President Biden wants to nearly double the capital gains tax paid by wealthy Americans, as first reported yesterday by Bloomberg and confirmed by Axios.

Counterintuitive: Biden's plan is better for private fund managers (hedge, PE, VC, etc.) than what he proposed during the campaign.

By the numbers: Biden wants a 39.6% top rate on long-term cap gains, up from the current 20% rate, for those earning at least $1 million of annual investment income. He's also expected to maintain an ACA-related investment tax, bringing the federal toll to 43.4%.

• Key here is that Biden wants a capital gains rate at all, maintaining it as separate from ordinary income.
• During the campaign he pledged to eliminate differential treatment of cap gains for high earners, instead categorizing such monies as ordinary income. Among other things, it was a backdoor way to close the carried interest loophole, since it's predicated on a lower tax rate for capital gains.

Wait, how is this better? The White House doesn't really expect to get that 39.6% rate for cap gains, just like it didn't really expect to get a 28% corporate tax rate. It's a starting point for negotiations, with Axios' Hans Nichols reporting that the Democratic sweet spot somewhere closer to 30%.

• Yes, 30% is still way higher than the current cap gains rate.
• But it's significantly lower than the 39.6% that Biden also wants for top earners on their ordinary income, and which he's more likely to get because it's just a small bump that returns us to pre-2018 levels.

Profit-taking. No word yet on if a cap gains increase would be retroactive to 2021 taxes, or go into effect next year (as the corporate tax proposal would do). If it's the latter, and this becomes law, expect a lot of Q4 asset sales.

Caveat: All of this is part of Biden's second infrastructure proposal, but there isn't even yet legislative language on his first one (let alone a scheduled vote).

• Plus, still no word on if Democrats will insist on some sort of SALT suspension, so as to lighten the tax load on wealthy voters in states like California, New York, New Jersey and Massachusetts.

The bottom line: Everyone knew Biden planned to raise taxes on the rich. They didn't know that he might let carried interest continue being taxed at a lower rate than ordinary income.