The liberal tax revolt, as the Wall Street Journal is calling it, is a very important topic — especially for investors and small-business entrepreneurs. And for new jobs.
The so-called revolt is comprised of three Democratic senators: Kent Conrad, Evan Bayh, and Ben Nelson. They want to extend all the Bush tax cuts. That includes taxes on the wealthy, or the top personal tax rate, the investment taxes on capital gains and dividends, and the estate tax.So is this revolt a game-changer, or merely wishful thinking?
With a strong pushback against the revolt by President Obama, Treasury man Tim Geithner, and House Speaker Nancy Pelosi, right now it looks like wishful thinking. But with Democrats getting badly paddled in various polls, you never know.
When Tim Geithner told me in a CNBC interview a few weeks ago about his 20-20 rule for the top tax rate on capital gains and dividends, I blogged that this was a good thing — in particular the story for dividend taxes, which could go to 39.6 percent. But no increase at all on investment taxes would be even better.
Let’s say you’re an investor who went long stocks in March 2009 and now has a long-term capital gain. You could sell right now at a 15 percent tax rate before it goes up to 20 percent. In a nutshell, this is the tax-hike story that has hung over the stock market this year like the proverbial Sword of Damocles. Year-end tax-related selling could still be in front of us.
So the liberal tax revolt is a very important issue for investors. It could mean a potential stock market rally in the second half of the year.
It’s also important for job seekers. Just take a look at the new Investor’s Business Daily poll by the accurate surveyor Raghavan Mayur. He notes that the average length of joblessness has soared to over 35 weeks, nearly two-times greater than the previous high for any downturn. And his polling data show that nearly one-half of households can be categorized as “job-sensitive.” That’s a huge number. These are the people who are either looking for work or fear that they may be laid off — or both.