The U.S. President, Barack Obama, repeated his attempt to introduce the extension of the Bush Tax cuts for the citizens of the middle class on July 9. This measure will not concern 2% of families earning over $250,000. Mr. Obama believes that it is about time to cancel the tax cuts for the most prosperous citizens of the USA. According to numerous surveys, the American population agrees with him on the idea to levy bigger taxes on the upper class of the country.
However, Josh Brown, the Fusion Analytics deputy president and the Reformed Broker blog author, states that middle class people may face higher taxes if the President does not take any measures before the beginning of 2013. Mr. Brown is anxious about the sharp increase of taxes imposed on capital gains and dividends as they may become a part of the ‘fiscal cliff’, i.e. the conundrum the U.S. government will probably experience at the end of 2012.
If congressmen fail to extend the Bush Tax cuts, the rate of capital gains is expected to increase from 15% to 23.8% in 2013. As for dividend taxes, the ‘Americans for Tax Reform’ analysis shows that they will also rise from 15% to 43.4%. If you take a ‘blue chips’ portfolio with a good revenue of 3% – 4% and triple tax on that yield, you will have a double financial restraint on many boomers seeking to cobble together a retirement.
Josh Brown also says that it is still unknown how serious Mr. Obama is about the extension of those cuts as his several endeavors to introduce it have brought no results. The financial restraint will eliminate incomes from Treasuries and CDs occurring primarily due to the zero interest rate policy introduced by the Federal Reserve System.