Standing at the fiscal cliff

At the stroke of midnight, unless something is done in the next few hours, we face the first option of screwing in that our taxes return to those charged by Bill Clinton. (The second, third, etc. options come in whatever deals are struck by our illustrious representatives in Washington.)

But not all things have been placed on the table; one in particular has the potential to slow investment down to a crawl. Truth be told, the changes in rates aren’t all that significant to the vast majority of taxpayers although any extra money vacuumed out of their wallets is too much in my estimation. No, the real issue is going to be the sharp rise in taxation on capital gains.

A couple weeks ago I did a piece on the Patriot Post which discussed the lengths some companies are taking to cushion the blow for certain investors. (Interestingly enough, the two examples I used were both leftward-leaning entities.) But Costco and the Washington Post Company were moving their dividends up to 2012 to avoid the prospect of a 43.4 cent tax per dollar of return. (The tax rate on dividends will actually by 39.6 cents, but don’t forget Obamacare is tacking on a 3.8 cent per dollar surcharge, beginning tomorrow.) It will be interesting to see where stocks go from here; they were up today on the assumption a deal was nigh. Perhaps the 20 percent rate being discussed is in play – still a rise but not as much as once thought. (With the Obamacare tax, though, it’s still a rate increase well over 50 percent.)

So – how much do you want to bet we’ll be having this same discussion in a year or two? In the meantime, on that note: happy new year!