A lot of Americans have heard about the looming "fiscal cliff", but most don't really understand the specifics.
For investors, there are several key changes which will happen unless Congress does something by January 1st.
First of all, the tax rate on capital gains will go from 15 percent to 20 percent. For those with high incomes, the rate will be even higher than that thanks to a tax increase that our politicians managed to sneak into Obamacare. So, some wealthy individuals will see their capitals gains taxed at nearly 24 percent in 2013 unless something is done.
For dividends, the outlook is even more frightening. The tax rate on dividends will increase from 15 percent right now to over 43 percent for the highest income earners.
We have already seen these tax increases play into business decisions that have been made in recent months. For example, it is being reported that George Lucas potentially saved hundreds of millions of dollars in taxes by selling Star Wars to Disney this year rather than next year.
Anyone out there that wants to take advantage of the current tax rates on capital gains and dividend income better do so now, because these tax rates look like they are going to go away and they probably will not be back for a very, very long time.
According to CNBC, this makes the next couple of months an ideal time to dump stocks and other financial assets...
For many of the wealthy, 2012 is becoming a good year to sell.And the truth is that stocks simply did not have much higher that they could possibly go anyway. Anyone that is trying to "get out while the getting is good" should take heed of what Marc Faber recently told CNBC...
They're worried about the "fiscal cliff," which is when tax cuts expire and spending cuts are set to go into effect at the end of the year.
Fearing an increase in capital gains and dividend taxes, many of the rich are unloading stocks, businesses and homes before the end of the year.
"The market is going down because corporate profits will begin to disappoint, the global economy will hardly grow next year or even contract, and that is the reason why stocks, from the highs of September of 1,470 on the S&P, will drop at least 20 percent, in my view."In fact, Faber is absolutely convinced that a full-blown stock market crash is coming no matter what happens with the fiscal cliff...
"I think the whole global financial system will have to be reset and it won’t be reset by central bankers but by imploding markets — either the currency [markets, debt market or stock markets,” he said. “It will happen — it will happen one day and then we’ll be lucky if we still have 50 percent of the asset values that we have today."Politics and economics have always been deeply intertwined. The results of the most recent election are going to have some very deep consequences. Already we have seen a large number of businesses either announce layoffs or that hours for their workers will be cut back. You can find a bunch of tweets from small business owners talking about how they won't be hiring anyone or that they will be forced to reduce hours right here. You can find a bunch of tweets from average citizens all over the country talking about how their hours are already being cut back right here.
With each passing day, our country is getting poorer, it is getting even deeper in debt and our economy is becoming even more unstable. We are on a path that will only lead to total economic disaster, but the American people just voted for more of the same.
So now we will get to see how this all plays out.
Is there anyone out there that is still optimistic about what is coming next for the U.S. economy?