Tags: Siegel Obama Healthcare Reform to Bring Higher Taxes

Siegel: Even Muni Bonds Get Hit by Obamacare Tax Hikes

Friday, 28 May 2010 08:17 AM

President Barack Obama’s healthcare reform bill may no longer grab headlines like it did since its passage, but tax hikes related to the bill are lurking, says author and University of Pennsylvania Wharton School of Business Professor Jeremy J. Siegel.

“The biggest negative is the surprise imposition of a 3.8 percent Medicare tax on investment income — the first time unearned income has been subject to such a tax,” Siegel writes in his column in Kiplinger’s Personal Income.

Further tax hikes include raising capital gains and dividends taxes as well as hikes on income taxes for the country’s wealthiest, although such moves will not likely affect stock markets as their increases are not high in historical terms, Siegel says.

In fact, tax-free investments such as municipal bonds may seem like good options, although investors should think again.

“Under Obama’s plan, municipal bonds may seem like winners because they maintain their tax-exempt status. And yields on the highest-grade muni bonds have recently been as high as those on taxable Treasuries," he says.

"But investors must be careful. I expect long-term interest rates to rise, and rising interest rates will mean capital losses for holders of any bond, tax-exempt or not.”

The Federal Reserve has kept interest rates very low in attempt to kick-start economic growth, although some Fed officials have said that such loose monetary policy may lead to asset bubbles and ultimately, inflation.

“We've gotten through the crisis,” says Federal Reserve Bank of Kansas City President Thomas Hoenig, according to Reuters.

“We are not out of the woods, the economy isn't booming, but we are now in a position where we ought to be thinking about the long run. That's what central banks should do.”

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President Barack Obama s healthcare reform bill may no longer grab headlines like it did since its passage, but tax hikes related to the bill are lurking, says author and University of Pennsylvania Wharton School of Business Professor Jeremy J. Siegel. The biggest...
Siegel Obama Healthcare Reform to Bring Higher Taxes
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2010-17-28
Friday, 28 May 2010 08:17 AM
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