Thursday (22) rumors that Biden plans to raise the 20% tax on the rich significantly almost 2 times, the market commotion and a wave of selling, Goldman Sachs found that before the capital gains tax increase, high momentum stocks are usually the target of priority selling by the rich, including Tesla, Micron, Super Micro are included, and the size of the sell-off amounted to $ 178 billion.
The news that the White House intends to raise taxes on the rich to support the U.S. family plan caused a flurry in the market, with the S&P 500 seeing its biggest drop in 1 month on Thursday and the cryptocurrency market seeing a massive duck tape.
Goldman Sachs analysts last October on the impact of past capital gains tax increases on the stock market statistics found that while the overall impact on the stock market was minimal, high momentum stocks have typically sold off before being taxed.
Stock market impacted by capital gains tax (Chart: Goldman Sachs)
Theoretically, investors tend to sell stocks that save the most tax expense due to higher tax rates. Goldman Sachs analysts found that the last time the capital gains tax was raised was in 2013, when the wealthiest groups sold 1% of their equity assets.
According to the Federal Reserve’s distributive financial accounts data, the top 1% of wealth held $17.79 trillion in stocks and mutual funds in the fourth quarter of 2020, so the potential size of the tax sale would be $178 billion.
The following are the high-momentum stocks that have risen the most in the past year versus the past five years.
As early as March this year, Evercore ISI U.S. public policy leader Bianchi (Sarah Bianchi), who served as Biden’s economic staffer, said that in order to support Biden’s infrastructure plan, the White House is likely to raise taxes on the rich twofold to 39.6%.
Bianchi said, in addition to corporate taxes and taxes on the rich, the White House is also considering other tax pipelines, including the restoration of the 2009 estate tax policy, limiting personal deductions, phasing out some business income exemptions, and the establishment of a financial transaction tax.
But even if the White House introduces the proposal, it must still face a vote in the Senate. Louis Navellier, chairman of Navellier & Associates, believes that these tax measures are likely to be vetoed by moderate Democrat Rep. Joe Manchin, resulting in the proposal not passing.
However, the Senate could propose a compromise plan to moderately raise the capital gains tax, with Goldman Sachs analysts predicting the tax rate could rise to 28% from the current 20%.
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