American Shareholders Association

List of Congressmen Who Voted To Raise the Capital Gains and Dividends Tax

The House yesterday voted to approve the "Blue Dog Tax Hike" (see the roll call here). Unfortunately, 27 Taxpayer Protection Pledge signers broke their promise to their constituents that they would never raise income taxes. Seven Pledge breakers (Phil English, Vito Fossella, Steve LaTourette, Tim Murphy, Jon Porter, Rick Renzi, and Fred Upton) are first-time offenders.

This vote would increase the capital gains and dividends tax rate to 15.47%.

Here is the complete list:

Don Young
Rick Renzi
Ileana Ros-Lehtinen
Mark Kirk
Tim Johnson
Ray LaHood
Ed Whitfield
Ben Chandler (D-KY)--the fifth Pledge violation this Congress
Wayne Gilchrest
Fred Upton
Joe Knollenberg
Candice Miller
Jim Ramstad
Jo Ann Emerson
Gene Taylor (D-MS)--the fourth Pledge violation this Congress
Walter Jones
Robin Hayes
Jeff Fortenberry
Robert Andrews (D-NJ)--the fifth Pledge violation this Congress
Chris Smith
Jon Porter
Vito Fossella
Steve LaTourette
Phil English
Tim Murphy
Tom Petri
Shelly Moore Capito

FactCheck.org Needs to Check Their Facts on 401(k)s and the Capital Gains Tax

FactCheck.org takes the McCain campaign to task for saying that a higher capital gains tax rate will affect 401(k) plans.  They (correctly) point out that 401(k) plan assets don't owe capital gains taxes.

What they fail to acknowledge is that a higher capital gains tax makes stocks less valuable on an after-tax basis, so stock prices decline to price that in.  Stock holders--whether their accounts be taxable or not--suffer from lower investment returns.  That's what McCain is saying, and common sense tells you he's right.  The stock market popped up by $5 trillion in wealth after the capital gains tax was cut in 2003.  Surely the higher after-tax value of stocks had something to do with higher stock prices.

So, a higher capital gains tax most certainly does affect each of our 401(k) balances.  It's too bad FactCheck.org doesn't allow comments once they have spoken from on high.  Very Web 1.0.

House Voting Today on Tax Increase

Today, the U.S. House will be voting on a tax increase.  Specifically, it would impose a 0.47% surtax on households earning more than $500,000 per year ($1,000,000 married filing jointly).

For investors, this means a dividends and capital gains rate of 15.47%.  In 2011, the dividends rate would rise to 40.07% and the capital gains rate would rise to 20.47%.

Meanwhile, 83% of tax returns that have income at this level are owners of partnerships and S-corporations.

Americans for Tax Reform will be double-rating this vote, which is also a violation of the Taxpayer Protection Pledge.  Good articles today on this in Roll Call (subscription required) and the Wall Street Journal (subscription required). 

The Club for Growth will also be key-voting it, as will NTU.

File Under, "Keynes 1, Laffer 0"

In a move one part futility and two parts stupidity, the British government announced they would be increasing the standard deduction by some $1170.  This to supposedly "stimulate" the economy. 

Supply siders (read: people who know that policy changes have consequences on behavior) realize that this won't work.  There will be no additional incentives to work, save, and invest.  At the margin, fiscal policy is no more growth-inducing than before.

If the Brits really want to grow the economy, they should take a page from Thatcher.  Cut the British top income tax rate of 40%.  Cut the corporate rate from 30% to the European average of 25% or lower.  Cut the British dividend rate of 22.5%.  Cut the capital gains rate of 18%.  This is not rocket science.

New Poll Shows 1/3 of Investors Might Sell Assets If Cap Gains Rate Hiked

Bloomberg seems to take it as good news that "only" 31% of shareholders earning at least $100,000 per year might sell assets if the 15% capital gains tax rate is hiked.  I don't know about you, but that scares the holy hell out of me.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRRZojfv5DQc&refer=home

Inflation Decellerating; Economists Getting Off Recession Bandwagon

Two pieces of cheerful news for investors this morning.

First, inflation seems to be cooling off.  Headline inflation grew by only 0.2% in April, less than anticipated.  For the trailing twelve months, inflation is 3.9%--still not good, but getting there.  The compounded annual quarterly rate is a reasonable 2.3%, so we might be out of the woods.  All these numbers look far better ex-food and energy.

Meanwhile, Wachovia has reduced its prediction of a recession (subscription required) from a 90% chance earlier in the year to 45% today.  While things aren't stellar, they aren't bad, either.

More Good News for HSAs, Unless Your Name is Pete Stark

The IRS released the 2009 HSA limits yesterday.  Here are the new levels:

• Contribution Limit: $3000 ($5950 family)
• High-Deductible Health Plan Minimum Deductible: $1150 ($2300 family)
• Out-of-Pocket Maximum: $5800 ($11600 family)
• Over 55 Catch-Up Contribution: $1000 ($2000 if both spouses age 55 or older)

Most HSA plans have a deductible of at least $1200 single/$2400 family, so this shouldn't affect too many people.  The extra contribution amount is yet another incentive to save more tax-free for future health needs.

Great news for America's 6.1 million HSA covered lives (likely far more, since that number is from 2007).  This hasn't stopped HSA public enemy number one, Congressman Pete Stark (D-CA), from raining on everyone's parade with an anti-HSA hearing today.

It's the Spending, Stupid: Part Two

The WSJ has a piece today on the dropoff in corporate income tax revenue, and imply that this is what's causing the larger budget deficit this year.

Hogwash.

Corporate income tax revenues, have indeed, fallen off.  But overall tax revenue is keeping pace with inflation (up 2.9%), and non-withheld income taxes are up over 7%.  Corporate income taxes being down 14% or so is not that much money--maybe $50 billion of the increased deficit, at the most.

No, the real culprit is spending.

Trifecta of News on HSAs

A few things on the health savings account (HSA) front:

1. The Republican Study Committee has come out with a very good refutation of the GAO report bashing HSAs
2. Helpful political news: the state of Georgia is giving small employers a $250 tax credit to open an HSA plan for their employees, is letting Georgians purchase HSA-qualified insurance inter-state, and is allowing HSAs to be a deduction against taxable state income.  Click here to read more
3. Harmful political news: Congressman Pete Stark (D-CA) is at it again.  He's holding a hearing this week on HSAs and other consumer-driven health care vehicles