- Joe Biden’s planned capital gains tax could put an immediate sale on stocks, according to Goldman Sachs.
- In a note on Friday the company explained that the recent increase in the capital-earnings tax in 2013 led to a stock sell-off worth approximately $ 100 billion from wealthy individuals.
- However, individuals who sold quickly repurchased stocks a few months later, leading Goldman to conclude that household sales around tax increases were “short-lived and fully recoverable. next residence. ”;
Biden’s planned tax-earnings tax increase could put immediate sale on stocks given what happened in the markets after the previous rate hike, according to Goldman Sachs.
A group of Goldman analysts led by Arjun Menon wrote on Friday that Joe Biden’s proposed changes to the corporate tax code would be supplemented by an increase in the tax rate applied to the increased capital and dividends for at maximum individual income.
History has shown that raising capital taxes results in the sale of stock. After the last increase in tax rate earned in capital in 2013, the richest 1% of households sold 1% of their initial equity and mutual fund assets, now worth nearly $ 100 billion, in the three months leading up with the rate hike, according to Goldman. Until 2020, the richest 1% of Americans own 53% of all household stocks. Their collective action can move markets.
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While this sale could be a risky risk to stock allocations in 2020, Goldman said it will not result in a long-term sale or slowing economic growth.
In the months following the rate hike in 2013, the top 1% bought more stocks than was sold before the change, Goldman said. Their reduction in stock exposure is only temporary, and Goldman said it believes the same pattern is likely to happen again.
“We expect that household sales around changes in the tax rate that capital gains should be short-lived and fully recoverable in future settlements,” Goldman wrote.
In fact, Goldman predicted that the richest 1% of Americans would be the biggest driver of total stock demand by 2021, even with a “blue wave” of election results.
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