Everything is going to be okay. It always has been.
This is Bloomberg Opinion Today, a capital-gains tax plan of Bloomberg Opinion’s opinions. Sign up here. There was a moment before Donald Trump was elected when people thought his election would crash the stock market. Then he was elected, and people quickly realized he would lead a unified Republican government that would cut taxes, and stocks were happy again. Market people get it wrong sometimes is the point here, and those times often involve taxes somehow. Yesterday stocks had themselves a little panic attack on news that Trump’s replacement, who has also not yet crashed the stock market, was going to raise capital-gains taxes. This should have surprised nobody, as President Joe Biden has promised for many months he would do just this, notes John Authers. Also we defy you to pinpoint the impact of capital-gains tax increases, or cuts, anywhere on this chart of the stock market: You can’t do it! In fact, if correlation were causation, then that series of tax cuts around the turn of the century apparently hurt the stock market. Of course that’s ridiculous. But so too is the idea that higher capital-gains tax rates will necessarily hurt the market. Biden’s plan targets the top 0.3% of earners. The rest of us should be OK. What they will hurt is actively managed mutual funds, which are subject to capital-gains taxes, writes Nir Kaissar. Passive investments such as ETFs will now get even more customers. This is terrible news for active fund managers, but wonderful news for all the rest of us. We’ll be better off in cheaper investments that don’t constantly fail to beat benchmarks. You can even build ETFs to mimic active managers, if that’s your thing. To be fair, everybody’s extra-antsy about taxes here in Wall Street’s metropolitan vicinity. Only four years ago, as part of that same tax plan Wall Street cheered, Congress capped the SALT deduction, a boon to those of us who own houses in high-tax areas.
