Taxes on Shares of a Stock Haven't Sold Kamala Harris' Proposal Breakdown

Kamala Harris' proposal aims to close the carried interest loophole, which allows investment managers to pay lower taxes on shares of a stock.

The loophole benefits private equity and hedge fund managers, who can defer taxes on their earnings until they sell the shares, often at a lower rate than ordinary income taxes.

Harris' plan would tax these earnings as ordinary income, eliminating the loophole and generating an estimated $14 billion in revenue over 10 years.

This change would apply to managers who earn more than $100 million in a year.

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A capital gain occurs when the value of an asset, such as a stock or piece of real estate, increases beyond its acquisition price.

If you buy shares of a stock for $500,000 and sell them for $750,000, you'll have a capital gain of $250,000.

Capital gains are only taxed after a "realization event", which means the sale of an asset.

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The rate at which capital gains are taxed depends on your total taxable income and the length of time you held the investment.

For short-term capital gains, those applying to assets held for less than one year, the tax rate ranges from 10 to 37 percent, depending on your income.

Long-term capital gains, held for more than one year, are taxed at a flat rate of 15 percent for individuals with incomes between $47,026 and $518,900, and at 20 percent for individuals making $518,901 or above.

You can hold onto assets for more than a year to qualify for the lower long-term capital gains tax rate.

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Taxing unrealized gains would require navigating the complex process of formal tax legislation, which involves multiple stages, including committee reviews, debates, and House and U.S. Senate amendments.

Any proposal to tax unrealized gains would likely face opposition from Republicans and some moderate Democrats, making it difficult to secure even a simple majority.

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The U.S. Supreme Court could be called upon to determine whether an unrealized gains tax is unconstitutional, grapple with questions surrounding whether the tax was a “direct tax” or an excise tax.

A tax on unrealized gains would essentially involve overhauling the current tax system, raising questions about valuation methods, liquidity issues for taxpayers, and practical IRS administration concerns.

Capital gains occur when the value of an asset, such as a stock or piece of real estate, increases beyond its acquisition price.

The rate at which realized gains are taxed depends on a person's total taxable income and the length of time that investment was held before being sold.

Short-term capital gains, held for less than one year, are taxed at various rates between 10 and 37 percent, while long-term capital gains are taxed at a flat rate of 15 percent for individuals with taxable incomes between $47,026 and $518,900.

Vice President Kamala Harris proposed a 28% tax on long-term capital gains for households with an annual income of $1 million or more, lower than the 39.6% rate President Joe Biden laid out in his 2025 fiscal year budget.

Currently, long-term capital gains are taxed at a maximum rate of 20%.

Here's a comparison of the proposed tax rates: