Avid readers of this column may have had a sense of déjà vu on Thursday. Last month, a Need to Know column explored what would pay for President Joe Biden’s infrastructure spending — and quoted a former Biden aide, Evercore ISI analyst Sarah Bianchi, who said it would “probably include nearly doubling capital-gains taxes on those with income over $1 million.” Not that it was any state secret — the Biden campaign’s website suggested such a move too.
In any case, the stock market reacted negatively to the Bloomberg News report that the White House was considering doubling capital-gains taxes on the wealthy to help pay for social spending, as the S&P 500
dropped by the most in a month. The news was particularly jarring to the highflying cryptocurrency space, with bitcoin
One question now is whether the closely divided Senate will go for it. “Frankly, I suspect that these proposed tax increases will be knocked down at the hands of Senator [Joe] Manchin who remains the ‘swing’ vote in the Senate,” said Louis Navellier, the chairman of Navellier & Associates. An alternative is that the Senate could increase the capital-gains tax, but by a smaller amount — analysts at Goldman Sachs suggest they’ll settle at 28%, up from 20% currently. Another question is whether the tax will be applied retroactively or not.
Analysts at Goldman Sachs — in October — ran the numbers on the stock market impact of previous capital-gains tax hikes. While there is only a modest impact on the stock market as a whole, momentum stocks usually get socked before they are levied, they found. That makes sense — investors logically are more motivated to sell the stocks where they would save the most by avoiding higher capital-gains taxes.
The last time capital-gains taxes were hiked, in 2013, the wealthiest households sold 1% of their equity assets, the Goldman analysts found. According to the Federal Reserve’s distributional financial account data, the top 1% held $17.79 trillion of equities and mutual funds in the fourth quarter of 2020 — so a 1% selling of stocks this time would be $178 billion. (The most recent Internal Revenue Service breakdown, from 2018, found that millionaires accounted for just over 500,000 filers, or about 0.4% of the total.)
Here is the list of the top price gainers in the S&P 500 and Nasdaq-100 over the last year and over the last five years.
|S&P 500 and Nasdaq-100 gainers|
|Company||One-year % change||Company||Five-year % change|
Advanced Micro Devices
|Data: FactSet (News Corp owns MarketWatch, the publisher of this report.)|
The launch of crew to the International Space Station was successful on Friday morning — here’s a profile of the four astronauts on board.
The Los Angeles Dodgers will set aside a “vaccinated only” section for Saturday’s baseball game.
A man used 80 pounds of explosives — for a gender-reveal party.
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