Investors “Incentive to sell stocks will increase, and will lessen the will to buy”
I am skeptical about whether or not to pass the Senate
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[뉴욕=뉴스핌] Correspondent Kim Min-jung = Wall Street entered a state of extreme tension as reports that US President Joe Biden will propose a tax reform proposal that will increase the capital gains tax rate up to two times.
Experts are concerned that raising the capital gains tax for the wealthy will increase incentives for long-term investors to sell their stocks before the tax change.
However, some analyzes that even if President Biden pushes for such a tax change, it is difficult to pass the parliament.
On the 22nd (local time), Bloomberg News reported that President Biden would propose a plan to raise the capital gains tax rate to a maximum of 39.6% for the wealthy in the United States. Taking into account the progressive income tax currently applied on investment income, the tax rate for the wealthy reaches 43.4%.
The news agency cited a source that the passage of these tax reforms would raise the capital gains tax rate, which applies to Americans with incomes of $1 million or more, from 20% to 39.6%.
|US President Joe Biden. [사진=로이터 뉴스핌]|
The report immediately shook the US stock market. On the New York Stock Exchange (NYSE), the Dow Jones 30 Industrial Average dropped to 400 points. The Nasdaq Composite Index, which had risen early in the market due to earnings expectations of large technology companies, also turned downward.
On Wall Street, concerns emerged that President Biden’s tax reform bill had increased incentives to sell in the stock market before it passed Congress. The fact that large-scale stocks are owned by’biggers’, classified as the wealthy, also pushed Wall Street into an ultra-tense state.
Chris Zacharelli, Chief Investment Officer of the Independent Advisors Alliance, told Bloomberg, “This will increase incentives to sell this year.” He was concerned that it would also dampen his willingness to buy.
“Biden’s proposal is to double the capital gains tax rate for those who make more than $1 million,” said Jack Ablin, founding partner of Cresett Capital Management, in an interview with CNBC. “If they think the bill will pass next year, they will sell the stock,” he predicted.
Thomas Hayes, head of hedge fund Great Hill Capital, told Reuters that “if the bill could pass Congress, the stock market would fall 2,000 points.”
|US New York Stock Exchange Trader [사진=로이터 뉴스핌]|
Market participants agreed that President Biden’s plan was far more radical than Wall Street’s expectations.
“I don’t think anyone was surprised that people would disclose a capital gains tax rate increase, but few people saw that it would be done so early and on a large scale,” said Max Gokman, head of asset allocation at Pacific Life Fund Advisors, told Bloomberg. did.
“Individual investors have the dominant power in terms of daily trading volume, but the reality is that the wealthy hold most of the stock,” Gokman said.
Sammy Samana, senior market strategist at Wells Fargo Investments Institute, said, “If this is the beginning of a policy that is less market friendly, it will be very difficult to profit from now on.” “I am more concerned that the impression will come out of the strengthened standards.
The market is skeptical about whether such an aggressive capital gains tax rate hike will actually become a reality. Democrats currently hold the majority in the House of Representatives, but in the Senate, Democrats and Republicans have the same number of seats. However, Vice President Kamala Harris holds the power of casting boat as the chairman of the Senate.
“Much more aggressive than people expected,” said Dan Suzuki, deputy CIO of Advisors Richard Bernstein.
Some advise that more attention should be paid to the details of the capital gains tax rate adjustment plan.
“The devil is in the details,” said Chris Grizanti, chief equity strategist at MAI Capital Management. “Will this go back to January 1st? Then there may be no need to sell stocks right now. What if this starts next year?” did.
“What investors can be sure of is that taxes will go up, and that we have to pay at least in part for all the money we’ve been spending as stimulus,” added Grizanti strategist.