The news that Biden may nearly double tax rates for wealthy investors sent the stock market crashing.
According to reports, the Biden administration plans to propose one of the country’s highest capital gains taxes, almost doubling the tax rate for wealthy investors.
Taxes Affect High-Net-Worth Individuals
The possibility of a tax hike was first revealed to Bloomberg on April 22 by White House staffers.
If the law is passed, the capital gains tax rate for investors with more than $1 million will be increased from 20% to 39.6%. The government will be able to invest $370 billion more due to this.
The stock market and the crypto market have also been affected by the possibility of a rise. According to Reuters, Bitcoin dropped below $48,000 within hours of the news, a fall of about 4%. Ethereum has lost about 10% of its value. Meanwhile, the S&P 500, Dow Jones, and Nasdaq all fell by about 0.9%.
In addition to the press, there has been a lot of talk about cryptocurrency on social media. With over 1,250 views, the subject became a top-ranking thread on Reddit’s/r/cryptocurrency subreddit. Users shared various concerns about the program, while others indicated that fears were exaggerated.
Will the Proposal Be Accepted?
The plan has not been formally announced as of Friday, April 23. When Biden presents the US fiscal policy next Wednesday, he will officially address the tax hike.
According to some analysts, tax reform will not be implemented. , the odds of the plan succeeding are “slim to none,” who told BNN Bloomberg that the proposal is the most considerable tax increase in history. Instead, he anticipates a more modest tax increase of 25%.
According to Thomas Hayes of Great Hill Capital LLC, the stock market would have suffered even more significant losses if the plan had a good chance of passing.
Would Crypto Users Be Affected by the Tax Plan?
Most investors will be unaffected even though the tax increase is allowed. The scheme is targeted at the top 0.3 percent of investors, and crypto capital is distributed similarly to traditional wealth.
From a starting price of about $8000 in 2010, Bitcoin prices increased by around 300 percent by 2020. To raise more than $1 million on a Bitcoin investment that year, you’d need to have about 32 BTC, which just around 0.4 percent of Bitcoin addresses have.
However, not all cryptocurrency investments are created equal. Defi services like yield farming platforms and liquidity pools are designed to give investors modest amounts of money to work for the underlying protocol highly high returns. Similarly, new ICOs can experience rapid growth in a short period.
As a result, some cryptocurrency ventures could have a higher percentage of users earning more than $1 million. However, since wealth distribution data on such incidents is lacking, impacted investors may still be in the minority.