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I’ve seen the “one person selling lots of stocks in an otherwise healthy company to raise cash tanks the market” claim repeated so many places as one of these “everyone knows this, it’s obvious” facts, and yet it never seems to play out that way to any meaningful degree. It’s one of the many Big Lies of capitalism that we’ve just been tricked into accepting.
You might occasionally see a minor one day dip of a few percent at worst, and even then they’re usually caused by some underlying issue unrelated to one person’s need for liquidity.
I think it's that a large pool of stocks going up for sale with no context seems suspicious. Stocks are inherently a gamble on the future price will be higher than current price, so by selling you're withdrawing your bet which could be interpreted as you knowing that the bet won't pay off and that other ~~gamblers~~ owners paying attention might panic and try and sell too, which then could trigger a feedback loop. New buyers might see a bunch of people trying to sell and then think to themselves the bet isn't a good one and won't buy, making the current sellers reduce the price in the hopes of actually selling off and not left holding the bag
A lot of "could" and "might* in that scenario, and it does play out from time to time (see NFTs, 2008 housing market). It also won't play out if the reason for the sale is known and isn't based on lost faith of the bet
The taxes aren’t on one person though, they’re on everyone. Everyone looking to sell their stocks at tax time => price goes down because no one is looking to buy.
If their portfolios were properly diversified, you wouldn't see that effect on the overall market.