🚀 go-pugleaf

> In reading the tax bill, I find that, for anyone making over like $25K or $30K
> per year, the new capital gains rate will be 27%. Now, I see a lot of people say
> that this is no big deal, because it is an increase of only 7% from the current
> maximum rate of 20%. I'm confused.  If you are a middle-income person in the,
> say 33% bracket (you can adjust this for your own) you now pay tax on capital
> gains at the rate of .4*.33 = 13.2%.  Thus, for most middle income people, the
> new tax law will ABOUT DOUBLE your capital gains rate (27/13.2 `=2). 
> Now, we all know that straight interest-producing instruments (money-market
> funds, T-bills, and the like) aren't what they used to be, so that currently a
> good and heavily used place for significant investment is stocks & bonds
> (whether directly or thru mutual funds).  Isn't this going to be quite a blow to
> the economy?  I mean, if the middle class has its tax rate on legitimate
> investment (as opposed to tax shelters, etc) doubled - what will that do to
> savings, investment, the stock market and the like? Have I misunderstood
> something here?  Or is this really bad news that the press has overlooked?

I'd say you understand everything perfectly.  There is such journalistic
myopia concerning the 27% tax rate,that you never here what is really going
to happen to the investments of the "less than rich."  In fact, the situation
is just as bad for 2 income couples that will be hit with a 5% surtax once
their GROSS (not taxable) incomes get over $75000.  The 5% surtax will give
them an effective marginal rate of 32%.  If these folks are currently in the
42% bracket they are paying an effective rate of 16.8% on LTCG so their tax
on LTCG will also double.  It's the same old story.  If you are already on
top, you don't get hit too badly; but if you're climbing up, UNCLE is there
to kick your ass back down the ladder.