In a move that could have far-reaching implications for investors and the broader financial markets, the Biden administration on Monday proposed raising the capital gains tax rate for individuals earning over $1 million annually from the current 20% to 39.6%. The plan, part of a broader push to fund social and infrastructure spending, has already sent shockwaves through Wall Street. Market reaction was swift. The S&P 500 fell 1.4% in afternoon trading, while the Nasdaq and Dow Jones Industrial Average dropped 1.7% and 1.1%, respectively. Tech and growth stocks, which are often favored by high-earners due to their capital appreciation potential, bore the brunt of the sell-off. "Investors are reassessing their risk exposure in light of this proposal," said Sarah Linton, senior analyst at Barclay Investment Partners. "If passed, this change could significantly alter investment strategies, especially for high-net-worth individuals and family offices." The proposed tax hike is part of a broader fiscal package that includes spending on child care, education, and healthcare. The administration argues that the tax increase will make the system fairer and help reduce the deficit over time. Treasury Secretary Janet Yellen defended the move, stating, “We’re asking the wealthiest Americans to pay a little more to ensure long-term economic sustainability." However, critics argue that such a move could dampen entrepreneurship and discourage investment. Republican lawmakers have already vowed to oppose the measure, with Senate Minority Leader Mitch McConnell calling it “a job-killing tax that punishes success.” Meanwhile, corporate earnings season continues with mixed results. While tech giants like Apple and Microsoft posted strong quarterly profits, several industrial and consumer discretionary companies issued cautious guidance, citing inflation concerns and slowing global demand. Analysts warn that the proposed tax hike, combined with economic uncertainty, could lead to increased market volatility in the coming weeks. Adding to investor anxiety, the Securities and Exchange Commission (SEC) announced on Tuesday that it is expanding its investigation into potential insider trading linked to recent mergers and acquisitions. The SEC said it had identified unusual trading patterns in at least six major deals over the past quarter. Though no charges have been filed, the probe underscores the agency’s renewed focus on market integrity under Chair Gary Gensler. With political battles brewing in Washington and earnings season in full swing, market participants are bracing for a turbulent stretch ahead. "This is a pivotal moment," said Linton. "Policy and politics are once again front and center for investors."