U.S. Rep. Brad Sherman (D-CA) released a draft of legislation that would exclude investments in China, Russia, Belarus, and Iran from eligibility for lower capital gains tax rates.
Sherman’s No Capital Gains Allowance for American Adversaries Act would amend the U.S. Internal Revenue Code to treat capital gains on all Chinese, Russian, Belarusian, and Iranian stocks as ordinary income. Thus, such investments would not be eligible for the lower capital gains tax rates, and would be taxed as high as 37 percent, rather than 15 to 20 percent for capital gains.
It would also eliminate the “step-up in basis” for Chinese, Russian, Belarusian, and Iranian assets inherited at death. The “step-up in basis” reduces an heir’s tax liability by treating the assets as “costing” its date-of-death value – so increases in value prior to the date-of-death go untaxed.
“Lower tax rates for capital gains on stocks and other assets are designed to incentivize Americans to make investments that grow our economy. Yet investments made in companies abroad – even in nations undermining U.S. national security interests – are still able to receive this tax incentive,” Sherman said. “It is time to end U.S. tax subsidies for investments that boost adversarial nations’ economies.”
Sherman contends that it is entirely reasonable for the United States to provide incentives for domestic investment that are not available on certain foreign investments, citing the fact that many countries have investment incentives not applicable to some foreign investments.
Sherman is currently recruiting cosponsors for the bill.