Obama’s Capital Gains Tax Plan Would Hit Hill’s Richest, Spare 2016 Aspirants
President Barack Obama pitched his proposal to increase the top capital gains and dividend tax rate to 28 percent from 23.8 percent as part of a simpler, fairer tax code that would favor the middle class. The proposed tax increase is designed to fall on the wealthy.
CQ Roll Call, using our Wealth of Congress study, estimated that the five richest members of Congress would collectively have owed at least $1.37 million more in taxes from their capital gains in 2013 under the proposal.
The five, who represent roughly the top 1 percent of Congress, are Reps. Darrell Issa, R-Calif.; Michael McCaul, R-Texas; John Delaney, D-Md.; Sen. Mark Warner, D-Va., and Rep. Jared Polis, D-Colo. They collectively earned at least $32.71 million in capital gains income in 2013, based on a CQ Roll Call study of annual financial disclosure forms. They all would have fallen into the top rate with the surtax on high-income households: those that earned more than $200,000 annually.
Issa, the richest member of Congress who is worth at least $357.25 million, would have owed at least $670,000 more under Obama’s proposal. McCaul, whose assets include those of his spouse Linda McCaul – the daughter of Clear Channel Communications founder Lowry Mays, would have owed at least $129,000 more. The third richest, self-made financier Delaney would have owed at least $510,000 more under the proposed increase. Warner and Polis, the fourth and fifth richest, would have owed at least $29,000 and $37,000 more respectively.
The calculations result from taking the minimum total value of each member’s reported capital gains income that year and applying the proposed increase of 4.2 points. Personal financial disclosure forms use broad ranges of values for assets and income that include open-ended tops. CQ Roll Call uses minimum values to generate statistically valid amounts.
Members report a capital gain when they sell an asset or part of one. Lawmakers who would sell their holdings in the aftermath of a capital gains tax increase would be subject to the higher rate. The CQ Roll Call calculations don’t consider the effect of that scenario. Obama’s proposal has little chance of enactment by Congress.
McCaul’s and Issa’s offices declined to comment.
Delaney was the CEO of HealthCare Financial Partners when the company went public in 1996. Heller Financial Inc. bought the business in 1999. Delaney, a supporter of the proposed tax increase, said in a statement, “Problems with the capital gains and estate tax have been at the core of why our tax code has become distorted.” He also rejected the assumption that investors would not invest without a capital gains rate lower than the ordinary income tax rate.
Polis, an Internet entrepreneur and venture capitalist, said, “I am very grateful for the opportunities this nation has provided me and I am ready and willing to pay my part to help reform our tax code, strengthen our middle class, and keep the American dream alive.”
Warner’s office took a similar stance. “Sen. Warner supports comprehensive reform that makes the tax code simpler, fairer, and flatter, and which generates additional revenue to bring down our debt and deficit,” his spokesman said. “Everything should be on the table as we strive to put our country on the right fiscal path.”
Some potential 2016 presidential candidates wouldn’t have owed any additional money based on their annual forms. Republican Sens. Ted Cruz of Texas, Marco Rubio of Florida and Rand Paul of Kentucky, and Democratic Sen. Elizabeth Warren of Massachusetts reported no income from capital gains in 2013. They also have significantly lower minimum net worth than the five richest members. Warren and Cruz are millionaires worth $3.66 million and $1.59 million respectively.
Another possible candidate, former Massachusetts Gov. Mitt Romney would have owed nearly $290,000 more due to the proposed increase, according to a review of his most recent publicly available tax return for 2011.
Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, said the proposal would make the tax code more fair and efficient. He said it would help remove the inefficient “bias in capital towards holding it for gain” until it can be passed to an heir.
Scott A. Hodge, president of the Tax Foundation, said the proposal “can have a negative effect on the economy, wages, investment and ultimately on federal tax revenue.” He emphasized the proposal is a classic example of a “policy aimed at very narrow group ends up effecting everyone in the end.”