“The trend of net equity selling and falling stock prices around capital gains rate changes has usually been short-lived and reversed during subsequent quarters,” Goldman strategists led by David Kostin wrote in a note Friday. In the three months prior to the last hike in the capital gains rate hike, in 2013, “the wealthiest households sold 1% of their starting equity assets, which would equate to around $120 billion of selling in current terms,” they wrote.
Goldman Estimate
Goldman analysts are penciling in congressional passage of a capital gains rate of “around 28%” for the wealthy, anticipating Biden’s proposal will be substantially altered.
Republicans are likely to oppose the tax increases en masse, but the White House is also risking a struggle with Democratic lawmakers. Some of those from New York, New Jersey and other high-tax states in particular were already mobilizing to demand relief for their constituencies even before Biden’s official announcements. With the 50-50 Senate and a narrow margin in the House, monthslong negotiations loom.
Biden is also likely to propose increases on the number of Americans subjected to the estate tax. He campaigned on closing popular tax breaks including a provision that lets appreciated assets go untaxed when they are inherited, along with eliminating the carried-interest tax break, which lets private equity managers cut their Internal Revenue Service bills.
Without the GOP, Biden will need to craft a deal with his own party’s lawmakers. Some Democratic moderates, such as West Virginia Senator Joe Manchin, have said they want to limit the size of the tax increases.
A bigger constituency Biden must woo is a group of House lawmakers largely representing districts in New York, New Jersey and California, who demand an expansion of a tax deduction that Trump limited in 2017. More than 20 Democrats have said they won’t vote for Biden’s plan unless the $10,000 cap on state and local tax, or SALT, deductions is addressed.
Deese on Monday highlighted that revenue would “help invest directly in our kids and our families and our future economic competitiveness and put us in a position where we can drive greater economic growth.”
—With assistance from Laura Davison.
This article was provided by Bloomberg News.