Here Come Higher Taxes: Goldman On Imminent Tax Increases
Submitted by Tyler Durden on 03/25/2010 14:26 -0500
You didn't think China would fund America's insane spendorama for ever, did you. Here's Goldman on the second, and much more relevant, part of Obamacare and the stock market reflation trade: tax rates going through the roof.
Tax policy has gained attention in recent days as a result of the tax increases used to pay for health reform. In fact, this is just one of several potential tax debates over the next several months, with the expiration of the 2001/2003 tax cuts and stimulus tax provisions scheduled for year end, proposed and recently enacted corporate tax proposals, and the possibility of some form of consumption tax on energy or, in the longer term, a broader value added tax.
There is little possibility of changes for 2010, apart from the expiration of some stimulus-related provisions, but tax rates in 2011 are almost sure to rise on higher incomes as well as capital income. One consideration for lawmakers will be the different effect that tax policy can have in a zero interest rate environment. This may reduce the negative effects associated with increased taxation of labor and capital, but could exacerbate the negative effect of any increase in consumption-related taxes.