New ACI Study Highlights Impact of Tax Hikes on Investment Income

Tue Dec 4, 2012 8:38am EST

* Reuters is not responsible for the content in this press release.

  WASHINGTON, DC, Dec 04 (Marketwire) -- 
Although much of the debate in Congress and the media about the upcoming
'fiscal cliff' has focused on federal spending and income taxes, the
pending increases in dividend and capital gains tax rates is no less
critical to the American economy. According to a new study coauthored by
Steve Pociask, the president of the American Consumer Institute Center
for Citizen Research, Erwin A. Blackstone, professor of economics at
Temple University and senior fellow at the institute, and Joseph P. Fuhr,
Jr., professor of economics at Widener University and senior fellow at
the institute, the looming January 1, 2013 increase in dividend and
capital gains tax rates will have negative consequences on the job
market. 

    "With the current rates set to expire at the end of the year, dividend
and capital gains tax rates will increase significantly -- with the top
tax rate for dividends increasing from 15 percent to 43.4 percent
(including a new investment surcharge) and capital gains from 15 percent
to 23.8 percent," according to the study's authors. 

    Major findings of the study include:


--  The increase in tax rates will affect market capitalization.
--  When market capital decreases, so will private business investment in
    plant and equipment.
--  The reduction in private investment will lead to fewer jobs in the
    economy.

    

"As policymakers deal with the ongoing fiscal crisis, investors face
uncertainty and that uncertainty is being reflected in stock market
prices," write Pociask, Blackstone and Fuhr. "If tax rates go up, the
after-tax value of stocks and mutual fund investments will decrease --
but there is also an impact on economic growth and jobs."

    The study, The Effects of Dividend and Capital Gains Tax Increases on Job
Creation, can be viewed at
http://www.theamericanconsumer.org/wp-content/uploads/2012/12/Tax-paper-final1.p
f.


    The American Consumer Institute Center for Citizen Research is a
501(c)(3) nonprofit educational and research institute. For more
information, visit www.theamericanconsumer.org. 

    

Contact: 
Steve Pociask 
703-471-3954 
steve@theamericanconsumer.org 

Copyright 2012, Marketwire, All rights reserved.

-0-
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.