US President Joe Biden is reportedly planning to propose a tax increase for the wealthiest groups in America.
This proposal, if passed, would increase the marginal tax rate and taxes on the profits of wealthy investors.
Reports indicate the revenue from the tax hike will support the childcare and education sectors, not healthcare.
The news contributed to the start of a wave of selling on Wall Street, and as a result, major indicators fell during Thursday’s trading.
The White House announced that the “American family plan”, which President Biden might present in details next week, will not affect any family whose annual income is less than US$400,000.
“His vision is that it should be done with the help of wealthier Americans and the institutions and companies that can handle it,” said White House spokeswoman Jane Sackey.
The presidential proposal would increase the maximum income tax rate from 37% to 39.6%, according to The New York Times and Bloomberg.
The plan is expected to lead to a significant increase in the profit tax rate, from 20% to 39.6% (nearly double) for those whose annual earnings exceed US$1m. It is worth noting that in some states that tax capital gains, investors may face a tax rate increase of more than 50%.
Such a plan is likely to meet resistance from Republicans in Congress, and it may not win unanimous support from Democrats, who represent a slim majority in the House. Meanwhile, the news has already caused some unrest in Wall Street trading; the Dow Jones Industrial Average dropped 420 points before recovering at a slow pace.
“We will lose 2,000 points if the proposal is passed,” said Thomas Hayes from Great Hill Capital, according to Reuters.