Friday, July 2, 2010

Record Tax Hikes are Right Around the Corner

Just a quick blurb tonight folks.

I wanted to share the new taxes hikes that are set to go into effect starting next year.

A few Highlights(or should I say lowlights):

Taxes on dividends will rise from 15% up to 39.6%!

Personal income taxes will rise no matter what tax bracket you are in:

Here are the increases included in the report above:

"Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:


- The 10% bracket rises to an expanded 15%

- The 25% bracket rises to 28%

- The 28% bracket rises to 31%

- The 33% bracket rises to 36%

- The 35% bracket rises to 39.6%


Income taxes will rise o"

Quick Take:

They always say the stock market is 6 months forward looking.  Perhaps this 2011 tax hike is why stocks took a faceplant this week. 

Folks, how on earth our senior citizens going to survive when they lose an additional 30% of their dividend income? 

Also:  What effect is this going to have on dividend paying stocks?

The pressure on the market is bad enough as it is!  This is guaranteed to trigger another viscous round of selling at some point before the end of the year as desperate retirees sell stocks and scramble for alternatives.

God help us if the interest rates on treasuries rise up to 6% or so by the end of the year due to to our rising deficits.  The senior citizens in this country will bail out of the stock market faster than the Fed bailed out AIG when the financial system was about to collapse.

Remember, many retirees survive on dividend income.  Also: as the baby boomers retire their investing habits are going to have an even more dramatic effect on all markets moving forward.

Additionally:

The income tax increases are also going to kill small businesses.  Many will reign in hiring as a result at a time when we need jobs more then ever.

When it comes to we the people: The tax increases will be devestaing.  I expect  to see another wave of personal bankruptcies as the debt knoose tightens around the neck of our citizens.  

Most of the debt slaves in this country are hanging on by a thread as they try and pay their bloated mortgages every month.  This will tip many over the edge

Higher taxes will also be a huge blow for consumer spending as disposable income dries up.  This is not good when you have a consumer driven economy!

The Bottom Line

The timing of this is absolutely awful.  The markets losing streak has been amazing. We haven't seen one bounce.  Not one!  I expect to see some type counter trend rally next week(let's all hope). 

Folks: If we don't see a rally then the risk of a collapse has to seriously be put on the table.

Perhaps we shouldn't be surprised by the price action that was seen on Wall St this week.  The emperor has no clothes and it appears the sheeple are finally realizing it. 

The collapsing of the stock market has never been a question mark for me as long as we failed to acknowledge our problems. Palying "hide the sausage" has been a hostorical failure just like it was in Japan. 

The economy will not turn around until the losses are taken  and the excesses of the 30 year credit boom have been purged. 

The government has chosen denial over prudence and we are all now paying the price.

What has surprised me is the speed in which this is all happening.  Now could this just be another headfake where the bulls buy on the dips which delays our day of reckoning?  Sure!  However, the catastrophic popping of the debt bubble is not in question if we fail to make dramatic changes.

The challenges that we face us as we head into 2011 are absolutely mind numbing.  Get prepared folks.  Pay off your debts and get liquid.
Have a happy 4th of July and enjoy the fireworks! 

4 comments:

getyourselfconnected said...

F#ck

sorry to be blunt.

Jeff said...

My thoughts exactly Get!

Had no clue it was going yo be that bad.

tondic said...

"They always say the stock market is 6 months forward looking. Perhaps this 2011 tax hike is why stocks took a faceplant this week."

Unlikely. When the tax rates were cut from the old levels in 2003, congress demanded (and got) a sunset provision effective 2011. Early on, there was some speculation that the tax cuts would become permanent, but that was always debatable.

The final nail in the coffin was when Obama was elected, who campaigned upon letting the bush tax cuts sunset.

True, there were some minor changes in late 2008 as a result of the EESA, but again, they were well known since late 2008.

Jeff said...

Tondic

Good Points.

I guess my point is the public has a tendency to stick their heads in the sand rather than face the music until they are forced too.

Obama is slowly turning into a nightmare president.

I gave the guy a fair chance but his decions have been a disaster IMO.

He is a one termer for sure if we continue down this path.