Dow takes sharp dive after reports that Biden plans to double capital gains tax on wealthy

The Dow Jones Industrial Average made a quick turn for the worse Thursday, closing down 321.41 points following reports that President Joe Biden plans to double capital gains taxes on wealthy Americans.

What are the details?

The New York Times reported just before noon that Biden was seeking to raise capital gains on the proceeds of assets like real estate or a stock for Americans earning more than $1 million from 20% to 39.6%. The newspaper stated that the president was seeking to tax the rich to "fund child care and education."

Bloomberg also reported the proposed hike 15 minutes later, noting that under the plan:

For $1 million earners in high-tax states, rates on capital gains could be above 50%. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, it could be 56.7%.

In reaction to Biden's purported proposal, Sen. Chuck Grassley (R-Iowa), a top Republican on the Senate Finance Committee told the outlet, "It's going to cut down on investment and cause unemployment."

Pointing to the 2017 tax cuts under President Donald Trump, he added, "If it ain't broke, don't fix it."

Jack Ablin, Cresset Capital Management's founding partner and CIO, told CNBC, "Biden's proposal effectively doubles the capital gains tax rate on $1 million income earners. That's a sizable cost increase to long-term investors. Expect selling this year if investors sense the proposal has a chance of becoming law next year."

What did Jen Psaki say?

During a media briefing in the afternoon, a correspondent pointed out to White House press secretary Jen Psaki that "the Dow is down about 350 points on reports that the Biden administration is going to propose doubling, essentially, the capital gains rate for high-income Americans."

The journalist asked, "Can you tell us any more about that plan, and do you have any concerns that that would discourage long-term investing?"

Psaki said that the administration was still working out the details on how to pay for Biden's tax hikes for funding his forthcoming initiatives, but explained, "The president's calculation is that there's a need to modernize our infrastructure, there's a need to invest in child care, there's a need to invest in early childhood education, and making our kids and the workers of the next generation more competitive."

"His view," she reiterated, "is that that should be on the backs — that can be on the backs — of the wealthiest Americans who can afford it."

She added that the view of the administration "is that that won't have a negative impact."