Some have said the revenue maximizing capital gains tax rate is around 28%. That is plausible if you are just raising the capital gains rate. But if you are also ending step up basis at death (as Biden proposes) the revenue maximizing rate is much higher, plausibly above 43.4%.

Cap gains realizations have a big voluntary component that make them very sensitive to tax rates—if you do not sell your asset then you do not pay taxes.

Past a certain point the tax base shrinks more than the rate rises & total revenue collections fall. (A real Laffer curve.)

Economic research is extremely uncertain about the magnitude of these effects and their is much debate (eg @omzidar). The JCT and Treasury have historically thought something like 28% or 30% was the revenue maximizing rate. And I don’t think that view is unreasonable.

But, the reason people are so willing to delay realizations in response to higher tax rates is that capital gains are not taxed at death. If you tax them at death then in present value it is the same whether you pay tax today or accumulate more gains and pay more in the future.

President Biden proposes to make tax capital gains at death. That would greatly reduce delaying realizations to avoid taxes (because you can’t). And if you do delay realizations you will still face the tax (although possibly outside the 10-year budget window).

As a result, the revenue maximizing capital gains rate is much higher under the Biden proposal & plausibly even higher than what they are proposing.

Good arguments for & against the Biden proposal. But they would likely not get more revenue if they were proposing a lower rate.