President Joe Biden has tanked the stock market with word of a tax hike. It was bound to happen with a Democrat in the White House.
Biden proposed an increase to the capital gains tax that nearly doubles the rate, Breitbart reported. The S&P lost its gains and then some, slipping by .5% after the plan was announced Thursday.
The capital gains tax rate would go from 20% to 39.6% for those earning over one million dollars. In addition, there would also be a 3.8% investment income tax, part of the Obamacare funding that makes the top effective rate 43.4 percent. Current capital gains taxes for lower earners range from zero percent for married couples making less than $80,000 to 15% for couples earning between $80,000 and $496,000.
This news caused the health care and real estate sectors to hang on by a thread in the positive as the other nine sectors slipped. Although these tax hikes come under the auspices of taxing the wealthy, they often apply to business owners who filter the business earnings through their personal income.
Capital gains taxes are paid when assets like houses or stock are sold after being held for longer than one year and gain value. Many wealthier investors will simply choose to sit on assets rather than sell them and take the tax hit. This will likely cause further dips in the stock market.
Biden has expressed a desire to match the capital gains taxes to the current income tax rates. Former President Trump had cut the rate for those making over $400,000 annually to 37%, down from the previous 39.6% that held since 2013.
The stock market has remained robust despite the coronavirus lockdowns that crippled many businesses. This tax increase, and the subsequent market losses, are the exact wrong thing to do at this time.
Biden has to pay for all the government spending and Democrats have the same one-note approach to simply fleecing top earners. Unfortunately, it’s destined to have the opposite effect as fewer stock and other sales will be made and the economy will grind to a halt.