Barack Obama has promised to roughly double capital gains tax rates — a move that he acknowledges might reduce tax revenues, but which is needed because it’s ‘fair.’ Friends of ATR points to this piece from USA Today, which explains how much the Obama capital gains tax increase will cost you:
If the current 15% tax rate on both capital gains and dividends, which has been in force since President Bush pushed them through in 2003, are made permanent beyond the 2010 expiration date, the estimated fair value of the Standard & Poor’s 500-stock index would be 1523, nearly 9% higher than Friday’s close of 1398, says Strategas. In contrast, if Democrat Barack Obama wins and boosts the capital gains tax rate to 28% and dividends to pre-Bush levels of 39.6%, the fair value dips to 1375, or 1.6% below the market’s current level.
Simply put, if you have $100,000 in your Roth IRA, and the higher tax rate goes into effect, you’ll lose $1,600 from your nest egg. If rates remain the same however, you’ll see an increase of $9,000. Will American voters really want to reduce their retirement benefits by 10 percent — especially when doing so will actually increase the federal budget deficit?
