In all, CRFB estimates that the current capital gains rates – which are classified as a tax expenditure – will cost around $1 trillion over a decade, though the Congressional Budget Office reports combined figures for capital gains and dividends.
President Obama’s fiscal commission proposed to again tax capital gains as the same rate as ordinary income. House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) have so far refused to take much off the table when it comes to crafting a tax reform plan.
Critics of lower capital gains rates say it can encourage tax sheltering and brush aside the idea that raising rates for investment income will stunt risk-taking.
The CFPB paper does say, however, that raising capital gains rates too high could be a revenue loser and sets 30 percent as the “revenue-maximizing” rate.
Wealthy investors are also facing an additional 3.8 percent tax on unearned income due to the president’s healthcare law.