Tax Increases Alter Investment--Evidence from Financial Advisors

As the Obama administration keeps passing tax hikes, financial advisors begin preparing advice for investors to make tax efficient investments. With the tax cuts from 2001 and 2003 expiring, the individual mandate tax from healthcare reform instated, and the 3.8 % surtax on investment income (and more), advisors have been coming up with innovative alternatives for investment opportunities such as unified managed accounts (UMA).

What Congress must recognize is that tax hikes do deter investment and competition. This fact is clearly illuminated by the behavior of financial advisors. If Congress continues passing bills with tax increases embedded within them and doesn’t renew the tax cuts set to expire this year, investment will likely fall, prolonging the recovery from the past recession.

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