![]() ![]() The increase in value of $500 is the amount of capital gains income “realized” by the taxpayer. For example, consider a taxpayer who bought 100 shares of stock for $10 each (total cost of $1,000) and sold them for $15 each (total value of $1,500). While the value of an asset can increase in each year that it is owned, the capital gain is taxed only when the asset is sold. States also have several options to boost capital gains revenue to support investments that benefit the state as a whole. States with such preferences should eliminate them. Capital gains, which go overwhelmingly to the wealthiest households, receive special tax preferences, such as a partial exemption, in a number of states. Most state and local tax systems are upside down: the wealthy pay a smaller share of their income in these taxes, on average, than low- and middle-income people do, even though they are best able to afford to pay more. One way states can build more broadly shared prosperity is by strengthening their taxes on capital gains - the profits an investor realizes when selling an asset that has grown in value, such as shares of stock, mutual funds, real estate, or artwork. Further, since wealthy people are overwhelmingly white, this extreme wealth concentration reinforces barriers that make it harder for people of color to make gains. As a result, millions of American families have less wealth, and therefore fewer opportunities, than they otherwise would. A historically large share of the nation’s wealth is concentrated in the hands of a few.
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