The Biden administration proposed almost doubling the maximum capital gains tax rate, from the current 20% to 39.6%, about the same rate as standard income, which has a top bracket of 37%.

This rate would only apply to those who have $1 million or more in annual income, which means only 540,000 investors need to actually worry about this tax.

This tax would not apply to many of the investment vehicles used by average people, such as the IRA, 401(k), and 403(b). In fact, 75% of investors hold their assets in one or more of these accounts, which would be shielded, regardless of income level.

However...

Research points to a level at which a higher capital gains tax yields diminishing returns, with around 28 or 29 percent the upper limit.

Also, analysis from the Penn Wharton Budget Model (PWBM) shows:

... raising the top statutory rate on capital gains to 39.6 percent would decrease revenue by $33 billion over fiscal years 2022–2031.

If stepped-up basis were eliminated — as proposed in President Biden’s campaign plan — then raising the top rate to 39.6 percent would instead raise $113 billion over 2022–2031.