Obama Budget would Increase Top Marginal Capital Gains Tax Rate in California to 37.2 percent

February 3, 2015

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.

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