As expected, the Democrats have decided to dramatically hike the capital gains tax on high-income groups.
With Biden’s new tax proposal, individuals who make more than $1 million dollars annually face up to a 39.6% income tax rate. This is double the current rate of 20% of the same income group left by the Trump administration.
Biden is planning to use the capital gains from these high-income groups to fund his American Family Plan. One of the most ambitious inclusions in this plan is making community college free throughout the country. The plan needs funding of around $1.5 trillion.
What does this mean for the stock market in general?
With news of these high-income group tax hikes, the S&P 500 was down 0.92%. The Dow was also down about 0.9%. Crypto assets have taken a beating, with Bitcoin down to around the $50,000 mark from $55,000 in just a few days since news broke of Biden’s new tax policies.
But analysts are skeptical about the long-term effects that Biden’s policy will have on the stock market. Mainly, the biggest ramifications of these tax policies will be burdened by the rich, mainly those making over $1 million annually. These represent roughly under 1% of all tax filers in the US, so certain analysts aren’t too worried about what this policy means for the stock market in general.
But it is worth keeping in mind that whales in the crypto-asset world exist, with a few addresses holding mass amounts of cryptocurrencies, largely Bitcoin. What this tax policy could induce is a large selling-off from these high-volume bitcoin addresses, which may result in a large correction from the gains Bitcoin has seen throughout the year.