Lots of Tax Hikes Coming in 2011 - Kiplinger.com.
Clients with taxable portfolios should pay particular attention to this article and start planning now to manage your taxes (if you're not already doing so). It's interesting to see that the average rate is the same as in 1982 and that "high income" earners are paying more than in 1982. Many studies have shown that raising marginal rates does not raise revenue as taxpayers make necessary adjustments. The net result is that taxpayers will pay what they believe to be a "fair" rate.
This is contributory to the economic pressures we face now and will likely face in the future. New monetary and fiscal stimulus, particularly fiscal, will have a meaningful impact if consumers spend. But consumers will instead save if they believe the fiscal stimulus will be funded by higher future taxes. They save because they know they'll have a higher future tax bill that must be paid. Lower spending/higher savings by consumers increases the probability the government will need additional stimulus. Higher savings and tax deferral strategies combine to keep revenue growing at a lower rate than expenses. In fact, U.S government revenue (mostly taxes) grew roughly 7% annually from 1947 through year-end 2008. Government expenses grew roughly 8%. Thus we have a growing budget deficit. Surprised?
Clients with taxable portfolios should pay particular attention to this article and start planning now to manage your taxes (if you're not already doing so). It's interesting to see that the average rate is the same as in 1982 and that "high income" earners are paying more than in 1982. Many studies have shown that raising marginal rates does not raise revenue as taxpayers make necessary adjustments. The net result is that taxpayers will pay what they believe to be a "fair" rate.
This is contributory to the economic pressures we face now and will likely face in the future. New monetary and fiscal stimulus, particularly fiscal, will have a meaningful impact if consumers spend. But consumers will instead save if they believe the fiscal stimulus will be funded by higher future taxes. They save because they know they'll have a higher future tax bill that must be paid. Lower spending/higher savings by consumers increases the probability the government will need additional stimulus. Higher savings and tax deferral strategies combine to keep revenue growing at a lower rate than expenses. In fact, U.S government revenue (mostly taxes) grew roughly 7% annually from 1947 through year-end 2008. Government expenses grew roughly 8%. Thus we have a growing budget deficit. Surprised?
