Death and… Capital Gains Taxes

A new year, a new US budget.  This year, the name of the game is payback – paying back for all the extravagant government spending over the past year.  On President Obama’s budget agenda is a variety of tax revisions and increases following Bush tax cut expirations aimed at Wall Street and America’s affluent in order to fund the on-going expensive public spending, aimed at pulling America out of the global recession.  While much of the American public is occupied with the move to reinstate higher progressive taxes for the upper-end earners (as high as 39.6 percent for singles earning more than $200,000 a year), that isn’t the only major change Obama is looking to make.

Obama is looking to implement progressive increases in capital gains tax.  The plan would initially raise the tax from 15 percent to 20 percent.  But what does this mean for the market?

Capital gains tax is traditionally viewed as a method by which the government can encourage more long-term investments.  The classic example of a capital gains investment is the purchase of property.  By offering investors a lower rate of tax, the government can effectively stimulate these supposedly more-secure, longer term investments.  The low capital gains tax was one large factor leading to the build up of the housing market boom.  But now, we are facing the aftermath of the housing market bust.  People…

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