April 22, 2021 | 5:55pm | Updated April 22, 2021 | 5:55pm
Stocks tumbled Thursday on a report that President Biden is mulling a plan to nearly double what wealthy people pay on their investment gains.
A Bloomberg News report that Biden wants to raise the capital gains tax to as much as 39.6 percent for people earning at least $1 million chopped 321 points off the Dow Jones Industrial Average, which closed down 0.9 percent to 33,815.90.
Before the report hit, major averages were trading higher, buoyed by better-than-expected unemployment data and some positive earnings reports.
But the report, which warned of an overall top tax rate of 43.4 percent when combined with an existing 3.8 percent tax on investment income to fund Obamacare, sent the blue-chip Dow benchmark down as much as 420 points at its lowest point.
The S&P 500 index ended the day down 0.9 to 4,134.98, while the Nasdaq Composite slid 0.9 percent to 13,818.41.
The current top capital gains rate is 20 percent.
Experts predict more selling if Biden’s tax plan becomes a reality — potentially ending a bull market that has defied even the devastating economic fallout of coronavirus pandemic, including high unemployment.
“Biden’s proposal effectively doubles the capital gains tax rate on $1 million income earners,” Jack Ablin, Cresset Capital Management’s founding partner and CIO told CNBC. “That’s a sizable cost increase to long-term investors. Expect selling this year if investors sense the proposal has a chance of becoming law next year.”
“The biggest risks to the stock market are the Fed’s taper tantrum and aggressive tax hikes,” added Edward Moya, senior market analyst at Oanda, in a note to clients.
Thursday’s capital gains news comes as investors waded through another batch of positive earnings reports.
Blackstone Group shares ticked up 3.3 percent after the private-equity firm swung to a record profit of $1.75 billion in the first quarter. AT&T saw its stock rise 4 percent, after the telecom giant said it added more wireless customers and HBO Max customers in the first quarter.
Shares of Equifax rose 14.9 percent after the credit-reporting agency late Wednesday raised financial projections for the year and said it expects to buy back more than $100 million worth of stock.
On the job front, workers filings for jobless claims reached another pandemic low of 547,000 last week, the Labor Department said Thursday. The dip is a sign the job market is strengthening.
While stocks remain near record highs, there’s also growing concern about a surge in coronavirus cases globally, which could delay the broader global economic recovery. India reported the world’s biggest one-day rise in new infections on Thursday, as COVID-19 rips through the region.