Recent history shows that the top capital gains tax rate has been higher than 28%.

• Vice President Kamala Harris, the Democratic presidential nominee, recently suggested a 28% tax on long-term capital gains for individuals earning over $1 million per year.
• Top earners would pay a combined rate of 33% if the net investment income tax was raised to 5%.
• Since 1978, the combined capital gains rate for top earners, Harris, would be the highest at 33%. However, the average effective rate, which is what investors actually pay, is typically lower, experts say.

With the election approaching, investors are intensely focused on the potential effects of capital gains tax proposals from both political parties on their investments.

Vice President Kamala Harris recently proposed a 28% tax on long-term capital gains for individuals earning over $1 million annually, an increase from the current top rate of 20%.

"On Sunday, Sen. Bernie Sanders, I-Vt., stated on NBC's "Meet the Press" that he would go higher than Kamala Harris' proposal. He believed that she was being pragmatic and doing what she thought was right to win the election."

The presidential election could impact your taxes.

Harris' plan diverges from President Biden's 2025 fiscal year budget, which proposes 39.6% long-term capital gains taxes for individuals earning more than $1 million annually.

The Wall Street Journal reported last week that Biden's 2025 budget plans to increase the net investment income tax, or NIIT, from 3.8% to 5% for those with modified adjusted gross income, or MAGI, over $400,000.

Under current law, investment earnings are subject to the NIIT when MAGI exceeds $200,000 for single filers or $250,000 for married couples filing together.

If Harris proposes raising the NIIT to 5%, the combined rate would be 33% for top earners. Biden's plan would raise the combined rate to 44.6%.

The Harris campaign did not immediately respond to CNBC's request for comment.

Former President Donald Trump generally supports tax cuts but hasn't presented a capital gains tax plan.

The Heritage Foundation, along with over 100 other right-leaning organizations, created a "vision for a conservative administration" known as Project 2025, which addressed the issue.

The NIIT would be abolished and a 15% tax rate for capital gains and dividends was proposed under Project 2025.

Numerous Trump administration officials have been linked to Project 2025, yet he has disavowed the initiative.

The Trump campaign did not immediately respond to CNBC's request for comment.

Any alteration in capital gains tax would necessitate Congressional approval, and the control of the House and Senate is uncertain.

How do the candidates' proposals compare to past capital gains tax rates?

History of capital gains tax rates

According to the Tax Foundation, capital gains tax rates have typically been lower than regular income tax rates in recent decades.

Garrett Watson, senior policy analyst and modeling manager at the Tax Foundation, stated that the preferential rates for qualified dividends and long-term capital gains have been decreasing over time.

Since 1978, the combined capital gains rate for top earners under Harris' plan would be the highest at 33%, close to 40%.

The 28% top capital gains rate of Harris (excluding the NIIT) would be the same as the top rate enacted by former President Ronald Reagan in 1986, which temporarily matched the ordinary income rate.

Since the tax cuts implemented by Former President George W. Bush, the top capital gains tax rate decreased from 20% to 15% from 2003 to 2012. This rate was the lowest since the Great Depression, as stated by the Tax Policy Center.

According to Watson, capital gains revenue is more unpredictable than regular income tax collections because it depends on when investors decide to sell and realize their profits.

"Revenue estimates for these proposals are uncertain due to the policy proposals," he stated.

According to the Tax Foundation, the average effective tax rates have been lower than the maximum capital gains rates.

Capital gains taxes can have a 'lock-in effect'

Investors have the option to sell their assets and incur capital gains taxes at their discretion. Experts suggest that higher or lower future tax rates may motivate investors to delay sales. On the other hand, investors may strategically realize gains in the 0% tax bracket based on their current taxable income and long-term objectives.

In 2024, capital gains taxes for investors will be 0%, 15%, and 20%, along with a 3.8% NIIT for higher earners.

According to Kent Smetters, a professor of business economics and public policy at the University of Pennsylvania's Wharton School, there is a lock-in effect associated with capital gains, and this effect will increase with a higher rate.

Despite suggestions to impose taxes on unrealized profits, these ideas have not garnered significant backing among Congress members.