Biden capital gains tax plan for rich expected to pass, but with some changes

President Joe Biden speaks after a jury reached guilty verdicts in the murder trial of former Minneapolis police officer Derek Chauvin stemming from George Floyd's deadly arrest, in the Cross Hall at the White House in Washington, U.S., April 20, 2021.
Tom Brenner | Reuters

Democrats are expected to raise the capital gains taxes for the wealthy, but the plan is not likely to pass as proposed, policy strategists said.

President Joe Biden has been expected to introduce a higher capital gains tax rate, totaling 43.4% for the wealthiest taxpayers earning $1 million or more, strategists said. However, they do not expect the plan to pass as proposed, and a compromise could reduce the tax rate or increase the income threshold.

Stocks sold off Thursday after an early afternoon news report said Biden would introduce the proposal next week as part of the tax increases to pay for social spending in his "American Families Plan." No matter how the plan is structured, it is expected to result in more stock market selling.

"Certainly, there is a sell first, ask questions later mentality to this," said Brian Gardner, Stifel chief Washington policy strategist. "We don't know the date when it's effective yet. I think that's why we're seeing the reaction right now."