President Obama may be throwing a tax bone to corporations with his proposal to slash rates to 28 percent, but individual Americans are facing at least seven mega-taxes at the end of this year, prompting financial advisors to yell “abandon ship!”
Instead of waiting until December and banking on protection from congressional gridlock, a GOP victory against Obama or the president’s pledge to protect middle-income earners, advisers are pressing individual investors to act now to avoid the taxes.
“A tax tsunami is coming at the end of the year,” warns David John Marotta of Charlottesville, Virginia’s Marotta Wealth Management Inc. “Regardless of your political persuasion, Congress agreeing to keep taxes low while we are experience the highest debt and deficit in our country’s history is implausible. The best we can hope for is gridlock, which would mean the tax rates expire and return to their previously higher values.”
Forbes calls it “the decade’s biggest investment challenge.”
A widely published advisor, Marotta warns that many new taxes are coming, mostly from the president’s proposals and the expiration of the Bush tax cuts: the lowest 10 percent bracket will rise to 15 percent, the marriage penalty on two-income families ends, the child tax credit will be halved, the death tax will return at 55 percent, the capital gains tax will rise form 15 percent to 20 percent, taxes on dividends will surge to 39.6 percent, and Obamacare taxes hit in 2014.
“Like a merchant in danger of going bankrupt, the government is trying to raise prices to stay solvent. Cutting overhead, nearly always the solution, isn’t even being considered,” said Marotta in memo to clients that urges IRA holders to convert to Roth IRAs to avoid taxes down the road. “It is time to take as much of your business elsewhere as you can before these rate hikes come into effect,” he warns.
