|We hope you are enjoying a wonderful holiday season! As another year comes to a close, we wanted to reach out to you. We've already executed the usual year-end transactions in taxable accounts. Year-end is not a catalyst for IRA activity and we continue to make appropriate changes, as need be.|
We are advising our clients to stay the course as the drama of the "fiscal cliff" approaches. Simply put the "fiscal cliff" is a possible tax increase coupled with government cuts. We've seen higher taxes in the past, and we'll navigate through any tax law changes.
If the "fiscal cliff" is enacted, the spending cuts would affect many government programs with deep, automatic cuts to programs including defense and Medicare. And, the federal budget deficit would be targeted to drop by about half.
So the "fiscal cliff" really means we'd have a slightly smaller government, higher taxes, and a much smaller federal government budget deficit.
A smaller government would be a good thing. A 50% drop in the federal budget deficit also seems like a good thing. Unfortunately, higher taxes are never a good thing, but it will not be as devastating as the media is hyping it. Historically, we had marginal tax rates as high as 90% (the rate peaked at 94% in 1945). We had capital gains taxes of 25% in the 1950s; 35% in the 1970s. During times of higher taxes, the economy can continue to grow and there are plenty of chances to make money, and raise our standard of living.
Today's rates are at a historical low. Even the "fiscal cliff" rates are lower than the high rates of many decades ago.
, if you're still concerned, then remember last year's "Debt Ceiling". President Obama called the debt ceiling issue "financial Armageddon." Treasury Secretary Tim Geithner called it a "catastrophe." Federal Reserve Chairman Ben Bernanke said it was "calamitous." What happened? President Obama signed the Budget Control Act of 2011 into law on August 2, 2011, which put an end to the drama. Ironically, that law created what's now being sold to us as the "fiscal cliff."
So what are we anticipating? Our government will create another law to prevent the so-called "fiscal cliff" from arriving. While it may not happen by the 31st, a "deal" will get done. Stay the course!