Donald Trump and Kamala Harris, the 2024 presidential candidates, present starkly contrasting visions for voters, particularly on federal tax policy.
Capital Gains Tax: Capital gains are the profits received after selling an asset. Gains are subject to taxes depending on how long the asset was held.
Assuming a long-term holding period, a single person would pay the following capital gains taxes in 2024, according to Nerdwallet.
- 0% rate with taxable income less than $47,025.
- 15% rate with taxable income between $47,026 and $518,900.
- 20% rate with taxable income over $518,900.
Trump’s Plan: Trump has largely been mum on his stance on capital gains taxes, according to the Tax Foundation. It is unclear whether Trump would seek to amend current policy in a hypothetical second term.
That being said, Trump’s record on taxes certainly points to policies aimed at lowering taxes for wealthy individuals. If extended in 2024, his Tax Cuts and Jobs Act, perhaps the centerpiece of his legislative record, would disproportionately lower taxes for earners in the top 5%.
Harris’ Plan: Harris’ 2024 campaign and the Biden-Harris administration have proposed several tax policies to lessen the federal deficit.
Harris would increase the top tax rate on long-term capital gains to 28 percent for taxable income above $1 million. She would also increase the net investment income tax to 5% (currently 3.8%) on income above $400,000.
According to the Tax Foundation, the Biden-Harris administration proposed “a minimum effective tax rate of 20 percent on an expanded measure of income including unrealized capital gains for households with net wealth above $100 million.”
Why it Matters: It will be difficult for either party to enact substantial policy measures if they do not win a legislative trifecta come 2025. However, the outcome of the election could still impact stocks and ETFs.
Growth stocks are often held long-term due to their appreciation potential. If Harris's plan to increase the long-term capital gains tax for high earners is implemented, wealthy investors may be incentivized to sell off assets sooner to avoid higher rates.
This could lead to short-term volatility in growth and tech-heavy ETFs, such as the NASDAQ-focused Invesco QQQ (NASDAQ:QQQ). On the other hand, Trump’s tax policy continuity would likely encourage holding these stocks long-term.
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