2021-04-22 22:05
publication
2021-04-22 22:05
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Thursday’s session ended with a one-percent decline in New York indices. Investors probably did not like the proposal to double the taxation of capital gains, which President Biden’s team reportedly intends to do.
The Joe Biden administration intends to present a bill to raise taxes in the United States next week. The highest tax rate PIT is expected to grow from 37% to 39.6%. This, however, is nothing compared to the plans of draconian capital gains taxation. Profits in excess of one million dollars a year are to be taxed on general principles – i.e. at a rate of 39.6%. This means doubling the current rate. It is not known when the new rates would apply.
Theoretically, such a move should come as no surprise. Exactly such a proposal was found in the Democrat’s official election program unveiled last year. Only on Wall Street hardly anyone believed that Joe Biden would keep his pre-election promises. Especially when it comes to raising taxes. It seems inevitable, however, as the Democrat intends to take from the richer (but not the richest) Americans a trillion dollars to spend that money on further social transfers.
So far, we are only talking about unofficial media leaks. Usually, however, they are an attempt to probe the reactions of markets and media. In addition, a possible tax increase will face a difficult path through a divided Congress with most of the Democratic Party hanging in the balance.
“If it has a chance of passing, we are going down 2,000 points,” commented Thomas Hayes of the Great Hill Capital hedge fund quoted by Reuters. It is unknown whether Hayes meant the Dow Jones Industrial Average or the S&P 500 Index.
So far, Wall Street’s reaction has been very restrained. The Dow Jones fell 0.94% on Thursday, ending the day at 33,815.90 points. The S & P500 fell by 0.92%, going down to 4,134.98 points. Nasdaq decreased by 0.94%, reaching the value of 13,818.41 points.
Meanwhile, on the macroeconomic front, the weekly labor market report was positively surprised. The number of applications for unemployment benefit decreased from 586,000. to 547k, while an increase to 625k was expected. It is also the lowest figure in 13 months, suggesting that the US labor market is returning to normalcy, although probably still with much worse parameters than before last year’s lockdown.
Krzysztof Kolany
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