For all those, who did not catch that during his campaign, Biden is indeed raising the taxes in the United States. But at no point during the Election in 2020, he was hiding that. From the get-go, he was highlighting the need to tax the wealthy, and thus reverse Donald Trump’s reforms.
Speaking of Trump, the ex-President campaigned for further lowering of the taxes, which he even managed to implement during the closing months of his term. So probably the Democrats managed to notice the social dissatisfaction with the widening gap in the wealth? Basically, Trump’s reforms allowed the rich class to become richer, while not helping the poorer enough. That is why the Democrats have been announcing their plans to implement the policies that would hit the ones from the top percentile of the wealthiest.
And it has been widely suggested, even by Disruption Banking, that the relationship between Washington and Wall Street may have gotten worse in the last few years. Since the last campaign, a few scandals have emerged – including the one involving Hillary Clinton, who received $600,000 for giving a private speech for Goldman Sachs. So the donations for both Republicans and the Democrats have drastically dropped, that is for sure.
But why would Biden even care about what Wall Street thinks of his actions? He does not hold any shares, and the economy of the United States needs to recover, and the new laws and rules seem to be setting a good trajectory towards that. So maybe the only thing that should be done is to wait until there is no more fuss around Biden’s Tax Plan, and see if his words come to an action.
Biden’s Tax Plan explained
There is still a lot of discussions about the President’s plans of Capital Gains Tax raising to as much as 43.4% (from the current 20% base rate). But don’t worry, the changes will affect only the people who make $1 million or more, and the whole rest of the American society will proceed to live as they did so far.
With this, the corporate rates would be rising by 7% (from 21 to 28), which resonates perfectly with Biden’s promises from the year 2020. There was also some suggestion of another extra tax for families that are making $400,000 per annum or more.
The President seems to already have it all planned when it comes to spending the money received after implementing the new taxation. At first, the enhanced $1.9 trillion relief plan for the economy during the (still ongoing) pandemic was introduced. Then they introduced the new infrastructure plan worth $2.25 trillion. To add to this, a new $1.8 trillion will be spent on child care and educational opportunities. Summed up, this gives almost $6 trillion, and we’ve only just reached the second half of Biden’s first year as the President.
Democrats are really proud to present their plans of overhauling the existing U.S. tax system. And taking all of their ambitions (and the costs of them) into regard, we can only wait for their next steps, as these initial plans will not be the last ones.
How will this affect Wall Street?
In 2020, Denise Chisholm, the Fidelity strategist, has presented the report, where she discussed the fact that increased rates are not necessarily influencing the stock market like the investors would expect it to be.
Also, this has been suggested for a while that there will be a shift in the investors’ preferences in the nearest future. The experts from Goldman Sachs actually believe that most of them will be actually coming from outside the U.S. We’ve already seen this with the example of Tesla, which lured thousands of international investors. They will not be paying taxes in the U.S., so if this becomes the truth, and Wall Street becomes reliant on foreign investors, the stock should not suffer from the increased taxes as much as some would believe it to.
If you want to read more about the topic o Wall Street’s relationship with Joe Biden’s new Tax Plan, and the possible scenarios for their stock markets, please use the following link and find a piece written by Andy Samu: https://disruptionbanking.com/2021/04/29/how-bad-is-bidens-tax-plan-for-wall-street/.
Be First to Comment