Obama Tax Plan: Uncertainty Weighing on Market

Many factors are weighing on the stock market. One of the factors likely impacting the markets is the potential drag Barack Obama's tax plan would have on businesses and U.S. investors.

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 According to The Election Choice: Taxes in Saturday's Wall Street Journal:

Mr. Obama would roll back the 2001 and 2003 tax cuts for taxpayers in the top two brackets, raising the top two marginal rates of income tax to 36% and 39.6% from 33% and 35%. The 33% rate begins to hit this year at incomes of $164,550 for an individual and $200,300 for joint filers.

If you're an individual with taxable income of $164,550, you will pay more taxes.

Particularly of concern is Mr. Obama's desire to eliminate the cap on payroll taxes. This has negative consequences for small business and it is small business that create most new jobs in the U.S.

Mr. Obama's most dramatic departure from current tax policy is his promise to lift the cap on income on which the Social Security payroll tax is applied.... it's unclear if that higher rate would apply to the employee, the employer, or both. ( The Election Choice: Taxes, October 25, 2008, WSJ)

If Mr. Obama's plan is instituted as proposed, a further slowing of the U.S. economy is likely. A slowing U.S. will have implications for global markets as well.

Updated: October 28 at 9:50 a.m.:

And this additional concern with respect to wealth redistribution.

Source:

• The Election Choice: Taxes, By: Brian M. Carney, The Wall Street Journal, October 25, 2008.

 

Comments

[PastTense:]

But an annual federal deficit of trillions of dollars a year won't have a negative impact on the economy? (something which will happen in several years with the retirement of the baby boom generation, exploding health care costs, more money for national defense, big bailouts to businesses via crony capitalism, more tax cuts--the McCain/Palin long-term strategy)

2008 Oct 28 11:49 AM

[Lars39:]

Obama's "Spread the Wealth" plan should succeed in speading the wealth and jobs out of the country. But, there will be huge increases in government jobs and entitlements. The wealthy just move money and investments off shore. The very wealthy pay little taxes because they can keep their income stream low, while having $billions in net worth.

2008 Oct 28 05:35 PM

[farmer448:]

Tax reduction is a bogus issue. Trickle down supply side macro economics failed to truely improve the US economy.

Economically these are the macro issues the politicians need to address:
Trying to align federal spending with revenue
(while dealing with recession);
The continued trade deficeit of the United States
(30+years out of balance);
Corporate and individual Gaming the fenderal tax system;
Social Security Insurance is not a pension but a safety net;
Changing the federal/state election systems
(Voters should be the ones to donate money to elections)
(Corporations/Partners... are not "People" by economic
structures)
Moving from rule based accounting back to Principles based Accounting

The problem problem both financially and politically is a complete lack of trust in the systems and the leadership. It is time to stop looking back and or thinking that assigning blame will solve the trust problem. We need to look to the future, what needs to be fixed and options in fixing it.
Finger pointing has never solved a problem

2008 Oct 29 09:26 AM

[LeoTheDog:]

Apparently the overwhelmingly stronger stock market performance under Democratic presidents compared to Republican presidents is not enough evidence for the author.

Barack Obama's tax plan is less taxing, so to speak, than Bill Clinton's in the 90's (in that he seeks only to restore the Clinton era tax rates to the top 5%, not all taxpayers). Just a question for the author: how well has your portfolio done in the last 8 years compared to the previous 8?

2008 Oct 29 12:15 PM

[carey_jim:]

You are forgetting that election promises are often broken.

Remember father George Bush's slogan "Read my lips ...." (He then mouthed the words "no more taxes.") He lied.

Economic political realities always dominate pre-election political rhetoric.

2008 Oct 29 01:29 PM

[Crisis Stra...:]

Setting aside whether it is moral or equitable to force a small fraction of the population to essentially pay for the whole cost of government, much of which entails the shuffling of checks to purchase votes of various aggrieved groups, there is a bigger question. Can it be wise for the whole fiscal regime to stand on the shoulders of a small group, like a pyramid tottering on its point, so that any tribulation which undermines the prosperity of those who pay would promise to bankrupt the state?

www.contrarianprofits....

2008 Nov 12 02:33 PM