Biden Expected to Raise Capital Gains Taxes
Posted by Brian Ford on April 27, 2021
Biden is expected to propose the largest tax hike of its kind in history. A close to 100% increase on capital gains taxes for individuals earning over a million dollars. He’s also looking to raise the marginal tax rate from 37% to 39.6%.
The new proposal, coupled with the existing federal surtax on investment income, could cost investors as much as 43.4%. In high tax states like New York and California, rates could be as high as 52.22% and 56.7% respectively.
The money grab is said to fund Biden’s, American Families Plan, which calls for $1 trillion in new spending. Joe’s plan would offer “free” tuition to community colleges nationwide, along with pre-kindergarten education, and paid medical and family leave.
All major indices tumbled on the news, with the DOW dropping by 400 points and the S&P by 1%. The sell-off is said to be caused by investors dumping their best-performing stocks to lock in existing capital gains rates. But in the end, it could prove to be futile if Biden decides to make the changes in the tax code retroactive to include all of 2021.
Below are some takes from a few of the financial industry’s top professionals.
Thomas Hayes, chairman of Great Hill Capital said, “If it had a chance of passing we’d be down 2,000 points”.
Sameer Samana of the Wells Fargo Investment Institute stated, “If this is the start of less market-friendly policies, it could make gains from here a lot choppier”.
And Max Gokhman of Pacific Life Fund Advisors said, “I don’t think anyone is truly surprised that Biden is unveiling a cap gains tax, but what few people expected is that he’d do it this soon and in this magnitude”.
It’s up in the air whether the Democrats will be able to push the proposed legislation through the Senate because the Democrats are currently tied with the Republicans with Kamala Harris’ vote being the tie-breaker. To succeed Biden would need every Senate Democrat to vote in its favor.
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