Biden plans to impose a "rich tax", the three major U.S. stock indexes closed down collectively, and cryptocurrencies may become a safe haven for the rich?

The Biden administration plans to significantly increase taxes on high-income people, Bloomberg reported on Thursday. People familiar with the matter revealed that US President Biden will propose to nearly double the capital gains tax rate for the rich to 39.6%, which, combined with the existing surtax on investment income, means that the federal tax rate for investors could be as high as 43.4%.

Capital gains tax is paid when an asset is sold and applies to the value of the asset from the time it is purchased to the time it is sold. For a long time, the tax rate on financial asset income has generally been lower than the tax rate on wage and salary income. Biden's tax policy may change this situation.

Biden campaigned on balancing capital gains and income tax rates for the wealthy, saying it was unfair that many of them paid lower tax rates than middle-class workers. A Biden administration would retain the existing 3.8% surtax on investment income, which was used to fund Obamacare, people familiar with the matter said.

For New Yorkers, the combined state and federal capital gains rates could be as high as 52.22%. For Californians, the rate could be as high as 56.7%.

"The Biden proposal effectively doubles the capital gains tax rate," said Jack Ablin, founding partner and CIO of Cresset Capital Management. "That's a huge cost increase for long-term investors."

White House press secretary Jen Psaki, asked about the capital gains tax plan at a press conference on Thursday, said they were still working out the final details. Biden is expected to release the proposal next week.

According to Reuters, the proposal to increase capital gains taxes on the wealthy is mainly to provide financial support for the upcoming American Families Plan, which is expected to be worth around US$1 trillion, or about RMB 6.5 trillion.

According to CNBC, the plan will be separate from the $2.3 trillion (about 15 trillion yuan) infrastructure plan, which was previously announced with the main source of funding coming from raising the corporate tax rate to 28%.

The news caused all three major U.S. stock indexes to fall. As of Thursday's close, the Dow Jones Industrial Average fell 321.41 points, or about 1%, to 33,815.9 points; the S&P 500 fell 0.9% to 4,134.98 points; and the Nasdaq fell 0.9% to 13,818.41 points.

On the one hand, the market is worried that the rich may sell their stocks before the capital gains tax rate increases; on the other hand, the market expects that if the tax rate is really increased, the enthusiasm of the rich to trade stocks will be greatly reduced.

Bitcoin fell as much as 8% to near a one-month low. U.S. investors who invest in crypto assets, which have risen about 80% since December, face the risk of capital gains taxes if they sell cryptocurrencies after holding them for more than a year. The IRS has also stepped up its tax collection on the sale of crypto assets.

In addition, in terms of tax avoidance by the rich, before the IRS revises the relevant regulations, if you hold Bitcoin that has appreciated significantly, then you may not be subject to corresponding taxes before selling the Bitcoin.

Cryptocurrencies such as Bitcoin still have the potential to become asset safe havens. If the government and regulatory authorities adopt a loose policy on cryptocurrencies in the future, wealthy people will still choose cryptocurrencies such as Bitcoin, further pushing up the price of cryptocurrencies. However, if the government imposes strict tax regulations on cryptocurrencies, it may significantly reduce the interest of these wealthy people in cryptocurrencies such as Bitcoin, which is not conducive to the continuation of the bull market.