By Steve Goldstein
Avid readers of this column may have had a sense of déjà vu on Thursday. Last month, a Need to Know column explored what would pay for President Joe Biden’s infrastructure spending — and quoted a former Biden aide, Evercore ISI analyst Sarah Bianchi, who said it would “ probably include nearly doubling capital-gains taxes on those with income over $1 million .” Not that it was any state secret — the Biden campaign’s website suggested such a move too.
In any case, the stock market reacted negatively to the Bloomberg News report that the White House was considering doubling capital-gains taxes on the wealthy to help pay for social spending, as the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.0072% dropped by the most in a month. The news was particularly jarring to the highflying cryptocurrency space, with bitcoin /zigman2/quotes/31322028/realtime BTCUSD -5.26% and ethereum /zigman2/quotes/108573964/realtime ETHUSD -5.95% slumping.
One question now is whether the closely divided Senate will go for it. “Frankly, I suspect that these proposed tax increases will be knocked down at the hands of Senator [Joe] Manchin who remains the ‘swing’ vote in the Senate,” said Louis Navellier, the chairman of Navellier & Associates. An alternative is that the Senate could increase the capital-gains tax, but by a smaller amount — analysts at Goldman Sachs suggest they’ll settle at 28%, up from 20% currently. Another question is whether the tax will be applied retroactively or not.
Analysts at Goldman Sachs — in October — ran the numbers on the stock market impact of previous capital-gains tax hikes. While there is only a modest impact on the stock market as a whole, momentum stocks usually get socked before they are levied, they found. That makes sense — investors logically are more motivated to sell the stocks where they would save the most by avoiding higher capital-gains taxes.
The last time capital-gains taxes were hiked, in 2013, the wealthiest households sold 1% of their equity assets, the Goldman analysts found. According to the Federal Reserve’s distributional financial account data , the top 1% held $17.79 trillion of equities and mutual funds in the fourth quarter of 2020 — so a 1% selling of stocks this time would be $178 billion. (The most recent Internal Revenue Service breakdown, from 2018, found that millionaires accounted for just over 500,000 filers, or about 0.4% of the total.)
Here is the list of the top price gainers in the S&P 500 and Nasdaq-100 over the last year and over the last five years.
|S&P 500 and Nasdaq-100 gainers|
|Company||One-year % change||Company||Five-year % change|
|Penn National /zigman2/quotes/209264611/composite PENN||575||Enphase Energy /zigman2/quotes/207948472/composite ENPH||6160|
|Caesars Entertainment /zigman2/quotes/205281174/composite CZR||527||Advanced Micro Devices /zigman2/quotes/208144392/composite AMD||1882|
|Tesla /zigman2/quotes/203558040/composite TSLA||392||NVIDIA /zigman2/quotes/200467500/composite NVDA||1538|
|Gap /zigman2/quotes/206554267/composite GPS||368||Tesla||1318|
|Freeport McMoran /zigman2/quotes/200215692/composite FCX||355||MercadoLibre /zigman2/quotes/200678442/composite MELI||1137|
|Enphase Energy||321||Paycom Software /zigman2/quotes/208108773/composite PAYC||943|
|Tapestry /zigman2/quotes/207417762/composite TPR||237||Atlassian Corp. /zigman2/quotes/207177221/composite TEAM||859|
|Etsy /zigman2/quotes/202790087/composite ETSY||235||Align Technology /zigman2/quotes/200300692/composite ALGN||733|
|Generac Holdings /zigman2/quotes/208144117/composite GNRC||233||Generac Holdings||720|
|Moderna /zigman2/quotes/205619834/composite MRNA||228||Micron Technology /zigman2/quotes/205710729/composite MU||695|
|Peloton Interactive /zigman2/quotes/208035743/composite PTON||226||Lam Research /zigman2/quotes/208077897/composite LRCX||662|
|Align Technology /zigman2/quotes/200300692/composite ALGN||224||ServiceNow /zigman2/quotes/202729495/composite NOW||650|
|News Corp /zigman2/quotes/201755982/composite NWSA||219||Zebra Technologies /zigman2/quotes/201850708/composite ZBRA||647|
|SVB Financial /zigman2/quotes/200548254/composite SIVB||210||Caesars Entertainment||645|
|Data: FactSet (News Corp owns MarketWatch, the publisher of this report.)|
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