Tags

, , , , , , , , , , , , ,

With the election season in full swing, we thought it would be helpful to recap a few topics that will likely be discussed at great length between now and November.

How will we increase employment figures?  According to the most recent Bureau of Labor Statistics report, the unemployment rate is still at 8.1% (though that measure is around 15% if you include workers that have stopped looking for jobs, according to www.shadowstats.com). There has been vigorous debate among both parties about how to increase job creation, and it’s almost certainly the top issue to many Americans.

What will happen to income taxes? At the end of 2011, an agreement was reached that temporarily reduced Social Security taxes for all of 2012. While this is unlikely to be addressed until after the election, if nothing changes Social Security taxes will revert to normal levels at the end of the year. This would effectively be a tax increase on many Americans.

Another item that will need to be addressed is the Alternative Minimum Tax (AMT), which is a tax that was created in 1969 to help prevent wealthy taxpayers from avoiding income taxes; for taxpayers who fall into AMT, the ability to claim many tax deductions is restricted or eliminated completely. Congress typically passes an extension each year to index AMT to inflation, but if the debate over budget deficits causes gridlock on the matter then there is the possibility that there will be no extension.

Finally, the tax cuts that were passed in the early 2000’s are also set to expire at the end of 2012. Both candidates have been discussing their plans to extend these tax cuts in some form, but it remains to see what a final plan that passes through Congress would look like.

How will dividends and capital gains be treated? Part of the tax cuts that were passed several years ago was a provision to tax dividends and capital gains at the same maximum rate of 15%. This was a reduction from the 20% rate that capital gains had been taxed at since 1997, and it is unclear whether the tax rate on dividends and capital gains would survive an extension of the current tax cuts. For those that want to raise tax revenues as a way to help reduce government budget deficits, raising this tax is seen as one way to do so.

While the election season still has a few months to go, these are the main investment-related themes we see facing the economy for the remainder of 2012.

Advertisements