White House says its capital-gains tax hike will hit only those earning above $1 million to fund childcare and education

• Only people making over $1 million would see their capital-gains tax increase, the White House said.
• Brian Deese, the National Economic Council director, discussed the tax-hike proposal in a briefing.
• Deese said the increase was not only fair but could help address tax avoidance.

Brian Deese, the director of the National Economic Council, said in a White House briefing on Monday that a proposed increase in capital-gains taxes would affect only taxpayers making over $1 million a year.

"In 2018, 0.3% of tax filers made more than $1 million a year," Deese said.

The Biden administration has reportedly considered nearly doubling the capital-gains tax rate, bringing it up to 39.6% with a 3.8% Obamacare tax tacked on. Capital-gains taxes are applied to assets, like stocks, that make a profit and are taxed at a lower rate than wages and other forms of income. Currently, gains on long-term assets - those held for over a year - are taxed at about 15% or 20%, Insider's Tanza Loudenback reported.

The capital-gains tax rate is also income-dependent, with the highest-earning Americans still generally paying about 20%.

The 0.3% might see their rate increase under President Joe Biden, with their capital-gains profits taxed as wages. Deese said that while about 70% of the typical American's income comes from wages, those making over $1 million a year derive only 30% of their income from wages.

Deese also said that could be an understatement, since the wealthy "can often strategically avoid reporting this type of income entirely." IRS Commissioner Charles Rettig recently testified that over $1 trillion in taxes might be going uncollected every year, citing a study from IRS researchers and economists.

"We believe that it's not only fair, but it would also help to reduce the kinds of tax avoidance that significantly undermines trust and fairness in the tax code itself," Deese said, adding that "there is no evidence of a significant impact of capital-gains rates on the level of long-term investment in the economy."

Deese's remarks were a fresh sign that wealthy Americans would be a key federal revenue source to finance the education and childcare elements of Biden's two-part infrastructure plan.

The White House chief of staff, Ron Klain, on Friday defended the tax-hike proposal, tweeting that it would hit only a sliver of Americans. The capital-gains tax increase is expected to be coupled with an increase in the top marginal income-tax rate to 39.6% from 37.6%.

-Ronald Klain (@WHCOS) April 23, 2021

"The principle here is to equalize the treatment of ordinary income and capital gains, and that is a principle that's neither new or particularly novel," Deese said. "In fact, the last president to enact a reform to equalize the treatment of ordinary income and capital gains was President Reagan, who did so while raising capital-gains taxes as part of the 1986 tax reform."

The White House press secretary, Jen Psaki, repeatedly declined during her press briefing on Monday to preview other parts of the plan ahead of Biden's joint address to Congress in two days. Neither she nor Deese clarified whether the $1 million threshold for capital gains would apply to individuals or households. There was a similar lack of clarity over a $400,000 threshold for an income-tax increase until Psaki said last month that it referred to households, not individuals.