|
Posted by on July 17, 2008, 8:32 am
On Wed, 16 Jul 2008 23:28:54 -0700, "FrediFizzx"
>Ya think the poli-tics would get a clue and figure out how to spend
>(waste) less money so we don't need higher taxes. But ya certainly
>can't count on that no matter who wins. The best we can hope for as
>far as stocks go is gridlock. Hopefully Iraq will get their act
>together over the next couple of years and we can stop spending so
>much on that.
Iraq won't "get their act together" until the oil is all gone.
Hal
>
>Fred
>
>http://www.ft.com/cms/s/0/5c1fd8be-4faa-11dd-b050-000077b07658.html
>
>Rob Arnott: Prepare for higher taxes and ways to reduce the pain
>
>By Rob Arnott
>
>Published: July 12 2008 04:03 | Last updated: July 12 2008 04:03
>
>There’s an old joke about a bitter man who is visited by a genie. The
>genie says: “I’ll grant your fondest wish, but there’s a catch. I’ll
>grant whatever you ask for, whether it’s gold or happiness or love,
>but I’ll give your neighbour twice what I give you.” The man thinks
>for a moment and says: “Pluck out one of my eyes.”
>
>This is the essence of the redistributive economics central to the
>upcoming US election. One side says: “The rich make more than they
>need, so we should boost taxes for anyone who makes more than me, to
>fund worthy causes.” In effect, let’s pluck out our boss’s eyes, even
>if it costs one of our own. The other side says: “These folks create
>the jobs and already pay most of the taxes, so let’s not reduce their
>incentives to keep doing so.”
>
>High taxes are a near certainty in 2009, no matter who wins in 2008.
>The prudent investor would do well to study history to learn how to
>mitigate the damage and, perhaps, even prosper.
>
>Consider the proposed 39.6 per cent top income tax; plus more than 16
>per cent uncapped combined employer/employee Medicare and social
>security tax; plus state and local taxes that can exceed 10 per cent
>in high-tax states such as California and New York; plus sales tax and
>property tax; plus the phase-out of even these deductions. For FT
>readers, the total can quickly exceed 60 per cent.
>
>The highest tax rates for nations in the Organisation for Economic Co-
>operation and Development are in Denmark, Sweden and France, all of
>which had top marginal rates of 55-60 per cent for 2006; the OECD
>average was 42 per cent. Current proposals would lift us from slightly
>below this average to, quite possibly, the highest tax regime in the
>OECD.
>
>Higher taxes reduce gross domestic product, but libertarians like to
>argue that higher taxes don’t even raise tax receipts, which is their
>core goal. Our genie at work. Even as a libertarian, I have to admit
>this isn’t quite true.
>
>Over the past 60 years, the top income tax rate in the US has been
>increased six times and lowered 10 times. How different were the
>results? GDP grew by an average of 3.7 per cent for the two years
>after a tax cut, and rose a scant 0.8 per cent after a tax increase.
>That latter figure is negative in per-capita terms; folks are getting
>poorer when taxes are raised, even before paying the higher rates.
>
>Still, when income taxes were raised, federal tax receipts as a
>percentage of a skinnier GDP rose by 0.8 per cent each year over the
>next two years; when taxes were cut, taxes as a percentage of a
>soaring GDP fell by 0.7 per cent a year. So, while higher taxes damage
>the economy far more than they raise tax receipts, they do raise a
>little more money for the government.
>
>There’s more. The top tax bracket over the past 60 years has ranged
>from 28 per cent to 91 per cent. Yet, federal tax receipts as a
>percentage of GDP stayed in a range just one tenth as wide, from 14
>per cent to 21 per cent. Even more surprising, tax receipts were at
>the low end of this range only when the top tax bracket exceeded 80
>per cent. So much for the very highest taxes raising more revenues.
>
>. . .
>
>What about the impact on our investments? Higher or lower income taxes
>have surprisingly little impact on pre-tax stock returns (though the
>impact on after-tax returns is obvious). But the impact on bonds is
>stark. Tax cuts have historically led to 5.5 per cent real returns –
>over and above inflation – on bonds for the next two years, while tax
>rises led to -0.7 per cent real returns – losing ground net of
>inflation, even before taxes. That’s an impressive 6 per cent return
>gap. The markets also anticipated these tax changes: the year before
>tax cuts or increases saw a nearly identical gap in real bond market
>returns.
>
>The picture is different for capital gains taxes. After these have
>been cut, stocks produced 12.8 per cent real returns and bonds beat
>inflation by 3.7 per cent, over the next two years. When such taxes
>have been raised, the next two years have produced drastically lower
>real returns of just 1.6 per cent and 0.5 per cent, respectively.
>
>Finally, what of the overall level of taxes? When combined income and
>capital gains tax rates have been above the 60-year average,
>subsequent real returns on bonds have been a shocking 6.5 per cent
>lower than in the lower-tax years, and real returns on stocks have
>been 1.2 per cent a year less. The after-tax return differences are
>even more stark, of course.
>
>This is daunting evidence, which no thoughtful investor should ignore
>– especially in 2008. With higher taxes looming, look away from
>mainstream stocks and bonds.
| 
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap