March 18, 2020

Analysis of Capital Gains Tax Proposals Among Democratic Presidential Candidates

 Key Findings

  • Income earned from appreciating assets—rather than wages—constitutes a large portion of income for taxpayers in the highest income brackets.
  • Democratic presidential candidates have suggested that long-term capital gains and dividends income earned by the wealthiest Americans should be taxed at ordinary income tax rates rather than the preferential rates.
  • Raising capital gains rates for the highest income taxpayers makes the tax code more progressive but reduces economic output and national income. The potential revenue of each plan varies by how the plans address deferral treatment of capital gains.
  • Former Vice President Joe Biden’s plans to end step-up in basis and tax capital gains at ordinary income tax rates on those with incomes over $1 million.
  • Senator Bernie Sanders’ (I-VT) plans to tax capital gains at ordinary income tax rates for the top 1 percent and impose a 4 percent tax on all income. He does not have a specific proposal for addressing step-up in basis.
Summary of Democratic Presidential Capital Gains Tax Proposal Estimates
  Biden Sanders
Plan Details Repeal step-up in basis. Raise capital gains taxes to ordinary income rates for those with >$ 1 million Raise capital gains taxes to ordinary income rates for those with >$250,000. Institute a 4 percent income premium on capital gains
Conventional Revenue, 2020-2029 (Billions of Dollars $451 $28
Dynamic Revenue, 2020-2029 (Billions of Dollars) $418 -$10
Gross Domestic Product (GDP) -0.03% -0.07%
Gross National Product (GNP) -0.21% -0.20%
Capital Stock -0.02% -0.08%
Full-time Equivalent jobs -400 -41,000

Source: Tax Foundation General Equilibrium Model, November 2019.

Introduction

The two major Democratic presidential candidates, former Vice President Joe Biden and Senator Bernie Sanders (I-VT), released proposals to tax capital gains at ordinary income rates for the wealthiest Americans.[1] As part of a broader platform to address income inequality, Biden and Sanders suggest increasing current capital gains rates on taxpayers with income over $1 million and $250,000, respectively.

The candidates’ proposals include different rate structures and income thresholds but have a common theme: capturing previously untaxed income on accrued assets due to the tax code’s deferral treatment of capital gains under current law.

This paper will review the current treatment of capital gains income and estimate the economic, revenue, and distributional effects of the capital gains tax proposals of the two major Democratic presidential candidates using the Tax Foundation’s General Equilibrium Model.

Note that we also include the plan of a former candidate, Senator Elizabeth Warren (D-MA), as the plan represents policy options that might be considered going forward.

Current Law Treatment of Capital Gains

The tax code currently taxes any increase in a capital asset’s price over the asset’s cost basis when the asset is sold, deferring taxation until a gain is realized. Capital assets can include everything from assets traded frequently in financial markets like stocks, to assets that are sold less frequently, like jewelry or art. Unlike wage income, capital gains are only taxed when they are realized, instead of every year on their accrued value. Investors can also deduct up to $3,000 in capital losses from their taxable income in the year the loss occurred and can carry forward losses in excess of $3,000 to offset taxable income in future years.

Capital gains that are realized within a year (“short-term” capital gains) are taxed at the same tax rates as ordinary income, but long-term capital gains (realized after one year) are taxed at lower rates: 0 percent, 15 percent, and 20 percent, depending on the filer’s taxable income (see Table 1). The Affordable Care Act (ACA) created a Net Investment Income Tax (NIIT), which imposes an additional 3.8 percent tax on the long-term capital gains of single filers who have a modified adjusted gross income (MAGI) above $200,000, and married filers with a MAGI above $250,000.

Table 1. Tax Rates on Long-Term Capital Gains, Tax Year 2020
Rate For Unmarried Individuals For Married Individuals Filing Joint Returns For Head of Households
  Taxable Income Over:
0% $0 $0 $0
15% $40,000 $80,000 $53,600
20% $441,450 $496,000 $469,050
  Additional Net Investment Income Tax (NIIT)
3.8% MAGI over $200,000 MAGI over $250,000 MAGI over $200,000

Source: Internal Revenue Service (IRS).

Step-up in basis reduces capital gains tax liability on property that is passed to an heir. When a property owner leaves assets to an heir, the cost basis of the asset is “stepped up” to its fair market value at the time of the original owner’s death. Step-up in basis reduces capital gains tax liability on property passed on to an heir by excluding from taxation any appreciation in the property’s value that occurred during the decedent’s lifetime.[2]

Higher tax rates on long-term gains discourage taxpayers from selling their assets, which is known as the lock-in effect. Investors have an incentive to hold assets for a long period in order to minimize their tax liability. Ultimately, because taxpayers can decide when to realize their gains, capital gains are highly responsive, or elastic, to taxation. However, proposals such as mark-to-market would make the realization effect a non-issue, because it requires taxpayers to pay tax on their capital gains every year rather than waiting to pay tax until the assets are sold and gains realized. The key feature of a mark-to-market system is that it effectively eliminates deferral treatment of capital gains.

The benefits of the current capital gains tax regime primarily accrue to wealthier individuals, as wealthy taxpayers hold a large portion of assets with unrealized capital gains.[3]

Former Vice President Joe Biden

Biden has proposed taxing capital gains at ordinary income tax rates for taxpayers earning more than $1 million annually[4] and repealing step-up in basis.[5] He also proposed increasing the top marginal income tax rate to 39.6 percent. When this is added to the Net Investment Income Tax (3.8 percent) on married filers (which phases in at $250,000 MAGI), the top marginal tax rate on capital gains reaches 43.4 percent under the Biden proposal, nearly double the rate under current law.[6] These proposed changes would only affect filers in the top long-term capital gains bracket.

Table 2. Biden’s Proposed Capital Gains Tax Rates
Income (Married Filing Jointly) Current Law Biden Proposal
$0 to $78,749 0% 0%
$78,750 to $250,000 15% 15%
$250,001 to $488,849 18.8% 18.8%
$488,850 to $999,999 23.8% 23.8%
$1,000,000 and above 23.8% 43.4%

Source: IRS, Biden campaign materials.

Economic Effect

According to the Tax Foundation General Equilibrium Model, Biden’s proposal would have a small, negative effect on output (-0.03 percent). However, national income would fall by 0.21 percent and total wealth would decline by 1.88 percent.

Table 3: Economic Effect of Biden’s Capital Gains Tax Proposals
  Repealing Step-Up in Basis Raising Capital Gains Rates to 43.4% for Taxpayers over $1 million Income
Gross Domestic Product (GDP) 0.0% -0.03%
Gross National Product (GNP) -0.08% -0.21%
Capital Stock 0.0% -0.02%
Change in Wealth -0.88% -1.88%
Full-time Equivalent Jobs -400 -14,000

Source: Tax Foundation General Equilibrium Model, November 2019.

While the proposal slightly reduces the size of economic output, more importantly, it shrinks national income owned by Americans, as measured by GNP. Increasing taxes on capital income discourages Americans from saving and leads to a decrease in national income; some of this reduction in saving is made up for by foreign investors, which is why there is a relatively smaller effect on economic output than on national income.

Revenue Effect

We estimate the Biden proposal would raise $451 billion between 2020 and 2029 on a conventional basis. In years 2020 through 2025, the Tax Cuts and Jobs Act’s individual provisions are in effect, but beginning in 2026, these provisions expire. On a dynamic basis, the proposal would raise about $418 billion between 2020 and 2029. Revenue collections are smaller on a dynamic basis due to lower domestic saving and investment as a result of the tax.

Table 4. Revenue Effect of Biden’s Individual Income Tax Proposal (Billions of Dollars)
Year 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020-2029
Conventional $13 $27 $42 $43 $45 $46 $54 $58 $60 $63 $451
Dynamic $13 $25 $40 $41 $42 $43 $50 $53 $55 $57 $418

Source: Tax Foundation General Equilibrium Model, November 2019.

This proposal raises revenue by expanding the tax base and increasing the tax rates on capital gains. Where capital gains were previously untaxed until they were realized, Biden’s plan would remove step-up in basis at death and require taxpayers to pay tax on their accrued gains over the lifetime of the original owner. Additionally, without indexing the $1 million income threshold to inflation, the tax will apply to more taxpayers over time. This phenomenon is known as “bracket creep,” where filers become subject to a higher tax rate as their income enters a higher tax bracket due to inflation.

Distributional Effect

The Biden proposal would increase the progressivity of the tax code, primarily due to the new top marginal rate on high-income earners. Overall, it would reduce after-tax income of the top 1 percent of taxpayers by about 2.75 percent.

Table 5. Conventional and Dynamic Distributional Effect of Biden’s Capital Gains Tax Proposal (Percent-Change in After-Tax Income)
Income Group Conventional Dynamic
0% to 20% 0.00% 0.00%
20% to 40% 0.00% 0.00%
40% to 60% 0.00% 0.00%
60% to 80% 0.00% 0.00%
80% to 100% -0.63% -0.62%
 
80% to 90% 0.00% 0.00%
90% to 95% 0.00% 0.00%
95% to 99% -0.01% -0.01%
99% to 100% -2.75% -2.74%
 
Total -0.34% -0.33%

Source: Tax Foundation General Equilibrium Model, November 2019.

Senator Bernie Sanders (I-VT)

Sanders proposes taxing capital gains at the same rate as ordinary income for taxpayers with household income of $250,000 and above, which is where the current Net Investment Income Tax phases in. Importantly, Sanders’ plan would also add a new tax bracket of 52 percent on income over $10 million and apply a 4 percent “income-based premium” on all income.[7] After applying the NIIT and income premium, Sanders would subject capital gains income to the following rates:   

Table 6. Sanders’ Capital Gains Tax Proposal
Current Law Sanders
Income (Married Filing Jointly) Capital Gains Rate Net Investment Income Tax (NIIT) Combined Rate (Current Law) Statutory Income (Capital) Tax Rate Income Premium NIIT Combined
0-$79,999 0%  N/A 0% N/A 4%  N/A 4%
$80,000-$250,000 15%  N/A 15% 15% (capital gains rate) 4%  N/A 19%
$250,000-$326,600 15% 3.8% 18.8% 24% 4% 3.8% 31.8%
$326,600-$414,700 15% 3.8% 18.8% 32% 4% 3.8% 39.8%
$414,700-$496,000 15% 3.8% 18.8% 35% 4% 3.8% 42.8%
$496,800-$622,050 20% 3.8% 23.8% 35% 4% 3.8% 42.8%
$622,050-$10 million 20% 3.8% 23.8% 37% 4% 3.8% 44.8%
> $10 million 20% 3.8% 23.8% 52% 4% 3.8% 59.8%

Note: The NIIT does not phase in until $250,000. We assume that Sanders begins to apply statutory income rates on capital gains income after $250,000. This is consistent with his previous pay-for documents for proposals such as “Medicare For All”, 2019.

Source: Author’s calculations, IRS tax brackets (2020), and Sanders’ campaign material.  

Under Sanders’ proposal, top marginal tax rates would reach 59.8 percent compared to current law, which peaks at 23.8 percent. Sanders’ plan would raise marginal tax rates on every income group, most significantly on those with more than $400,000.

Sanders also proposes “cracking down on the zero-tax rate on capital gains passed on through bequests.”[8] We do not include this policy change in our estimates because we do not know how Sanders plans to change step-up in basis.

Economic Effect

According to the Tax Foundation General Equilibrium Model, Sanders’ proposal would reduce GDP by 0.07 percent and eliminate 41,000 full-time equivalent jobs. Moreover, Sanders’ plan would reduce national income by 0.20 percent and shrink total wealth by 1.40 percent.

Similar to Biden’s plan, Sanders’ tax increase on capital gains has a slight effect on economic output. However, it does decrease national income as domestic savers reduce their saving in response to the tax.

Table 7: Economic Effect of Sanders’ Capital Gains Tax Proposals
  Tax Capital Gains at Ordinary Income Rates for filers with >$250,000 Income and Impose a 4 Percent Income Premium on All Filers
Gross Domestic Product (GDP) -0.07%
Gross National Product (GNP) -0.20%
Capital Stock -0.08%
Change in Wealth -1.40%
Full-time Equivalent Jobs -41,000

Source: Tax Foundation General Equilibrium Model, November 2019.

Revenue Effect

We estimate Sanders’ proposal would raise $28 billion between 2020 and 2029 on a conventional basis and lose $10 billion on a dynamic basis.

Table 8: Revenue Effect of Sanders’ Capital Gains Income Tax Proposal (Billions of Dollars)
Year 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020-2029
Conventional -$40 -$18 $9 $10 $11 $12 $9 $11 $12 $13 $28
Dynamic -$40 -$19 $6 $7 $7 $8 $4 $5 $6 $6 -$10

Source: Tax Foundation General Equilibrium Model, November 2019.

The disparity between these revenue estimates arises from the behavioral effects on investors who will react to higher marginal tax rates by realizing fewer capital gains, thus causing revenue to fall over the long term. Further details on how Sanders plans to address capital gains in estates would affect this result. For example, Sanders’ plan would raise more revenue if it were conducted under a mark-to-market tax regime, where gains are evaluated and taxed annually on their accrued value.

Distributional Effect

Sanders’ plan would increase the progressivity of the tax code but would burden taxpayers in all but the bottom quintile on a conventional basis. On a dynamic basis, all taxpayers would see a reduction in after-tax income. On average, the plan would reduce after-tax incomes of all taxpayers by 0.07 percent (0.13 percent dynamic), while the top 1 percent would see a reduction of 0.38 percent (0.45 percent dynamic). The largest burden of the tax is felt by the top 1 percent of income earners.

Because the Sanders campaign did not provide sufficient information for the phase-in threshold for the increase in capital gains tax rate, we assumed the rate phases in at $250,000 (this is also where the NIIT phases in and the number Sanders previously used in a document to pay for his “Medicare for All” proposal).[9] As Table 9 shows, taxpayers in the first four quintiles experience lower after-tax AGI on a dynamic basis due to the phase-in of both the NIIT and the new ordinary income tax rates on capital gains under the Sanders plan.

Table 9. Conventional and Dynamic Distributional Effect of Sanders’ Capital Gains Tax Proposal (Percent-Change in After-Tax Income)
Income Group Static Dynamic
0% to 20% 0.00% -0.06%
20% to 40% -0.03% -0.08%
40% to 60% -0.05% -0.11%
60% to 80% -0.05% -0.11%
80% to 100% -0.09% -0.15%
80% to 90% -0.01% -0.08%
90% to 95% -0.01% -0.07%
95% to 99% -0.05% -0.11%
99% to 100% -0.38% -0.45%
Total -0.07% -0.13%

Source: Tax Foundation General Equilibrium Model, November 2019.

Additional Analysis

Although Sen. Warren is no longer a Democratic presidential candidate, we have included an analysis of her proposal as it represents other ideas that might someday return to public discussion. Warren proposed taxing capital gains as ordinary income for the top 1 percent of taxpayers, raising the rate on capital gains from 23.8 percent to 39.6 percent for those in the top 1 percent of income earners, a new tax of 14.8 percent on investment income of individuals making more than $250,000, and for couples more than $400,000, and mark-to-market taxation of capital gains for the top 1 percent.[10], [11]

Table 10. Warren’s Capital Gains Tax Proposal
Income (Married Filing Jointly) Current Law Warren’s Plan
$0 to $78,749 0% 0%
$78,750 to $250,000 15% 15%
$250,001 to $400,000 18.8% 18.8%
$400,001 to $488,849 18.8% 33.6%
$488,850 to Top 1% Threshold 23.8% 38.6%
Top 1% 23.8% 58.2%

Source: IRS, Warren campaign materials.

Warren’s plan imposes a top marginal tax rate on capital gains of 58.2 percent. At $400,000, Warren’s 14.8 percent investment tax phases in, raising the rate from 18.8 percent under current law to 33.6 percent. At $496,000, the 23.8 percent combined capital gains rate begins to apply, thus raising the total rate on capital gains to 38.6 percent (23.8 percent + 14.8 percent investment tax). Finally, at $517,371 (the top 1 percent AGI threshold for 2017[12]), Warren’s top marginal rate kicks in (39.6 percent) to make the combined total rate 58.2 percent.

Neither Biden nor Sanders has proposed mark-to-market taxation of capital gains.

Economic Effect

According to the Tax Foundation General Equilibrium Model, the Warren proposal would reduce GDP by 0.46 percent and eliminate 71,000 full time equivalent jobs. Moreover, Warren’s plan would reduce national income by 0.94 percent and shrink total wealth by more than 5 percent.

By imposing mark-to-market-style taxation, Warren’s plan effectively repeals the deferral advantage on capital gains available to investors under Biden’s and Sanders’ plans.  

Table 11: Economic Effect of Warren’s Capital Gains Tax Proposals
  Raise Capital Gains Taxes to Ordinary Income Rates for Top 1 Percent of Households Impose a 14.8 Percent Net Investment Tax Impose Mark-to-Market Regime on Capital Gains for Top 1 Percent of Filers Combined
Gross Domestic Product (GDP) -0.03% -0.05% -0.38% -0.46%
Gross National Product (GNP) -0.11% -0.12% -0.71% -0.94%
Capital Stock -0.03% -0.09% -0.72% -0.85%
Change in Wealth -0.86% -0.71% -3.52% -5.09%
Full-time Equivalent Jobs -15,000 -16,000 -40,000 -71,000

Source: Tax Foundation General Equilibrium Model, November 2019.

Revenue Effect

According to the Tax Foundation’s General Equilibrium Model, Warren’s plan would raise almost $5 trillion on a static basis and, after accounting for avoidance under the mark-to-market regime,[13] $4.16 trillion over the 10-year window. After accounting for economic feedback effects, the Warren plan would recoup approximately $4.70 trillion on a dynamic basis.

Table 12: Revenue Effect of Warren Capital Gains Income Tax Proposal (Billions of Dollars)
Year 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020-2029
Conventional 425 435 445 458 471 484 521 558 569 594 4959
Conventional (with Mark-to-Market Avoidance) 358 366 374 385 396 407 435 466 475 496 4159
Dynamic 421 425 431 439 448 457 487 518 525 545 4696

Source: Tax Foundation General Equilibrium Model, November 2019.

Warren’s revenue results are significantly higher than those under Biden’s and Sanders’ plans for two major reasons: a mark-to-market regime taxes gains each year rather than allowing deferral and an additional investment surtax of 14.8 percent. Thus, her plan would target a previously untaxed base at more than double the top rate under current law, on an annual basis.

Distributional Effect

Warren’s proposal would increase the progressivity of the tax code and on a conventional basis only affect the top 10 percent of taxpayers. On a conventional basis, after-tax incomes of the top 1 percent would fall by 17.45 percent. On a dynamic basis, all income groups would be affected by the proposal; on average, after-tax incomes of all taxpayers would fall by 3.21 percent, while the top 1 percent would see a reduction of 16.65 percent.

Table 13. Conventional and Dynamic Distributional Effect of the Warren Capital Gains Tax Proposal (Percent-Change in After-Tax Income)
Income Group Static Dynamic
0% to 20% 0.00% -0.34%
20% to 40% 0.00% -0.33%
40% to 60% 0.00% -0.33%
60% to 80% 0.00% -0.32%
80% to 100% -5.29% -0.53%
80% to 90% 0.00% -0.34%
90% to 95% -0.01% -0.34%
95% to 99% -0.16% -0.34%
99% to 100% -17.45% -16.65%
Total -2.96% -3.21%

Source: Tax Foundation General Equilibrium Model, November 2019.

Conclusion

The top 1 percent of taxpayers accrue much of their income through capital gains that often remains untaxed under current law due to deferral and step-up in basis. Taxing capital gains at progressive ordinary income rates is an attractive option for Democratic presidential candidates searching for revenue. However, raising tax rates on capital gains reduces national income and reduces after-tax income for taxpayers across income groups.

Raising capital gains taxes increases the tax burden on domestic saving and investment; as Americans save less, national income (GNP) falls. However, because the United States economy is open to foreign inflows, as domestic saving and ownership of assets falls, foreign investors step in. Thus, the overall investment in the United States remains relatively stable, although the ownership of assets has changed hands and Americans experience lower levels of national income.

Appendix: Methodology and Modeling Assumptions

We use the Tax Foundation General Equilibrium Tax Model to estimate the impact of tax policies.[14] The model can produce both conventional and dynamic revenue estimates of tax policy. Conventional estimates hold the size of the economy constant and attempt to estimate potential behavioral effects of tax policy. Dynamic revenue estimates consider both behavioral and macroeconomic effects of tax policy on revenue.

The model can also produce estimates of how policies impact measures of economic performance such as GDP, wages, employment, the capital stock, investment, consumption, saving, and the trade deficit. Lastly, it can produce estimates of how different tax policy impacts the distribution of the federal tax burden.

This analysis is based on details released by each presidential candidate and their advisors. Ultimately, the impact of each proposal depends on its final details and whether it is applied in combination with other policies that may create interaction effects.

Capital Gains Realization and Changes in Capital Gains Taxation

Capital gains are only taxed upon realization. Capital owners will change their realization behavior if they face a tax rate change on capital gains. According to the existing empirical estimation, individuals’ realization behavior is very sensitive to the tax rate.

In our revenue estimate, we assume the long-run capital gains realization elasticity is -0.79.[15] Individuals respond more drastically to the change of capital gains tax rate at the beginning years of tax change, with a transitory elasticity of -1.2 and -1.0 for the first two years.

Modeling the Revenue from Mark-to-Market Regime

Due to an absence of information from the candidates, it is difficult to estimate the revenue effects of increasing the capital gains rate on the top 1 percent for assets which are not publicly traded. However, in order to approximate a score that closely tracks with the information currently available from the candidates, we make the following assumptions, some of which are drawn from the work of New York University tax professors Lily Batchelder and David Kamin.[16]

When scoring a mark-to-market tax system, we assume annual taxation of publicly-traded assets under an accrual regime. We use the 2016 Survey of Consumer Finances (SCF) to estimate the total taxable publicly-traded assets held by U.S. households. Applying an imputed nominal rate of return of 8.33 percent,[17] we derive the total capital gain accrual from these assets. Using the total accruals over realized capital gains and dividends, we increase the capital gains income from corporate stocks in the tax calculator to calculate the extra revenue from those unrealized accruals. We assume half of realized capital gains is from the publicly traded corporate stock, following Batchelder and Kamin’s assumption.[18]

We treat illiquid assets as taxed when realized (as in current law) such that gains on illiquid assets would only be taxed when the asset is sold or when the owner dies. We impose a deferral charge at the time of sale for non-publicly traded assets.[19] Under the deferral charge regime, taxpayers still pay capital gains tax when they sell the hard-to-value assets but with extra interest charge on the accrual tax that is deferred.

To estimate the revenue from deferral charge, we assume the non-publicly traded assets have the same rate of nominal rate of return as publicly traded assets. The estimated average holding period for these private assets is seven years using IRS capital gains data. The deferral charge is then estimated as the interest charge on the forgone revenue which should have been collected annually on an accrual basis. We assume the other half of the realized capital gains in the IRS Statistics of Income (SOI) data is from the sale of private assets.

Under the mark-to-market regime, we treat bequests and gifts as realization gifts. For a revenue estimate of this, we use the tax expenditure estimate from the Joint Committee on Taxation (JCT). That estimate is based on the statutory rate of 20 percent. We double that estimate to reflect the proposal that the capital gains will be taxed at 39.6 percent instead of 20 percent.

We assume the same semi-elasticity (-8) for tax avoidance under a mark-to-market (accrual taxation) regime as we did for modeling wealth tax. We apply the semi-elasticity in the way of transforming an income tax rate on capital gains to an equivalent wealth tax.

[1] Specifically, ordinary income tax rates prior to the passage of (or assuming the repeal of) the Tax Cuts and Jobs Act (TCJA) of 2017.

[2] Id.

[3] Committee on the Budget, United States Senate, “Tax Expenditures: Compendium of Background Material on Individual Provisions,” Congressional Research Service, December 2012, III, 1031, https://www.govinfo.gov/content/pkg/CPRT-112SPRT77698/pdf/CPRT-112SPRT77698.pdf.

[4] We assume the $1 million threshold is for both single and married filers. The Biden campaign has given no indication about whether the threshold applies to single filers or total household income. See Scott Eastman, “Unpacking Biden’s Tax Plan for Capital Gains,” Tax Foundation, July 31, 2019, https://taxfoundation.org/joe-biden-tax-proposals/

[5] Scott Eastman, “The Trade-offs of Repealing Step-Up In Basis,” Tax Foundation, March 2019, https://files.taxfoundation.org/20190312171146/The-Trade-offs-of-Repealing-Step-Up-in-Basis-FF-641.pdf

[6] We assume the Net Investment Income Tax (NIIT) of 3.8 percent is an exclusive variable that applies in addition to changes to ordinary income tax rates.

[7] Bernie Sanders for President, “Issues: How Does Bernie Pay for His Major Plans?” https://berniesanders.com/issues/how-does-bernie-pay-his-major-plans/

[8] Id.

[9] Senator Bernie Sanders, “Options to Finance Medicare for All,” subhead “Options to Make the Wealthy Pay Their Fair Share, Make the Personal Income Tax More Progressive,” 3, 2018,  https://www.sanders.senate.gov/download/options-to-finance-medicare-for-all?inline=file

[10] Erica York and Garrett Watson, “Reviewing Elizabeth Warren’s Tax Proposals to Fund Medicare for All,” Tax Foundation, Nov. 1, 2019, https://taxfoundation.org/elizabeth-warren-medicare-for-all-tax-proposals/

[11] See John Harwood, “Elizabeth Warren proposes sweeping increase in Social Security benefits, financed by wealth taxes,” CNBC, Sept. 12, 2019, https://www.cnbc.com/2019/09/12/elizabeth-warren-proposes-sweeping-increase-in-social-security-benefits-financed-by-wealth-taxes.html

[12] See IRS “SOI Tax Stats – Individual Statistical Tables by Tax Rate and Income Percentile, All Individual Returns Excluding Dependents: Number of Returns, Shares of Adjusted Gross Income (AGI) and Total Income Tax, AGI Floor on Percentiles in Current and Constant Dollars, and Average Tax Rates, by Selected Expanded Descending Cumulative Percentiles of Returns Based on Income Size Using the Definition of AGI for Each Year, Table 1, Tax Years 2001-2017,” https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-tax-rate-and-income-percentile#earlyRelease

[13] See Appendix on discussion on the assumption about the tax avoidance under the mark-to-market regime.

[14] Lily L. Batchelder and David Kamin, “Taxing the Rich: Issues and Options,” The Aspen Institute: Economic Strategy Group, Sept. 11, 2019, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3452274

[15] Following research from both the Joint Committee on Taxation (JCT) and the Congressional Budget Office (CBO). Tim Dowd, Tobert McClellland, and Athiphat Muthitacharoen, “New Evidence on the Elasticity of Capital Gains,” June 15, 2012, https://cbo.gov/publication/43334

[16] Lily L. Batchelder and David Kamin, “Taxing the Rich: Issues and Options.”

[17] Consistent with the assumption used by Eric Toder and Alan Viard (below), and Lily Batchelder and David Kamin. See Eric Toder and Alan D. Viard, “A Proposal to Reform the Taxation of Corporate Income,” Tax Policy Center, June 2016, https://taxpolicycenter.org/sites/default/files/alfresco/publication-pdfs/2000817-a-proposal-to-reform-the-taxation-of-corporate-income.pdf; and Eric Toder and Alan D. Viard, “Replacing Corporate Tax Revenues with a Mark-to-Market Tax on Shareholder Income,” National Tax Journal 69(3), 701-731, September 2016, https://www.taxpolicycenter.org/sites/default/files/alfresco/publication-pdfs/2000949-Replacing-Corporate-Tax-Revenues-with-a-Mark-to-Market-Tax-on-Shareholder-Income.pdf.

[18] Lily L. Batchelder and David Kamin, “Taxing the Rich: Issues and Options.”

[19] See Tyler Parks, “Looking back on Taxation of Capital Gains,” Tax Foundation, Jan. 22, 2020, for details on deferral charge, https://taxfoundation.org/lookback-charge-mark-to-market-capital-gains/

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