The S&P 500 erased earlier gains and closed 0.9% lower at 4,134.98, while the Nasdaq Composite slid 0.9% to 13,818.41.
The proposal would hike the capital gains rate to 39.6% for those earning $1 million or more, up from 20% currently, according to Bloomberg News, citing people familiar with the matter.
“Biden’s proposal effectively doubles the capital gains tax rate on $1 million income earners,” said Jack Ablin, Cresset Capital Management’s founding partner and CIO.
Growth stocks, which could come under selling pressure on higher capital gains taxes, led the intraday decline on Thursday with shares of Tesla and Amazon falling 3.3% and 1.6% respectively.
“Markets are highly concentrated in a small number of growth names,” said Mark Yusko, CEO & CIO of Morgan Creek Capital Management.
Nonetheless, the firm raised its year-end S&P 500 target to 4,400, which would translate into a 6% gain from here.
Also on Thursday, the Republican party set forth its counteroffer to Biden’s $2 trillion infrastructure plan.
“I think these are also trial balloons and sort of laying the stake out for future negotiations.