How will budget talks affect your tax rate?
Do you want to pay higher taxes? I know I don’t! But if you happen to be among the fortunate few that earn more than $250,000 a year, new polls suggest your neighbors want you to pay up.
According to the latest New York Times/CBS News poll, 72% of adults approve of increasing federal taxes on households making more than $250,000 starting in 2013. At the same time, a separate poll from ABC News and the Washington Post showed that 72% of respondents want to raise taxes on the rich to help reduce the federal deficit. The desire to see America’s wealthiest citizens paying higher taxes even spans political boundaries, with 55% of Republicans, 74% of independents and 83% of Democrats all calling for an increase.
So will increasing taxes on the rich fix the budget? This is not a question we will even try to answer in this brief commentary. It is worth noting however, that less than 3% of all American households earn more than $250,000 per year, and as it stands today, the U.S. tax system is already highly disproportionate. The top 1% of income earners pay 40% of all federal income taxes, the bottom 50% pay only 3%, and more than one-third of U.S. earners pay no federal income tax at all.
As new data from the Congressional Budget Office shows, raising all six income tax rates by 1 percentage point would yield an additional $480 billion over 10 years, while raising the top two rates by 1 percentage point would yield only $115 billion. So what is better: Increasing taxes a little bit for everyone or a lot for just a few? Perhaps another question to ask is whether America has a spending problem or a revenue problem? Again, these are not questions we can answer in this forum.
The point of sharing this information with you is not to fuel a political debate. The nation is already sharply divided on this issue. The reason we draw your attention to this matter is because directly or indirectly, it affects every American. And, at the rate things are going, there is a good chance we will see higher taxes in the future. Taking into consideration how taxes can affect your investments, both now and in the future, is an important element to preparing sound financial strategies. As always, we will monitor how the landscape changes and do our best to help you adapt to changing conditions.
ECONOMIC CALENDAR: Tuesday – S&P Case-Shiller Home Price Index, Consumer Confidence
Wednesday – Durable Goods Orders, FOMC Meeting Announcement
Thursday – GDC, Jobless Claims, Pending Home Sales Index Friday – Personal Income and Outlays, Chicago PMI, Consumer Sentiment, Ben Bernanke Speaks
HEADLINES:
U.S. stocks advanced for a third straight session Thursday, with the Dow closing at almost a 3-year high following a slew of strong earnings.
Sales of existing homes increased in March. Home sales rose at an annual rate of 5.1 million in March, up 3.7% from February, the National Association of Realtors said Wednesday. However, sales were 6.3% lower than in March 2010.
With a 4% gain so far this month, following March’s 10% rise, benchmark oil futures are keeping up with a long-running trend – advancing in March, April and May before taking a breather in June.
Toyota Motor Corp.'s global car production, disrupted by parts shortages from Japan's earthquake and tsunami, won't return to normal until November or December, imperiling its spot as the world's top-selling automaker.
