The Ignorant Investor

Ignorance Can't Stand in the Way of My Opinion

Thursday, February 09, 2006

 

Capital Gains Tax Probably Going Up in 2008

There's a story in today's Wall Street Journal about maneuvering in the Senate over extending Bush's capital gains and dividends tax rate cuts past 2008 and on to 2010.

My opinion, it ain't gonna happen. Right now Congress and the White House have zero credibility on the deficit and spending. Someone's taxes are going to go up to cover the shortfall, and it's only a question of who's going to get hit.

Most low and middle-income people are participating in the stock market through tax-deferred retirement plans, if they're in the market at all. So the republicans can't work their "everyone wants a tax cut" mantra to build up support for their position on the cap gains and dividends tax issue. People with money in the market outside retirement plans, me included, can raise all kinds of reasons for keeping cap gains and dividends taxes low, but I don't see those carrying weight in Washington right now. Letting the Bush cuts expire is the parth of least political resistance towards bringing in extra revenue.

This gives me a reason to sell some individual stocks that have given me huge unrealized long term gains, among them GE, BP, and Glaxo, and move the money into various index products that I've been looking at. I can use the push, frankly. Right now I'm suffused with investor ennui.

Overall, I don't see a cap gains/dividend tax increase as a bad thing so long as its part of a deficit reduction program. We've got to get the deficit under control to maintain long-term stability and growth in the markets. At least, that's my own mantra. The one I hum to myself as I put my head down on the pillow at night. Beats the republican's "any tax cut is a good tax cut" mantra hands down, doesn't it?

No? You think it sucks? Oh, well. No pleasing everybody.

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