Obama Budget would Increase Top Marginal Capital Gains Tax Rate in California to 37.2 percent February 3, 2015 Kyle Pomerleau Kyle Pomerleau The President’s budget has a proposed increase in the federal capital gains tax rate. Under current law, the federal tax rate is 20 percent plus a 3.8 percent net investment tax. State and local governments in the United States also levy income taxes on capital gains as low as zero in states with no income taxes to as high as 13.3 percent in California. Combined, this leads to top marginal tax rates as high as 33 percent in California. The average tax rate across all states under current law is 28.4 percent. Under Obama’s budget, the federal tax rate would increase to 24.2 percent. Add that to the 3.8 percent net investment tax, you get a top rate of 28 percent. Combine that with state and local rates and top marginal tax rates would exceed 37 percent in California and average 32.6 percent across the United States. Top Marginal Capital Gains Tax Rates under Current Law and Proposed FY2016 Budget State Current Law Under Obama FY2016 Budget Alabama 27.49% 31.58% Alaska 23.80% 28.00% Arizona 27.72% 31.92% Arkansas 27.94% 32.14% California 33.07% 37.27% Colorado 27.78% 31.98% Connecticut 29.03% 33.23% Delaware 29.03% 33.23% Florida 23.80% 28.00% Georgia 28.60% 32.80% Hawaii 31.62% 35.82% Idaho 29.45% 33.65% Illinois 28.00% 32.20% Indiana 27.82% 32.02% Iowa 29.57% 33.56% Kansas 27.88% 32.08% Kentucky 29.51% 33.71% Louisiana 27.92% 31.98% Maine 29.78% 33.98% Maryland 30.27% 34.47% Massachusetts 28.12% 32.32% Michigan 27.73% 31.93% Minnesota 30.93% 35.13% Mississippi 28.00% 32.20% Missouri 28.72% 32.92% Montana 27.94% 32.14% Nebraska 29.11% 33.31% Nevada 23.80% 28.00% New Hampshire 23.80% 28.00% New Jersey 30.40% 34.60% New Mexico 26.46% 30.66% New York 31.45% 35.65% North Carolina 28.48% 32.68% North Dakota 26.34% 30.54% Ohio 29.22% 33.42% Oklahoma 28.15% 32.35% Oregon 31.02% 35.22% Pennsylvania 27.74% 31.94% Rhode Island 28.60% 32.80% South Carolina 27.35% 31.55% South Dakota 23.80% 28.00% Tennessee 23.80% 28.00% Texas 23.80% 28.00% Utah 28.00% 32.20% Vermont 30.39% 34.59% Virginia 28.45% 32.65% Washington 23.80% 28.00% West Virginia 28.91% 33.11% Wisconsin 28.21% 32.41% Wyoming 23.80% 28.00% DC 30.39% 34.59% U.S. Average 28.44% 32.64% Note: U.S. Average Weighted by Amount of Capital Gains in Each State. Pease limitation on itemized deductions affects taxpayers in states with income taxes. Stay informed on the tax policies impacting you. Subscribe to get insights from our trusted experts delivered straight to your inbox. Subscribe Share Tweet Share Email Topics Center for Federal Tax Policy Individual Income and Payroll Taxes Tags Tax Reform
