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Hedge fund billionaire John Paulson, known for his successful bets against the housing market during the financial crisis and a vocal supporter of former President Donald Trump, expressed concerns about the potential consequences of Vice President Kamala Harris’ proposed tax plans. Paulson warned that implementing the proposed tax increases, such as raising the corporate tax rate to 28% and the capital gains tax to 39%, along with adding a tax on unrealized capital gains, could lead to a market crash and a recession.

Harris has proposed a 28% tax on long-term capital gains for households earning over $1 million annually, lower than President Joe Biden’s suggested 39.6% rate in his 2025 budget. Additionally, Harris has supported Biden’s proposal for a 25% tax on unrealized gains for households with assets exceeding $100 million. However, there are doubts about the feasibility of taxing unrealized gains and whether such a plan could pass through Congress.

Paulson, who gained fame and fortune for his bets against mortgage bonds before the financial crisis, has been a significant donor to Trump’s presidential campaign. He believes that taxing unrealized gains could trigger massive selling in various asset classes, potentially leading to a recession. While some experts warn that raising the corporate tax rate could impact S&P 500 company earnings and stock prices, the extent of the potential market downturn remains a topic of debate.

Despite Paulson’s optimism about Trump’s economic plans, there are concerns about the impact of proposed tariffs on Inflation and the budget deficit. Paulson dismissed fears of Inflation resulting from tariffs if implemented correctly and argued that lower taxes could stimulate economic growth, subsequently boosting revenues and narrowing the deficit.

Overall, the potential implementation of Harris’ tax proposals raises uncertainties in the financial markets, with Paulson warning of a severe market downturn and a possible recession if these plans are realized.

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