US Stocks Tumble On Worries Over Tax Hike Proposal

Wall Street stocks finished solidly lower on Thursday following reports the White House will propose a steep increase in capital gains taxes on wealthy individuals.

The Biden administration is developing a plan to increase the tax rate on profits from stock transactions to 39.6 percent from 20 percent on people earning more than US$1 million, according to reports in The New York Times and Bloomberg, citing government officials.

Any such proposal faces a long process on Capitol Hill before becoming a reality, but analysts said the reports indicate tax hikes are very much in the mix in Washington.

The Dow Jones fell 0.9 percent to end at 33,815.

The S&P 500 also shed 0.9 percent to finish at 4,134, as did the Nasdaq, which ended at 13,818.

Prior to the reports, markets took in a series of mostly strong corporate earnings and data showing US new claims for unemployment benefits hit their lowest level since the Covid-19 pandemic began.

But stocks have been under pressure most of the week amid concerns about lofty equity valuations and rising coronavirus infections in India and other countries, but losses deepened after the tax hike reports.

During the presidential campaign, President Joe Biden said he favoured raising taxes on the wealthy and later proposed an increase on corporate taxes as part of his US$2 trillion jobs and infrastructure plan.

"The market was reminded that this was a possibility and now this whole prospect of higher taxes is going to be sitting out there," said Briefing.com analyst Patrick O'Hare, adding that it also served as "an excuse to do some selling."

National Securities analyst Art Hogan noted that the report comes during a week "when the market was already taking profits."

Among individual companies reporting results, big movers included Dow, which plunged 6.0 percent, American Airlines, which lost 4.5 percent and AT&T, which gained 4.2 percent. (AFP)