New York Stock Market 'Sudden Shock'... Proposal to Double Capital Gains Tax Rate

US Government Proposes Raising Capital Gains Tax Rate from Current Maximum 20% to 40%
Funding for $1 Trillion Education Infrastructure Investment Plan
Announcement Expected Next Week
New York Stock Market Reverses to Decline Amid Capital Market Headwinds

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The Biden administration in the United States has decided to double the tax rate on capital gains earned by the wealthy through stock and bond trading, according to Bloomberg News and other U.S. media reports on the 22nd (local time). As a result, the New York stock market reversed from an upward trend to a downward trend.

According to Bloomberg, the Biden administration plans to raise the capital gains tax rate applied to high-income earners with annual incomes over $1 million to 39.6%. Including the surtax, the capital gains tax rate will soar to 43.4%. The current top capital gains tax rate is 20%, and including the surtax, it is 23.8%. The media explained that the U.S. government intends to double the capital gains tax for the ultra-high-income group.

CNBC predicted that if this plan materializes, the capital gains tax rate will rise to a level similar to the top individual income tax rate of 37%.

The capital gains tax rate has been set lower than the income tax rate to encourage investment, which has drawn criticism as a benefit for the wealthy.

The Biden administration plans to use the increased tax revenue from the higher capital gains tax rate as funding for the $1 trillion human infrastructure investment plan called the 'American Families Plan,' which is scheduled to be announced next week.

The American Families Plan is expected to include measures such as expanded childcare subsidies and free tuition for community colleges.

President Biden previously called for a corporate tax increase as a funding measure for the $2.3 trillion social infrastructure investment plan called the 'American Jobs Plan,' announced last month.

Meanwhile, upon news of the significant capital gains tax hike, the New York stock market immediately turned bearish.

The S&P 500 index was up 0.1% around 1 p.m. but plunged sharply right after the report on the capital gains tax hike, falling 1.2% within an hour. The Nasdaq index also reversed from a 0.5% rise to a 1.2% decline.