The cited 2021 Tax Foundation analysis does not support the headline’s count of 11 states: under its modeled Biden proposal, the combined top marginal rate would exceed 50% in 12 states and the District of Columbia. Delaware would be exactly 50.0%. These were hypothetical proposal-era estimates, not current tax rates or the tax bill most investors would pay.
What the 2021 proposal modeled
In an April 23, 2021 analysis, the Tax Foundation modeled a proposed 39.6% top federal rate on long-term capital gains and qualified dividends for higher-income taxpayers. Adding the 3.8% Net Investment Income Tax (NIIT) produced a 43.4% top federal rate before state and local taxes. The analysis estimated an unweighted average combined rate of 48.4% under the proposal, compared with about 29.0% under the current-law comparison in that analysis. These are marginal-rate estimates, not effective rates or bills for a typical taxpayer. Tax Foundation’s analysis and table explain the assumptions.
The proposal was not a blanket 39.6% tax on everyone’s investment gains. The Tax Policy Center described the American Families Plan proposal as applying ordinary income-tax rates to capital gains for people with adjusted gross income above $1 million. The Congressional Research Service’s account of the Biden budget proposal specified a threshold above $1 million for married couples and above $500,000 for other returns. Threshold wording should be read in the context of that proposal and filing status; it does not describe current law. See the Tax Policy Center summary and the Congressional Research Service report.
States above 50% in the Tax Foundation table
The table’s proposed combined top marginal rates above 50% are:
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|---|---|
| California | 56.7% |
| Connecticut | 50.4% |
| Hawaii | 50.7% |
| Idaho | 50.3% |
| Maine | 50.6% |
| Minnesota | 53.3% |
| Montana | 50.2% |
| Nebraska | 50.2% |
| New Jersey | 54.2% |
| New York | 54.3% |
| Oregon | 53.3% |
| Vermont | 52.2% |
The District of Columbia is also above the threshold, at 52.4%, but is not a state. Delaware is listed at exactly 50.0%, so it does not count as exceeding 50%. The figures are the proposal-scenario estimates reported in the Tax Foundation’s 2021 table, not rates in force today.
Why the combined rates vary by jurisdiction
The estimates combine the modeled federal rate with state and local tax provisions. The Tax Foundation noted that most states apply their individual income-tax rates to long-term capital gains and qualified dividends, while Hawaii applies lower rates and some states provide exclusions or deductions. The table therefore should not be read as though every state taxes gains in exactly the same way.
A combined marginal rate describes the tax on an additional dollar of income at the applicable top bracket under the analysis’s assumptions. It is not the percentage automatically taken from every dollar of an investor’s gain: actual exposure depends on income, filing status, holding period, and the federal, state, and local rules that apply to the taxpayer.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.These are historical proposal estimates, not a current rate guide
The Tax Foundation figures describe a 2021 policy proposal and its modeled effects. They should not be used to estimate a present-day tax bill without checking current federal and state rules. A June 30, 2025 Congressional Record entry includes a motion proposing a 39.6% income-tax bracket and reports that the motion was rejected; that entry does not establish the complete current treatment of capital gains. Congressional Record, June 30, 2025.
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