I’ve been holding my breath until Congress came to grips with not raising taxes – and I can exhale, now that “the Bush tax cuts” have been signed (once again) by a president. George W. Bush and Barack H. Obama – who’d have thought it?
Three cheers for compromise, bipartisanship and not shooting our economy in the foot as of Jan. 1. So here are the tax goodies that apply to investors:
- The top tax rate on dividends remains at 15% through 2012, a boon to shareholders of companies with healthy yields. Investor relations people for utilities and other firms with attractive dividends should breathe a sigh of relief.
- The top tax rate on long-term capital gains also remains at 15% for two years. So equity investors are encouraged to keep taking risks in pursuit of gains. And this helps public company shareholders and small business owners with gains in M&A transactions.
- Some industries may profit from specific cuts – e.g., extensions of the R&D tax credits and incentives for businesses to buy capital goods.
- Of course, the tax bill is also a stimulus bill. Retail spending and GDP should get a shot in the arm from keeping the Bush-era tax rates for all, AMT patch, extension of unemployment benefits and 2% cut in payroll taxes for 2011.
You can debate whether all this is good policy, either in the way it structures our income taxes or the way it affects near-term deficits. There is controversy. But I’m glad to see it resolved – in favor of keeping money in the hands of the people.
The Tax Bill: Santa Comes Early
… and by far the best illustration, showing “Obamaclaus.”
Merry Christmas to all, and to all a good night.