On April 22, The New York Times and Bloomberg News reported on the alleged tax hikes proposed by President Joe Biden. Reports claims doubling of the highest long-term capital gains taxes on individuals making more than $1,000,000 from 20% to 39.6%. They also reported the proposal of raising the marginal income tax rate from 37% to 39.6% for the highest earners, above $400,000.
As a result of these reports on potential tax hikes, the S&P 500 Index took a dive of 420 points, which shortly recovered afterwards. According to the comments reported by Reuters on portfolio manager at Valueworks LLC, Charles Lemonides, “The market reaction has been pretty muted because there’s a long way between a proposal and event. If people put a high likelihood on that taking place the reaction in the markets would be more dramatic.”
After the reports by The New York Times and Bloomberg News, White House Press Secretary Jen Psaki was asked whether there’s further information on the plan, and whether there could be a discourage for long term investments. To these questions, Press Secretary Jen Psaki responded with open arms providing the future uncertainty of the finalization of the plan, and re-affirmed the White House’s promise on not raising a cent on taxes for Americans making less than $400,000 a year.
With up-coming “American Families Plan” set to be announced by President Biden in a speech to Congress this week, the tax hikes will be a vital segment in order to reduce the budget deficit and provide finances to pay for his plans.