Congress proposes steepest tax hike on investment income in decades

What it does

This bill raises the standard deduction (the amount of income you can earn tax-free) to $75,000 for married couples and $50,000 for single filers, and replaces the current progressive income tax system with a new one featuring four tax brackets (25%, 30%, 40%, 50%, and 70%) that apply to different income levels. It also eliminates the preferential tax treatment of capital gains (investment income), taxing it at the same rates as ordinary income. The bill takes effect for tax years beginning after December 31, 2025.

Why we flagged it

The bill restructures federal income taxation by raising standard deductions (a middle-class benefit) while simultaneously eliminating capital gains preferential rates and introducing steeper marginal rates on high earners. The net effect is a shift toward more progressive taxation, though the title emphasizes only the standard-deduction increase.

What the text implies

• The elimination of preferential capital gains rates (currently taxed at 0%, 15%, or 20% for most taxpayers) means investment income is now taxed as ordinary income at rates up to 70%, potentially affecting retirement savings, stock portfolios, and incentives for long-term investment.
• The 70% top marginal rate is the highest federal income tax rate in decades; combined with state and local taxes, top earners in high-tax states could face marginal rates exceeding 50%, potentially affecting high-income professional and business decisions.

The full analysis lists 4 implications of this text.

Who stands to gain

federal government (increased tax revenue from capital gains and high earners); lower-income and middle-income households (higher standard deduction)