(Bloomberg) — President Joe Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6% to help pay for a raft of social spending that addresses long-standing inequality, according to people familiar with the proposal.
For those earning $1 million or more, the new top rate, coupled with an existing surtax on investment income, means that federal tax rates for wealthy investors could be as high as 43.4%. The new marginal 39.6% rate would be an increase from the current base rate of 20%, the people said on the condition of anonymity because the plan is not yet public.
A 3.8% tax on investment income that funds Obamacare would be kept in place, pushing the tax rate on returns on financial assets higher than rates on some wage and salary income, they said.
Stocks slid the most in more than a month on the news, with the S&P 500 Index down 0.7% as of 2:57 p.m. after climbing 0.2% earlier.
Ten-year Treasury yields erased gains.
Meanwhile, market breadth between large cap and small cap stocks near the widest ever.
While the Dow, the S&P 500 and Russell 2000 indices all fell on Biden’s announcement, the Russell 2000 fell less.