Hedge fund billionaire John Paulson, who made his name betting against the housing market during the financial crisis and who today is a prominent supporter of former President Donald Trump, said a collapse in financial markets and a recession could occur if Vice President Kamala Harris’ proposed tax plans are becoming reality.
“They want to raise the corporate tax rate from 21 to 28%, they want to raise the capital gains tax from 20% to 39% and then they want to add a 25% tax on unrealized capital gains,” Paulson said in an interview on CNBC’s “Money Movers ” on Friday with Sara Eisen. “I think if they implement those policies, we’ll see a crash in the markets, there’s no doubt about that.”
The Democratic presidential candidate proposed a 28% tax on long-term capital gains on every household with an annual income of $1 million or more, lower than the 39.6% rate President Joe Biden set in his FY 2025 budget .
Meanwhile, Harris previously supported Biden’s proposed tax increases, including a 25% tax on unrealized profits on households worth at least $100 million, known as the billionaire minimum tax. However, people close to the Harris campaign, including investor Mark Cuban, have said she has no interest in taxing unrealized profits and there are doubts whether such a plan could pass Congress.
Paulson rose to fame and made a fortune after making a huge bet on mortgage bonds using credit default swaps before the financial crisis. The founder and president of family office Paulson & Co. has been a major donor to Trump’s 2024 presidential campaign. reportedly advised him about the idea of creating a US sovereign wealth fund.
The 68-year-old investor believes that the economy could also quickly enter a recession if the specific plan to tax unrealized profits were implemented.
“If the Biden-Harris team comes in, and they implement what’s in their platform, which is a tax on unrealized profits, it will lead to a massive sell-off of homes, of stocks, of businesses, of art and that would … immediately put us into a recession, so hopefully they won’t pursue that if they get elected,” he said.
Some Wall Street economists and strategists believe that raising corporate taxes from the 21% where Trump cut them could hurt S&P 500 corporate profits and depress stock prices, but no one from the big companies has said this would cause a decline of the magnitude Paulson describes.
There is also some concern that Trump’s economic plans may not be as market-friendly as Paulson believes, as proposed tariffs reignite inflation and more tax cuts widen the budget deficit.
Paulson, who has Trump reportedly talked about as Treasury Secretary in a second administration, said in the CNBC interview that he does not believe tariffs would be inflationary if applied correctly. The investor also said the lower taxes would generate economic gains that would help boost revenues and close the deficit gap.