Tags: Warning | Delayed | Tax | Vote | Stock | Market | Chaos

Warning: Delayed Tax Vote Could Cause Stock Market Chaos

Friday, 03 Dec 2010 01:18 PM

Any delays in Congress preventing extensions of the Bush tax cuts, especially locking in a 15 percent capital-gains tax rates, will fuel a stock market selloff starting Dec. 15, says Daniel Clifton, a partner at Strategas Research Partners in Washington.

The capital-gains tax is scheduled to jump to 20 percent next year, which would send investors fleeing from stocks and wiping out 2010 gains.

"Capital-gains tax rates will increase from 15 to 20 percent if the tax cuts are not extended. The last time the capital gains tax rate increased — on Jan. 1, 1987, from 20 to 28 percent — investors realized their gains at the lower tax rate," says Clifton, according to U.S. News and World Report.

"We would expect a similar effect this time around as investors see the tax rate going up and choose to realize their gains and incur the 15 percent tax," Clifton says, adding most investors would sell around Dec. 15, a day when many stock options expire.

Both parties appear close to a deal that would extend the tax cuts to all Americans despite previous efforts among Congressional Democrats to let tax breaks for the wealthy expire while at the same time extending unemployment benefits, both moves opposed by Republicans.

The debate should now focus not on if cuts are extended for everyone rich or poor, but for how long, says one key Senate Republican.

"I think the issue in the end is going to be how long we extend the current tax rates," Senate Minority Leader Mitch McConnell tells Kentucky's Louisville Courier-Journal.



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Any delays in Congress preventing extensions of the Bush tax cuts, especially locking in a 15 percent capital-gains tax rates, will fuel a stock market selloff starting Dec. 15, says Daniel Clifton, a partner at Strategas Research Partners in Washington. The capital-gains...
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2010-18-03
Friday, 03 Dec 2010 01:18 PM
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