The Homa Files

Barack-O is bound and determined to raise capital gains taxes — from 15% to 20%.

I guess that’s because O thinks returns on invested capital aren’t really “earned” and capital gains only accrue to rich folks.

The problem: this ill-timed move is certain to suppress any market rebound that might materialize.  Why?

2011 sounds like a long way off.  But, to qualify for capital gains, an asset has to be held for at least 12 months.  That means that stocks bought next year (after Jan. 1 2010) will be — by definition — subject to the upped capital gains tax rates.  So, their after tax returns will be reduced.

What to do? Buy stocks later this year (2009) and sell them late next year — before the tax rate goes up — and before the sell-off that will certainly occur in Nov-Dec 2010 (as every Tom, Dick & Harry) tries to bail to beat the tax rate increase).

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Reminder to Pres Obama: a tanked stock market impacts almost 2/3s of Americans — mostly in 401-Ks

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WARNING: This is an econ-political observation, not investment advice.

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This entry was posted on March 5, 2009 at 7:45 am and is filed under Obama Administration, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.