Lawmakers in the state of Washington last week voted to push up capital gains tax rate on the sale of bonds and stocks over $250,000. At the national US level, wealth advisors are bracing for a CGT hike. Reports of leaked White House proposals hit US equities on Thursday before recovering on Friday. 

The Washington state measure passed on a 52-46 vote in the House after nearly two hours of debate in the Democratic-led chamber (source: Associated Press, April 22). 

At a time when lawmakers in Washington DC and the Biden administration are eyeing a big hike to CGT, the state of Washington’s vote adds to worries about a rising tide of taxes on the “rich”. Elsewhere, Bloomberg and others reported that Biden administration officials leaked that they will soon propose raising the federal tax on capital gains to 43.4 per cent from a top rate of 23.8 per cent.

With public finances around the world hammered by COVID-19, an obvious target for governments are high net worth and ultra-HNW individuals, such as those who've invested in Big Tech firms benefiting from the shift to home working and remote business amidst the pandemic. Even before the pandemic, however, the wealth distribution impact of central bank quantitative easing, along with globalisation's impact on some sectors, made inequality a political hot issue. 

Last Thursday, when rumours broke that there could be a large rise to CGT, US equities fell sharply - about -0.9 per cent - before they recovered on Friday: The DJIA Index rose 0.67 per cent; the Nasdaq was up 1.4 per cent and the S&P 500 Index rose 1,09 per cent.

Unnamed sources told Bloomberg that the administration wants to impose CGT on taxpayers who earn more than $1 million at the personal income tax rate, which he also wants to raise to 39.6 per cent from 37 per cent. With some states also imposing CGT on gains, such as the 13.3 per cent rate in California and 11.85 per cent in New York – it means that the coastal financial powerhouses might have rates approaching 60 per cent in total.

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“One of the biggest sources of angst among equity institutional investors is the prospect that US corporate taxes could increase, according to an RBC Capital Markets survey. Such tax hikes are included in the infrastructure bill proposed by President Joe Biden. Concerns about this have even overshadowed the potential benefits of the sweeping $2 trillion, multiyear infrastructure package,” RBC said. 

Earlier last week, a tax and migration advisor told this news service that he predicts the number of Americans seeking to renounce their citizenship and leave the US will rise "dramatically," with tax hikes playing an important role in those decisions.