H.R.2908 - Middle Class Savings Act (119th Congress)
Summary
H.R.2908, the "Middle Class Savings Act," proposes to amend the Internal Revenue Code of 1986 by adjusting the income tax bracket breakpoints applicable to capital gains tax rates. The bill aims to provide tax relief to the middle class by aligning capital gains brackets with current income tax brackets. It was introduced in the House of Representatives on April 14, 2025, and referred to the Committee on Ways and Means.
The bill specifically targets Section 1(j)(5)(B) of the Internal Revenue Code, modifying the income thresholds for preferential capital gains tax rates. The proposed changes would increase the income levels at which higher capital gains tax rates apply.
The amendments would be effective for taxable years beginning after December 31, 2024.
Expected Effects
If enacted, H.R.2908 would change the amount of capital gains taxes paid by individuals, particularly those in the middle class. Some taxpayers would pay less in capital gains taxes, while others may see no change or a slight increase depending on their income and investment returns.
The changes could incentivize more investment, as individuals may be more willing to realize capital gains if the tax burden is reduced. This could lead to increased economic activity and potentially higher tax revenues in the long run.
The overall impact on the federal budget would depend on the magnitude of the behavioral response to the tax changes and the distribution of capital gains across income levels.
Potential Benefits
- Potential tax savings for middle-class individuals with capital gains income.
- Increased incentive for investment due to lower capital gains tax rates for some.
- Simplification of the tax code by aligning capital gains brackets with income tax brackets.
- Could stimulate economic activity by encouraging the realization of capital gains.
- May lead to increased long-term tax revenue if the changes spur significant investment.
Most Benefited Areas:
Potential Disadvantages
- Potential revenue loss for the federal government, depending on the behavioral response.
- The benefits may disproportionately favor higher-income individuals who have more capital gains income.
- Increased complexity in tax planning for individuals trying to optimize their investment strategies.
- Possible perception of unfairness if the changes are seen as primarily benefiting wealthier investors.
- The changes may not significantly impact individuals with little or no capital gains income.
Most Disadvantaged Areas:
Constitutional Alignment
The bill falls under the purview of Congress's power to lay and collect taxes, as granted by Article I, Section 8, Clause 1 of the Constitution. The bill does not appear to infringe upon any specific constitutional rights or protections.
The power to tax is broad, but it must be exercised in accordance with other constitutional limitations, such as equal protection and due process. This bill appears to be a straightforward exercise of the taxing power.
Whether the bill promotes the "general Welfare" as stated in the preamble is a matter of policy debate, but the bill itself does not violate any explicit constitutional provision.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).