Wealthy Dump Assets Amid Worries About Going Over 'Cliff'

Robert Frank
12 Nov 2012

For many of the wealthy, 2012 is becoming a good year to sell…

…If the Bush-era tax cuts expire, taxes on capital gains would revert back to its previous rate of 20 percent from its current 15 percent. Another 5 percent may be added from health-care levies and changes in itemized deductions, bringing the rate to 25 percent for many high earners.

Taxes on dividends could go from 15 percent to over 43 percent. And the estate tax could go from 35 percent on estates worth more than $5 million to 55 percent on estates over $1 million.

As a result, the wealthy are taking a close look at all of their assets to see what could or should be sold off now to avoid potentially higher taxes next year.

The most noticeable sell-off has been in stocks. Wealth managers say many of their clients who have large gains on stocks are selling them now, or selling them or buying them back again to create a higher basis (and thus a lower tax bill later).

Since the wealthiest one percent of U.S. households control more than half of the stocks in the United States, their selling and buying can have strong ripple effects on the market.

Bankers say owners of private businesses are also pressing to sell their companies to ahead of a possible tax hike. If an entrepreneur, for instance, sells a company for $100 million, they could pay $10 million less in taxes than if they sold in 2013….

…Roberton Williams of the Tax Policy Center said the direct impact of all this front-loading is hard to determine, since there are so many other factors in the economy. But he said that a rise in wealthy sellers could put pressure on asset prices and stocks, at least in the short term.

“This could depress asset values,” he said…

Read the complete article at CNBC.

Related: Marc Faber Predicts Market To Tank 20% In Meltdown

Informed citizens brace for meltdown 

…Contrary to popular perception, these mind boggling increases in taxes on the wealthy do not have the expected effect. Politicians like Obama, Harry Reid, Nancy Pelosi, and others claim that the government needs the added revenue in order to address the massive debt load. But in reality such tax increases historically have resulted in decreased revenue for government. The reason? When the wealthy are taxed too much, they pull out of the markets, meaning that everything down the line is negatively impacted. The value of stocks, bonds, and property plummets. New jobs dry up, and workers get laid off. Businesses have a tough time making a profit due to the fact that the taxes collected from them by the government make it impossible for them to invest in expansion, new technology, and jobs.

Thus, when the wealthy pull their money out of these things, there is less money available for government to tax. The result, therefore, is an even deadlier national debt load.

Already we are hearing that major businesses across the country are set for major layoffs of workers due to the coming meltdown.

Obama has made it abundantly clear over the past four years that despite his public rhetoric he has little or no desire to cut government spending to a level that will truly impact the national debt. One can only assume that this basic political philosophy will continue over the next four years…

Update: Obama Promises MoveOn.org: We’ll Raise Taxes

…According to Justin Ruben, MoveOn.org’s political action executive director, “MoveOn’s 7 million members will be pleased to know that President Obama today strongly reiterated his steadfast commitment to ensuring that the Bush tax cuts for the wealthiest 2 percent finally end December 31—and to protecting the middle class in the process.”

This is something new. During the campaign, President Obama promised that he would not increase taxes for those making beneath $250,000 per year. He reiterated that promise last week. But the top 2% of income earners include individuals earning more than $200,000. Obama’s bar is getting lower and lower. Those earning $200,000 are hardly millionaires. That’s a low-level lawyer at a major law firm. Or an average orthodontist.

But President Obama kept the MoveOn.org crowd happy…

Obama Meets With Union Leaders and MoveOn.org Today at White House


Update 2: You’ve Only Got Yourself To Blame

Update 3: Mark Levin: Fiscal cliff? We’re facing the COLLAPSE of our society and Republicans need to “wake the hell up”

Update 4Marc Faber on CNBC: Global Markets Will “Implode” at some Point; Collapse of Society Coming in 5-10 Years

Here is CNBC video of Marc Faber talking about the “pain” ahead post-re-election of Barack Obama because we are unwilling to do what is necessary to get the nation’s debt under control. Faber said he believes global markets will “implode” at some point…

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