Yahoo Finance Bitcoin tumbles after reports Joe Biden will raise taxes on rich
Speculators in Bitcoin have been left nursing heavy losses after reports Joe Biden is planning to raise taxes on the wealthiest Americans to tackle inequality and finance trillions of dollars in higher social spending.
The cryptocurrency price fell more than 6% to below $50,000 (£36,000) a bitcoin, hitting the lowest level since early March, as the White House puts the finishing touches on plans to almost double the rate of capital gains tax for rich individuals.
For those earning $1m or more, the tax on investment income would rise to 39.6%, up from a current rate of 20%, as part of plans expected to be announced next week. A 3.8% tax on investment income used to fund Obamacare would also be kept in place, meaning the new top rate would be as high as 43.4%.
Biden is also preparing to raise the top marginal income tax rate to 39.6% from 37%, according to reports by the New York Times and Bloomberg News, bringing the levy on investment gains into line with taxes on income.
The UK government was urged to bring taxes on investment into line with rates applied on income by the Office of Tax Simplification last year.
The Biden administration is planning a sweeping overhaul of the US tax system designed to make wealthier individuals and big companies pay more in tax, tackling inequality and helping to foot the bill for the president’s economic agenda.
Wall Street stocks, shares in technology companies and digital assets such as Bitcoin all retreated after the reports late on Thursday. The S&P 500 closed 0.9% down, while the FTSE 100 and European markets traded lower on Friday morning.
Bitcoin had surged to a record high of $64,895 on 14 April, the day of the launch of the US’s largest cryptocurrency exchange, Coinbase, on Wall Street’s tech-heavy Nasdaq stock exchange. The rise for the digital currency also comes as emergency stimulus from the US Federal Reserve and government support schemes during the Covid-19 pandemic help to inflate financial markets.
Analysts said the higher rates could lead to rich individuals selling shares to lock in current rates, while private equity investors and hedge funds would also be affected.
Joshua Mahony, a senior market analyst at the financial trading platform IG, said: “With the past year having seen traders react with glee over repeated bouts of stimulus, traders are gradually seeing the uncomfortable truth that those debts have to be paid one way or another.”
Biden will need the full support of his party to pass the tax plans through Congress, with the president requiring unanimous backing from Democrats against resistance from Republicans.
“This could lead to a situation where the actual implemented tax raise is lower than what is currently being proposed in an effort to compromise with other lawmakers,” said Walid Koudmani, a market analyst at the financial trading platform XTB.
Asked about Biden’s plan and the impact on investors, the White House press secretary, Jen Psaki, said: “His view is that that should be on the backs of the wealthiest Americans who can afford it, and corporations and businesses who can afford it. And his view and the view of our economic team is that that won’t have a negative impact.”
