Monday, December 13, 2010

Upcoming Senate Tax Vote: What it could mean for you

The Senate is scheduled to vote on whether to extend the already existing tax cuts that former President Bush implemented during his term.

Most of you know--by now--that everyone already has this tax break extended, except for people making $250K/year or more.

The people AGAINST it want the "rich" to help buoy the economy since they, theoretically, HAVE the money to be able to afford to contribute. (This is NOT always true, by the way.)

The people FOR the extension is that the "rich" help provide people with jobs. So we need to keep money in their hands to continue creating jobs.

I'm not anything close to being a tax expert, but I'm not sure that Congress is focusing on the right measure here. The "job creators" generally are
  • People who file a Schedule C Form (owners of companies where the money goes directly to them)
  • People who file a Schedule E Tax Form (either owners of partnerships or investors in them)
  • Corporations
The high-priced CEO of a large company is not "creating" jobs any more than another person sitting in that position. That CEO is probably getting paid over $250K (the income bracket under discussion), but he or she is not really creating any jobs.

Even so, most people have the belief that the tax break passage is a vote either FOR or AGAINST "the rich."

This vote should have an impact on the stock market--SHORT TERM.

Why only in the short term?

We are toward the end of the year. During this time of year, many people very specifically either
  • SELL off stock today to get TAX BREAKS for THIS year (if they hold a "losing" stock position)
  • HOLD off selling stock until after the New Year to POSTPONE paying taxes until NEXT year (if they hold "profitable" stock position)
So this is the time of year that people are more likely to base buying or selling decisions on "tax timing" than basing these decisions upon the stock prices or company performances.

I'm guessing that the vote will affect the market for a few days, at the most. The taxes WE have to pay mean a lot more to us than the taxes the "rich" have to pay.

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