’s coming for every dime of your home equity, while others argue it’s just a "fair share" tweak for the ultra-wealthy.
The truth? It’s somewhere in the middle.
Honestly, the tax code is already a headache. When you add campaign rhetoric to the mix, it becomes nearly impossible to figure out what would actually happen to your brokerage account or that small business you’ve spent a decade building. We need to look at the math, not just the memes.
The 28% Shift: Not Quite What Biden Wanted
If you’ve been following the White House budget proposals, you might remember President Biden floating a nearly 40% rate for capital gains. Specifically, he wanted to tax investment income at the same rate as ordinary income for those making over $1 million.
Kamala Harris went a different way.
In a move that surprised some of her more progressive allies, she proposed a top long-term Kamala Harris capital gains rate of 28%. It’s a significant hike from the current 20%, sure, but it’s a far cry from the 39.6% Biden was eyeing.
Why the change?
Basically, it’s about "rewarding investment." During a speech in New Hampshire, she mentioned that a 28% rate keeps the incentive for "innovators, founders, and small businesses" to take risks. She’s trying to walk a tightrope here. On one side, she wants to raise revenue to fund things like the $50,000 tax deduction for new small businesses. On the other, she doesn’t want to scare off the venture capital that fuels Silicon Valley.
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Who Actually Pays the Kamala Harris Capital Gains Tax?
Let’s be real: most people won't pay this.
The 28% rate only kicks in if you’re earning $1 million or more a year. If you’re a teacher, a nurse, or even a pretty successful mid-career professional, your long-term capital gains rates (likely 0%, 15%, or 20%) aren't the primary target of this specific proposal.
However, there is a "hidden" layer.
We can't talk about the 28% rate without mentioning the Net Investment Income Tax (NIIT). Right now, that’s an extra 3.8% on top of your capital gains if you make over $200,000. Biden’s budget suggested bumping that to 5%. If Harris keeps that part of the plan, the actual top federal rate for those million-dollar earners would be 33%.
Then you have to add state taxes.
In a place like California, where the state takes a massive bite, the combined federal and state rate could climb toward 46%. That's a lot of "skin in the game" for someone selling a company or a large chunk of stock.
The Real Elephant in the Room: Unrealized Gains
This is the part that makes everyone's hair stand up. You might have heard that the government wants to tax you on the value of your house increasing, even if you don't sell it.
Kinda true, but mostly not.
The proposal for taxing "unrealized gains"—basically taxing the "paper profit" of assets before they are sold—is part of the Billionaire Minimum Tax. Here are the hard boundaries:
- It only applies to people with a net worth over $100 million.
- It’s meant to ensure they pay at least a 25% effective tax rate on their total income, including those paper gains.
- If you have $2 million in a 404(k) and a $700,000 home, this doesn't touch you.
The controversy is real, though. Groups like the Tax Foundation argue this would be a nightmare to track. How do you value a private company every year? What happens if the stock market crashes the year after you paid the tax? The plan allows for "pre-payments" to be credited against future sales, but for a startup founder whose wealth is all on paper, it could force them to sell shares just to pay the IRS.
The "Death Tax" and the End of Stepped-Up Basis
Another major piece of the Kamala Harris capital gains puzzle involves what happens when someone passes away. Currently, we have something called "stepped-up basis."
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Imagine your grandpa bought stock for $10 in 1970. Today it's worth $1,000. If he sells it, he pays tax on the $990 gain. But if he dies and leaves it to you, your "basis" becomes $1,000. If you sell it the next day, you pay zero tax.
The Harris-supported plan (following the Biden budget) wants to change this.
They propose taxing those gains at death. There would be a $5 million exemption ($10 million for couples), so your family home is likely safe. But for larger estates, the "forced realization" of these gains would be a massive change in how Americans pass down wealth.
Small Business: The Give and Take
Harris often frames her tax plans as a way to jumpstart the "Opportunity Economy." She’s proposed a massive increase in the startup tax deduction—taking it from $5,000 to $50,000.
That’s a big deal.
The average cost to start a business is around $40,000. Getting a full deduction in year one could be the difference between a business surviving or folding. But critics, like Americans for Tax Reform, argue that the higher capital gains rates and the repeal of certain Trump-era tax cuts would ultimately hurt these same businesses once they become successful.
It’s a classic trade-off: more help at the beginning, but a higher bill at the finish line.
Actionable Insights: How to Prepare
Even if these proposals are just "plans" for now, they signal where the wind is blowing. If you are in a high-income bracket or expect a major "liquidity event" (like selling a business), you should probably be looking at your timing.
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- Harvest Gains Early: If you're sitting on significant profit and worry about a 28% or 33% rate, realizing those gains under the current 20% (+3.8%) regime might save you a fortune.
- Watch the $400k Threshold: Many of the proposed changes, including NIIT increases, seem to center on income above $400,000. Staying under this through 401(k) contributions or other deferrals becomes even more valuable.
- Evaluate Estate Planning: If the stepped-up basis is on the chopping block, talk to a pro about irrevocable trusts or other vehicles that might protect your heirs from a massive tax bill at the time of your passing.
- Document Everything: Especially for small business owners, keep impeccable records of your "basis"—the money you actually put into the business. If tax rates go up, your ability to prove your initial investment is the only thing that reduces your taxable gain.
Tax laws aren't written in stone until Congress signs off, and with a divided government, many of these proposals might never make it past a committee. But the Kamala Harris capital gains strategy is a clear map of her economic priorities. It’s less about "taxing everyone" and more about a very specific, very targeted squeeze on the top 1%. Whether that squeeze funds the next generation of startups or slows down the current one is the $750 billion question.